[ruzbehxyz]

In addition to higher taxes during purchase, we are also paying the following taxes during the lifetime of the car:-

1. GST @ 28% on car insurance (every year).

2. GST on various car parts and car service.

3. Various taxes on fuel, which just keeps increasing.
During the lockdown, oil prices turned negative*, however prices in India still kept increasing.

4. Resale value. Although this is not directly related to taxes, it still affects the car owner, as resale value for most cars is pathetic in India.

So overall, a car package is a major financial loss from day 1, whether you buy a 6 lakhs Maruti or a 60 lakhs SUV.

Negative* - Please read on google and on this link: https://www.team-bhp.com/forum/shift...ml#post4791243 (American crude prices have crashed 90%! Now trading at $2 - 3 per barrel)

[1.2TSI7DSG]

Originally Posted by ruzbehxyz

So for a 36 lakhs car, the government takes away 13.5 lakhs.

Not to mention the import duties earned while the car was being made. Steel, Components, Wheels, Tyres...

[dragracer567]

Given the share to which the car industry contributes in the GDP and exports, it certainly gets a step-motherly treatment. The problem is that we've spent decades preaching that cars are owned by rich people (same goes for high-end smartphones now). Instead of squeezing the motor industry which is easily the most productive manufacturing industry in India by far, the government should try to bring most of its population into a taxable middle-class which obviously is much harder.

This is a time when governments are subsidizing industries and even their own people directly while in India, the government has done absolutely nothing. A fiscally sound budget means nothing when industries are starved for oxygen and people are starved for food. 10 years ago, each and every carmakers on earth were lining up to enter the Indian market but now just PSA is trying (and they'll probably fail as well).

And I can't get over the irony of the government asking companies to cut costs. Companies are obviously run to save costs, so what does the government want? Make mechanically compromised cars?

Maybe we don't deserve to be industrialized country since the government thinks that cars are a sin anyway (ironically socialist for a right leaning government).

[shobhit.shri]

This is the graph from https://tradingeconomics.com/india/car-registrations. The total market has been stagnant since 2012 when it was expected to triple in size.

When the pie stops growing, obviously the participant will hurt each other to get the bigger piece. IMHO, that is what is happening among the customers, automobile companies and the govt now.

[landcruiser123]

I'm quoting my post on the thread talking about Toyota's expansions. The Auto company is not going to cut prices and the government doesn't want to give up it's share of the tax pie. The citizen is getting screwed in the process.

The government needs to increase wages and rely on income taxes rather than excise tax and cess from manufacturing. Currently, 2% of the population is bearing the tax burden for the whole country. This maybe unpopular opinion, but India needs to tax cars and provide GOOD public transit. We simply don't have the space to accommodate more cars, our fuel import bills are high, and our aging electricity grids won't handle additional stresses of charging cars.

Originally Posted by landcruiser123

I side with Toyota on this issue. Go to any major SE Asian country, and you'll see Toyota dominating the streets.

There are two approaches to transportation:
1. Mostly private cars with low taxes on cars and gasoline: US, Canada, Australia, NZ etc follow this model as most people live in the sparsely populated suburbs
OR
2. Mostly public transportation with high taxes on cars & gas to encourage public transit: Works well in the mostly densely populated countries of Western Europe and Singapore. (The approach I agree more with )

Problem is, India is trying to follow a hybrid approach to generate employment and tax revenue. In the process, the average citizen has got the worst of both worlds - expensive cars and gasoline with jam packed cities and bad public transportation.

In short, the government is slowly killing the goose which is laying the golden egg. The statement of ‘We Don’t Want You’ Taxes shows in Toyota India's approach - they are not interested in selling anything other than the Innova, Fortuner, and a few rebadged Suzuki models.

[Hayek]

Get truly amazed at how arrogant our politicians and government servants are, and how blinkered our populace (unfortunately including some of us) is in getting taken in by their arguments, without looking at data.

I fully recognise that governments need to raise resources for the services they provide. I also recognise that there is mass scale tax evasion in this country - which is very difficult to solve, which implies that those government services have to be paid for by the small minority that cannot evade taxes. And that as a product which needs to be registered to be used, automobile purchases are therefore one such source from which the government can raise resources without the risk of tax evasion.

But through slow increases in various taxes on this sector, we have reached a stage where the government has almost killed the Golden Goose. And this is especially true when you look at Car purchases by that small segment of salaried people who are very high income by Indian standards (even though they may not have high wealth, either by Indian or global standards).

That is the reason why demand for so called luxury sedans and SUVs (anything priced above ₹30 lakhs) has been decimated in India (even though these are mass market products elsewhere).

