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Old 17th June 2024, 14:23   #1
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Toyota once again pushes for rationalization of GST rates | To make them Merit-Based

Toyota has thrown down the gauntlet once again, lobbying for GST rates on cars to be "merit based". Vikram Gulati, country head of Toyota Kirloskar has called for the GST council to relate GST rates more to emission levels and and fuel consumption goals rather than size of the car, size of the engine, weight of the car etc. To quote Mr. Gulati:

"Policies and taxation should be aligned towards the national goals (i.e becoming self-energy reliant and reducing carbon emission) and enabling consumers to make a better choice in terms of technology meeting those national goals.

https://www.newindianexpress.com/bus...d-toyota-motor

I could not agree with Mr. Gulati more. Taxing based on Engine size is such a retrograde method. The evolution of turbo charged technology means engines have got smaller, but their fuel efficiency has not really gone up relative to the NA engines they replace. Take a look at the Honda 1.5 iVTEC and the VW 1.0 TSI equipped cars (Honda City and Skoda Slavia) with MTs, which make comparable power output on paper. However, based on Autocar's real world mileage tests, the smaller turbocharged engine is actually less fuel efficient (11.2 KPL city, 14.2 KPL highway) than the larger NA engine in the Honda (11.5 KPL city and 17.7 KPL highway). Please see reference links below for these mileage test reports.

Taxing based on vehicle size is an equally bad idea. We get oddly shaped cars, that have been chopped off, just to comply to the 4 meter rule. For example, the XUV 3XO could have been a much more comfortable and spacious car without any major additional penalty in terms of emissions or FE, if M&M had not been forced to truncate it for GST benefits. Perhaps many families who have been buying the XUV 300 for years and are forced to do an upgrade to the next segment after a few years, only for want of space, could have been spared the expense. Fewer such cars that have been unnecessarily upgraded from, may have been on the roads via secondary market, if this market-distorting rule had not been in place.

Mahindra had to unwillingly lower the GC of the XUV500 in the past, to save a few percentage points on VAT/GST - this benefits no one, not the consumer, nor the environment, nor it results in any positive impact from reduction of oil import bills - it simply reduces the intended off-road functionality and capability without benefiting anyone at all. The lowered GC of the new ScorpioN also seems to be motivated by this logic. These forced moves also increase costs for manufacturers, as they have to design new tooling and sourcing, spend money on more repeated testing cycles, for modifying trivial vehicle characteristics, just to meet artificial tax structures.

We also miss getting a lot of global models in India due to the ridiculous GST rules that make them too pricey for the Indian market, while in fact they are only very marginally above the 4m threshold. For instance, after the massive success of the 2010 VW Polo, the next generation Polo was never launched in India, as it was marginally above 4 meters long, but would have become too expensive due to the distorted GST structure we have.

The benefits of strong hybrids are immense, including 40-80% increase in FE, and a significant possibility to cut down on oil import bills, as well as reduction of pollution in our big cities. The global trend has become clearer over the last 4-5 months - slow down in growth of pure EVs and steep growth in strong hybrids. I was in Germany and France for 2 weeks and literally every taxi was a Toyota strong hybrid (Prius/Camry/Corolla) or a Lexus ES300h. The thus-far-ubiquitous E class diesel is dwindling in their taxi fleet. At least 30-40% of newer private passenger cars seemed to be strong hybrids from a range of manufacturers.

Now is the time for the government to do a complete review and overhaul of GST structures for cars, based on the principles of taxing vehicles with lower real world FE and higher emissions more, so that the taxation can be used positively towards the larger cause of reducing environmental pollution and reducing over-reliance on oil imports and saving foreign exchange outflows by cutting our oil import bill. The market leader Maruti, for once, will be supportive (only because they find themselves, for once, at an advantage via-a-vis competition, thanks to Toyota, on hybrids - Maruti would never, I mean NEVER, otherwise support any progressive emission-reducing or safety-increasing measures or regulation). Hyundai and Tata are going to cry foul, this is to be expected as they do not have a play in strong-hybrid Technology. I do not think the government will give much credulence to Hyundai's position, as it was apparent from Nitin Ghadkari's previous remarks that the government is unhappy about "some carmaker's" strategy to reduce strength and safety specifications of its global cars when it comes to launching them in India. Tata's opposition will be formidable, but as a group, there may be some other TATA line of business (e.g. Air India) that the government can incentivize as a trade-off. So, all-in-all, there is a fair chance of pushing this rationalization through and getting India's taxation on autombiolies more in line with rational principles and global practices adopted by countries tta attach equal importance to reduction of fossil fuel consumption and environmental pollution reduction as Mr. Ghadkari does.


