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Govt officials defend auto sector taxation, want companies to improve efficiency, cut cost

GST rates on automobiles are less than what VAT and excise duty rates used to be in pre-GST times, sources said.

September 18, 2020 / 08:50 PM IST

Responding to reports that high taxation is causing a demand slump and difficulty in scaling up for auto industry players, finance ministry sources said that there has been complete certainty in the auto sector taxation in India and certain concessions have already been provided to electric and hybrid vehicles.

"Most established auto sector players have been in India for quite some time and are used to the regulatory and taxation environment and have flourished in this regime. It is evident from the huge payouts in the form of royalty made by these auto companies to their parent companies located abroad," the sources said.

GST rates on automobiles are less than what VAT and excise duty rates used to be in pre-GST times, the sources pointed out. India’s tax policy on automobiles has been quite consistent for the last three decades, in the form of allowing foreign investment and incentivising the domestic manufacturing by providing reasonable protection from imports, they say.

"Industry has on its part delivered. It has contributed by way of large investments and employment. All of a sudden, dissent in some quarters on tax rates is surprising," the ministry sources observed.