Think of someone looking to buy a Skoda Superb. Back in 2010, I bought my car for a OTR price of about ₹22.5 lakhs. Back in 2010, the maximum marginal tax rate was 30.9%, so to spend ₹ 22.5 lakhs on a car, I had to earn ₹ 32.6 lakhs before taxes. The VAT in Maharashtra was 14% and Road Tax was 7%. Excise duties on cars was 22%. Import duty on CKD kits was 10%. The manufacturer therefore would have earned ₹13.7 lakhs on a car with OTR price of ₹22.5 lakhs. Given the customer needed to earn ₹32.6 lakhs to buy the car, the government’s take was ₹ 18.9 lakhs while the manufacturers take was ₹13.7 lakhs. The effective tax take was 58%. Bad, you would say.

But look at what happens for someone looking to buy a Superb today. With an ex show room price starting at ₹30 lakhs, and OTR price of about ₹34 lakhs (before Insurance), I would believe that it would be mainly bought by people who have a pre tax income of above ₹ 2 Cr.

The effective tax rate on someone earning more than ₹ 2 cr has risen from 30.9% to 39%. Individual car registration in Maharashtra is now 13% (for petrol cars). GST (which subsumed VAT and Excise) is 48%. And import duty on CKD kits where any one of the engine, transmission or gearbox is not fully assembled in India is 30%. So to pay the current OTR price of ₹ 34 lakhs, the customer has to earn ₹ 55.7 lakhs. And the manufacturer takes home ₹15.6 lakhs. So the effective tax take when someone buys a Skoda Superb is now ₹ 40.1 lakhs or 72%.

Please note that the amount the customer has to earn to buy a Superb has risen from ₹32.6 lakhs to ₹55.7 lakhs or 71%. What the manufacturer gets has risen in INR terms from ₹ 13.7 lakhs to ₹15.6 lakhs or 14%. And the government’s tax take has risen from ₹ 18.9 lakhs to ₹40.1 lakhs or 112%.

Measuring things in Euros, the manufacturer took home EUR 22,800 back in 2010. He takes home EUR 18,050 today.

The facts are clear - the government’s increasing tax take on both income and consumption has made making high end cars for India (which are actually mass market cars everywhere else) an unviable proposition.

[Malyaj]

Government does not want to cut taxes because it knows that it will not spur demand. It will end up with lower tax collection per capita, without having widened the tax net (in this case the cars sold). In a way it is a confirmation of its own cynical outlook towards the economy.

[CarJunki]

This triangle of consumer, producer and government can not be solved.
The consumer has a binary choice only, to buy or not to bye.
Other 2 players have choices on a continuous scale.
Producer has additional option to stop producing. Many will go this route.

The root cause of all this is a bureaucracy which has absolutely no skin in the game.
When you want to set moderately high consumption tax (which is what VAT was and GST is), direct taxes have to be lower and applicable to a wider base.

[zensure]

Originally Posted by CrAzY dRiVeR

62 lakhs gross income before income tax.
After ~30% (ignoring slabs and cess) income tax, you have money in hand for OTR, which is about 46 lakhs.

Road tax and GST on insurance ~ 7.5 lakhs.
Which brings us to ex-showroom price of 36 lakhs.

GST and compensation cess (28% + 22% of factory value) is around 12 lakhs. So that means Toyota finally gets 24 lakhs (which incidentally, is also the price in some other markets, post currency conversion) out of ~60 we need to earn, to build and market the product? Whereas govt gets GST, GST compensation cess, import duty, Road Tax, GST on insurance, various cess etc from the product and income tax from the customer - which all adds upto 36 lakhs?

For a change, I truly hope the math in my post is horribly wrong somewhere!

For good or bad - your line of thinking is right. Only correction is if you are earning more than 50 lakhs, income tax is around 35% - implying you need to earn more.

BTW - I had done an analysis for Innova and provided an estimate of tax collected by the local and central governments.
https://www.team-bhp.com/forum/india...ml#post4888281 (Toyota halts India expansion, blames ‘We Don’t Want You’ taxes)

My analysis also shows that each state is on their own to tax the cars, as they like it.

In the end - we pay more income tax, more tax for cars, more tax for maintenance and more for fuel. Last but not least, toll on highway now works out be more than a rupee per km.

Don't know to laugh or cry when the government feigns ignorance and says nothing it's the same tax as was earlier and nothing has changed. Cars are getting into the Cigarettes category now.

[Tucker48]

Although, initial buying cost is high in India, but the cost of ownership is higher in developed economies and at some point in time, the total cost of owning a car in those countries becomes more than in India.