REFERENCES:
https://www.autocarindia.com/car-new...plained-420804
https://www.autocarindia.com/car-new...plained-424048
https://www.cartoq.com/mahindra-slas...nce-heres-how/
https://www.carandbike.com/news/niti...hmarks-2480197

Last edited by 84.monsoon : 17th June 2024 at 14:50.
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Old 17th June 2024, 14:49   #2
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re: Toyota once again pushes for rationalization of GST rates | To make them Merit-Based

Quote:
Originally Posted by 84.monsoon View Post
Toyota has thrown down the gauntlet once again, lobbying for GST rates on cars to be "merit based". Vikram Gulati, country head of Toyota Kirloskar has called for the GST council to relate GST rates more to emission levels and and fuel consumption goals rather than size of the car, size of the engine, weight of the car etc.
Mr. Gulati, I fully understand that like any committed employee, you're campaigning for your company's cause, but let's look at it from a different perspective?

Is it simply GST the reason why the Innovas and Fortuners have such stratospheric prices? If there's any GST reduction, one can be quite sure it will only lead to fattening Toyota India's hefty margins than any benefit being really passed onto the consumer.

Plus if other manufacturers are able to engineer products around regulations, why cant Toyota? Should all nations formulate rules as per Toyota's product lineup?

Ultimately for what real benefit to India? Toyota is only focussed on selling Innovas and Fortuners in India and rest of the business is supplemented by selling rebadged Marutis. Out of the 60-70 model lineup you have globally, India gets 2 or 3, that's it. Neither are you really interested in pushing India as an export base, all that favouritism is directed at Indonesia, Thailand etc... If that's all the commitment you can show to the Indian market, do not expect a lot of love in return.

Last edited by manson : 19th June 2024 at 01:29. Reason: Typo.
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Old 17th June 2024, 14:54   #3
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re: Toyota once again pushes for rationalization of GST rates | To make them Merit-Based

Totally agree on the engine aspect.

But on the other side, I actually appreciate the 4m rule and feel it should be even stricter.

A lot of people are going for the 3XO because it is cheaper than the other cars in it's segment. 3XO is getting away with this taxation despite making the car too wide, kind of defeating the point of the sub-4m rule in the first place.

The 4m rule needs to promote smaller AND narrower cars (3XO is over 1820mm) on our already overly congested roads. I would say there should be even more tax incentives on cars smaller than < 3.8m and less than < 1700mm wide, think cars like Ignis.
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Old 17th June 2024, 15:49   #4
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re: Toyota once again pushes for rationalization of GST rates | To make them Merit-Based

There should be a comprehensive re-look at the principles behind taxing pf private vehicles, I mean the starting tax rate for smallest of the vehicles is 29% (28% GST + 1% cess) and this does not make sense - cars of all types are still viewed as sin products - this thinking has to change. Have a look at Chinese - vehicles having engine capacity below 1L at taxed at 1% & those with upto 1.5L are taxed at 3%, yes they do have a 40% slab for cars having >4000cc engines. We need to really learn from them in this regard.
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Old 18th June 2024, 12:46   #5
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Re: Toyota once again pushes for rationalization of GST rates | To make them Merit-Based

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Originally Posted by mizu View Post

The 4m rule needs to promote smaller AND narrower cars (3XO is over 1820mm) on our already overly congested roads.
I don't agree with this at all. How much space a vehicle occupies on the road depends on how it is driven with respect to the moving traffic.

I'm sure, you would have noticed a single biker, occupying the space of a car, or even a lorry while driving in the middle and not maintaing enough speed to move along with its traffic. This, along with tapering roads, bus stops and other parking hassles are the main cause of congestion. Of course all of this is resulting because of the overcrowding of the same cities for real estate gains, which is fundamental reason for our congested cities.
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Old 19th June 2024, 11:59   #6
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Re: Toyota once again pushes for rationalization of GST rates | To make them Merit-Based

I admire the Japanese approach to Kei cars on size of the car has to have any significant impact on parking and manoeuvrability beautifully explained in video by none other than Jason Camissa. Worthwhile to note that Japan did not rely on overseas manufacturers to re-engineer their global models to suit local legislation.

I am fully supportive of merit based taxation where the outcomes are taxed (emissions) rather than specify an engine type of 'not larger than'. Tax kerb weight which has a direct impact on efficiency whilst keeping safety in check through BNCAP (not so fast, MSIL). Foster innovation by not laying down the 'how' but the 'what'.

Our very own micro car (Nano) had an unceremonious demise, Qute dodges safety and engineering requirements through the quadricycle route; leaving just a lone Chinese Comet which is pricey despite its diminutive size.

