India has a lot of people with low-income groups and affordability for them poses a major issue while switching to a four-wheeler. The Indian car market is one of the largest globally but vehicle penetration is still pretty low. However, the Union Government is now considering a tax reduction on automobiles to make them affordable. The Revenue Secretary of our nation might be ready to conduct a discussion over the existing GST rates and see what altering them would lead to.
With all the tax rates combined, the final price of the vehicle increases significantly which poses a major threat to affordability. Taxes that are as high as 28% are levied on two and four-wheelers. Therefore, the request for a tax reduction might help in increasing demand which will lead to an increase in sales and for this to happen, the Union Government has to take appropriate action.
Revenue Secretary, Tarun Bajaj might have hinted that the government might be open to the possibility of reducing taxes on automobiles. He said, ‘I would be very happy to engage with you to see what we can do even on (GST) tax rates, what is the tinkering we can do to see to it that certain (vehicle) segments get the encouragement they deserve’.
When it comes to vehicle penetration, China and the Western parts of the world are leaders and China has the biggest automobile market in the world. All of this boils down to the affordability factor. Manufacturers have to deal with the rising input costs in order to provide an offering that is safe and also meets the stringent emission norms along with several other things. If taxes are to be lowered, the manufacturing costs will come down and it will act a positive step not just for OEMs, but for the consumers as well. Moreover, this could lead to boosting in jittery sales which have been there since 2018-19.