[lurker]

Originally Posted by Malyaj

Government does not want to cut taxes because it knows that it will not spur demand. It will end up with lower tax collection per capita, without having widened the tax net (in this case the cars sold). In a way it is a confirmation of its own cynical outlook towards the economy.

It is never immidiate, the consumption spurt in response to a tax cut take roughly 6-8 quarters to materialize. Until then the govt of the day has to manage with a deficit.

[fiat_tarun]

Originally Posted by WorkingGuru

...
Also, post-COVID surely car makers would've renegotiated across the board to reduce input costs. If they could rationalise their prices for cars sold within India, robust car sales could be very helpful to the economy as a major boost to all the connected sectors.
...

On the contrary input costs have gone up. All pricing is linked to volume and the moment volumes drop, suppliers will approach the car makers to correct pricing in line with the revised volume outlook

Understand the government is currently fund starved, but their approach can be so much better. The high handedness displayed is what comes across as arrogant.
Something needs to be done to boost demand and a 6 month GST cut for instance would have definitely boosted demand and could have actually netted them more revenue.

[bongSENse]

Taxes, Government, cars, consumers are elements of a never-ending loop that stands to find opportunities to blame each other incessantly. Primarily, the function of the government is to ensure that jobs are created, socioeconomic condition of its citizens improve, businesses flourish, exports supersede imports, and so on. These metrics are otherwise popularly and quantitatively measured by terms such as GDP, Ease of doing business index, etc. Among such functions, I certainly don't see any merit when the Government sends out blank diktats to an industry for reducing costs.
Reason: Simple economics tells us that Private organizations exist to accrue profits and flourish while providing certain benefits in the form of value proposition to consumers. If the company's products do not find takers, they are going to fall flat anyway. So, the Government should let the market and the economics play out the game, while it regulates - but by no means handicap anyone in the process! Safe to assume, our Government can't sit back while it sees consumers mouth a delicious pie all by themselves. It is one thing to tax products viably, and another to capitalize on tax streams from one industry to meet the lion's share of its tax revenues.

I fail to believe in a subjective statement like 'reducing costs' simply because you can't expect an auto company to come back after a year and publicly disclose their y% reduction in COGS, x% margin improvement and other trade sensitive data. On the other hand, we can clearly see the byzantine tax structures and how consumers are juiced out to their last penny while buying a common commodity like a car. So the Government's retaliation of reducing costs against reducing taxes is fundamentally an incorrect realization.

Let us not forget that today, the Government is trying to point fingers at the industry which championed the concept of lean manufacturing/Six Sigma and pioneered how efficiently manufacturing processes could be revamped (Toyota/Ford). So, for such an industry which has been at the forefront of revolutionizing the way we look at process/waste elimination/minimizing cost outlays/etc, is it very difficult to assume that the industry is foolish enough to have not adopted the industry best practices over so many decades? Given my limited knowledge, I really don't think that any auto company out there is making exorbitant profits while duping the Governments around the world of their rightful tax revenues.

Besides, is it really the Government's duty to decide how much profit a particular industry should make? Or how much base cost they should be operating at? The moment you throw around such statements, you might as well declare that this country is not fit for supporting privately owned businesses.

[AnAvgJoe]

I fully agree with the views expressed in this post.

I would like to add my 'Two Cents' worth to this discussion.

In India, it is true we pay high taxes, however, many other countries have higher taxes on vehicles or income (China, Scandinavian Countries spring to mind).

But (and this is a big 'BUT') the citizens who live in these countries do not feel the same anger we Indians feel (maybe the Chinese do feel it, but that is another story). The reason for this is that, the money they pay as taxes is utilized to make their life much easier in tangible ways (Great roads, no power/water cuts, clean towns and villages). We in India meanwhile do not see any tangible benefits in lieu of paying taxes. We instead, are left (individually) to deal with 'Bad roads, Power/Water cuts, Rubbish piled in the streets, Delayed Trains, Crumbling infrastructure. This is the reason for out anger.

All of us have spent fortunes (tiny or large) on a great holiday/resort. We (at least I) did not resent the money we were charged, as the experience was great and the memories pleasant.
Taxes would also not be resented if the experience of the results was pleasant, but they aren't and therefore our anger.

[sramanat]

A friend of mine made this observation about India 10 years back... India has a somewhat rich urban population of about 50MM which earns and spends like an European country. This India subsidizes ~800MM+ socialist economy. The 800MM is hardly affected by inflation, interest rates or any of the other monetary variables. In boom time the capitalist economy pays enough taxes to cover the socialist economy. The wheels come off spectacularly during the other half of the business cycle, which is what we are seeing now.