Last edited by GeeTee TSI : 19th June 2024 at 12:22.
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Old 19th June 2024, 12:00   #7
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Re: Toyota once again pushes for rationalization of GST rates | To make them Merit-Based

In fact the cars should be charged based on their road foot-print (area) than only its length. And regarding the engine, now a days, with recent advent of newer technologies (turbo, active cylinder deactivation, hybrid, diesel emission through adblue etc.) it is not only the engine size that directly correlates to the pollution, rather, there are too many factors to consider. Bluntly charging based on engine size deter manufacturers to introduce newer technologies in Indian market. Preferably, introducing a pollution test during registration may collect facts and figures to consider the ultimate GST to be charged (or get tax refund, may be). This is just a quick thought, there ought to be loose ends to tie to implement, of course.
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Old 19th June 2024, 12:57   #8
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Re: Toyota once again pushes for rationalization of GST rates | To make them Merit-Based

Apologies for this off-topic post but in terms of GST I implore the govt. to please remove the 'luxury goods' GST of a whopping 28% on ACs, in this life-threatening weather (45 degreeC + in NCR), while nothing is being done to reduce the effect of global warming atleast make ACs cheaper in the meantime so more people can afford them and live in comfort.
I am well aware of the cyclic effects more ACs will have on the temperature but I do not care anymore.

Last edited by sh3lby : 19th June 2024 at 13:00.
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Old 19th June 2024, 13:01   #9
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Re: Toyota once again pushes for rationalization of GST rates | To make them Merit-Based

The tax rates certainly need to be reassessed. Should they be based on fuel economy? No.

Let's consider a scenario. Car X has an ARAI FE of 20 kmpl. The real-world FE will definitely be lower. Driver A achieves 16 kmpl, while Driver B achieves 14 kmpl. Therefore, taxation can realistically never be based on real-world FE.

Factor in drives modes, ISG, cylinder deactivation technology etc.; the variables never end.

Now, the next question is, should it be based on the rated FE? Car X has an ARAI FE of 20 kmpl for the MT variant. The FE for the AT variant will be lower. For carmakers like Hyundai-Kia and VW-Skoda, which offer multiple engine and gearbox combinations, tax rates will vary by variant. This will only add more confusion for customers.

When it comes to hybrids, the question is, what should be the definition of a hybrid? Do not forget that the FAME 1 scheme offered benefits to hybrids, and Maruti cheekily claimed these benefits with its SHVS mild hybrid technology. After this exploitation was highlighted, the FAME 2 and 3 policies became solely EV-oriented.

General definition of a strong hybrid: "A strong hybrid is a type of hybrid car that can run on electric power alone for short distances."

Note: The term "short distances" is again a variable. The government needs to establish a minimum distance: 5 km, 10 km, 15 km—whatever is feasible in real time. Then they can reduce additional cess on strong hybrids.

Currently, our tax classification is based on length, engine size, and fuel type. It is debatable and confusing, but one thing is certain: it is straightforward and does not involve any variables.

The government is controlling fuel economy and carbon emissions through CAFC regulations, which are expected to become even more stringent in the future.

Do not expect any drastic policy changes in terms of taxation, as the industry is a significant contributor to the GDP. Even in a hypothetical scenario where there is a policy change, the tax rates will likely remain at similar levels.

Lastly, if Toyota is aligned with national goals, it should present concrete ideas to help the nation rather than using vague terms like "merit-based taxation". Please define what "merit" should entail. Toyota should reconsider its profit margins in the first place and stop looting customers if at all they are truly concerned about the prices.
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Old 19th June 2024, 14:13   #10
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Re: Toyota once again pushes for rationalization of GST rates | To make them Merit-Based

The current GST Tax Structure does not make any sense at all. Unfortunately a lot is not expected to change in the near future.

Cars should be taxed inversely to the fuel efficiency. Broadly I see 3 categories emerging.

1. Hyper-Efficient Fossil Fuel Cars:
This slab will need a clear definition of the various vehicle types that can be included. Like Mild Hybrids, Strong Hybrids, Plug-In Hybrids, CNG, Alternate Fuels. In fact this category could even include smaller cars (with NA engines) with very high fuel efficiency say tested FE of 20 kmpl+. (Say a Mild Hybrid Alto) Standard tests which are already in place can be used with little or no modifications. This will incentivize more efficient cars. Ideally there would be some variation in GST rates for say a mild hybrid vs a strong hybrid but overall should be within a broader band only. The rates for this category should be significantly lower than Category 3.

2. Zero Tail Pipe Emission Cars
It should be a broader category including Hydrogen Fuel Cell Vehicles or any other future tech which have no tailpipe emissions. EVs would fall in this category. Initially this should be an exempted category but with time it needs to be taxed as well.

