Taxes on car sales in India is one of the highest in the world. It is also one of the biggest reasons that the car industry is not growing at a brisk pace.
After COVID-19 hit the world, auto sales in India were at an all time low. Especially the luxury car sales. It accounts for only 1 percent of the Indian car market but has witnessed the biggest downturn. One of the biggest reasons is that its target customers are thinking conservatively right now and splurging cautiously.
Another reason is enormously high taxes!
As per the report published in The New Indian Express, a large part of the car's price comprises of taxes. And when it is a luxury car, tax component is even higher with all the import duties, GST and registration tax.
Luxury car market might be just 1 percent of the total volume but it contributes around 10 percent of the total revenue.
The import duty on complete built-up (CBU) vehicle can go from 60 percent to as high as 100 percent. For example, Ford Mustang in India costs around double the price for what it is sold in the USA.
Registration taxes on cars vary between 10 to 20 percent depending upon the engine capacity and size of the car. On top of that, GST is around 45 to 50 percent. Let us put the things in perspective.
If, you are buying a imported CBU car worth Rs 1 crore, then you will have to shell out taxes to the tune of up to Rs 70 lakh. The taxes on a locally manufactured car worth Rs 50 lakh can go as high as Rs 20 lakh.
Recently Toyota also announced to stop expanding in India due to high taxes.
Unless these exorbitantly high taxes are not lowered, automobile industry can't expect a sustainable growth in the long term.