3. Polluting Vehicles
This category should be technology agnostic totally. For instance if an automaker launches a strong hybrid Hummer with a fuel efficiency of 10 kmpl it should not be allowed to take tax benefits. Same goes for an inefficient sub 4m vehicle. Ideally there is no need for a length constraint anymore. Since you are incentivizing efficiency and lower emissions you are automatically putting cap on Vehicle Size. Diesels or any other fuel which has dangerous emissions (Maybe even Alternate Fuels) should fall squarely in this category. This needs to have the highest TAX rates.
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Old 19th June 2024, 20:31   #11
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Re: Toyota once again pushes for rationalization of GST rates | To make them Merit-Based

Quote:
Originally Posted by sh3lby View Post
Apologies for this off-topic post but in terms of GST I implore the govt. to please remove the 'luxury goods' GST of a whopping 28% on ACs, in this life-threatening weather (45 degreeC + in NCR), while nothing is being done to reduce the effect of global warming atleast make ACs cheaper in the meantime so more people can afford them and live in comfort.
I am well aware of the cyclic effects more ACs will have on the temperature but I do not care anymore.
I absolutely agree with you. Furthermore the simple fact is in order to “reduce pollution” people in the NGT region are being forced to change their diesel cars after every 10 years while the huge amount of pollution caused in making the new cars is not factored in at all. Then we are paying road tax for 15 years and yet are allowed to use our diesel cars for only 10 years. If that is the level of logic behind policies, I doubt the taxation structure would be made more logical.
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Old 19th June 2024, 20:43   #12
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Re: Toyota once again pushes for rationalization of GST rates | To make them Merit-Based

Yes and no.

Saying size of the car does not matter when the cities and towns are choking with cars and parking them being a mess everywhere is hilarious. Cars should ideally be paying an additional size based tax considering how much of the valuable city spaces they collectively occupy.

Car engine volume based rule is ancient, tweak it to be based on engine type and fuel efficiency but car size restrictions should remain.

Last edited by Yieldway17 : 19th June 2024 at 20:45.
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Old 19th June 2024, 21:30   #13
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Re: Toyota once again pushes for rationalization of GST rates | To make them Merit-Based

Completely disagree. If the cities will start choking. I am sure someone who regularly suffers from bigger cars will downsize to gain a comparative advantage. Why for some few all must suffer?? No, There should be no size-based taxation. People because of their use and expenditure will automatically adjust their buying preference. Already Small cars like MG Comet EV are selling in good numbers because of their value proposition. Forcing via taxation is not a good idea in this case.

Take Polo for example because of improvements in Engine and car aerodynamic design. The company is offering its customers a little more space. But unfortunately, because of this insane taxation, it is not economically competitive for them to sell new Polo in India.

A progressive taxation based on Ex-Showroom price or emissions will actually increase the diversity in choice of cars available to the customer.
Now coming to the Polo example back again. The company can't without constraint increase the size of the car without increasing the price of the car itself. Thus affecting its ex-Showroom price and attracting higher taxation. It is still discouraged to increase the car size significantly. But this company still retains the flexibility to offer a better product to its customers.
Thus taxation based on car size is not a solution. If govt. want to encourage smaller cars even more. More incentive should be given to smaller cars in parking.

Last edited by Eddy : 19th June 2024 at 22:10. Reason: Spacing and typo corrections.
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Old 19th June 2024, 22:41   #14
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Re: Toyota once again pushes for rationalization of GST rates | To make them Merit-Based

And if this rule is implemented all cars will feel like a Maruti tool drive as every other manufacturer will shed weight on their cars. And once that happens, people will stop buying other brands because they will no more find a value proposition in other brands. Then the Toyota Suzuki combine will make merry. Remember what happened with the Figo Twins 2.0?

Sarcasm aside, I think the tax should be purely based on purchase price or segment. Lower the price, more affordable the car is for someone wanting to enter the car market. The price point itself can be adjusted yearly basis the inflation rate. Worst case scenario is the size. The merit based proposal is another form of lobbying, Toyota is entitled to lobbying. It won't do us buyers any good.
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Old 20th June 2024, 00:50   #15
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Re: Toyota once again pushes for rationalization of GST rates | To make them Merit-Based

I think that we have to be careful what we ask for. While I am no fan of ridiculous 1st world like 28% taxation in a 3rd world country like ours, if reduced taxation were to actually result in cheaper cars, imagine the number of 4 wheelers that would join our already congested roads. Imagine the pollution and misery of wading through even more traffic than there is today.

I think that we should go the Singapore way i.e. make it really difficult to own a car. I know that I may upset many T-Bhpians, but given the more than pathetic state of our civic infrastructure and worse, our lack of civic sense especially in the cities, I think that car ownership norms should be tightened.

I would prefer that the government first modernize RTOs all over the country(which are currently, cesspools of corruption), improve the scrappage policy to incentivize sales of newer cars (i.e. scrap your old car to get a 50% or so GST discount on your new car purchase) and then rework the GST policy to promote the use of small (and I mean tiny) cars in tier -1 and tier-2 cities.
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