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Government rebuts high taxes, tells automakers to lower costs and cut royalty payouts, rebutting Toyota

Government rebuts high taxes, tells automakers to lower costs and cut royalty payouts, rebutting Toyota
The Society of Indian Automobile Manufacturers (SIAM) urged the government to cut taxes on cars, motorbikes and buses to 18 per cent.

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Government rebuts high taxes, tells automakers to lower costs and cut royalty payouts, rebutting Toyota

The government says that automakers should lower costs and cut royalty payouts to foreign parents and improve efficiency to decrease the purchase price of vehicles. This comes as a strong rebuttal to Japanese carmaker Toyota, which attributed its dampening business to high taxes.




According to reports, the Society of Indian Automobile Manufacturers (SIAM) urged the government to cut taxes on cars, motorbikes and buses to 18 per cent while warning that it would take three to four years for sales to return to their peak levels in 2018.

A senior finance ministry official said automakers should not expect the government to reduce taxes. He also brushed off Maruti Suzuki and Toyota Kirloskar Motor highlighting the tax structure on automobiles for impacting demand. “Companies should cut down their costs of manufacturing by cutting down the royalty payments to their parent companies abroad instead of asking the government to reduce GST,” the official said. “Royalty payouts by some companies to their foreign associates have been a matter of tax disputes in the past. These hefty payments, a cost on the books of the local producer, also represent how auto companies have flourished under the domestic regulatory and taxation framework that offered predictability and certainty to businesses besides reasonable protection from imports.”

Commerce and Industry Minister Piyush Goyal, earlier this month, had asked automobile companies in India to reduce royalty payments to their parent firms as it would help them sail through the crisis easily. He said automakers that hold a sizeable chunk of the country’s auto market pay millions of dollars as royalty to their parent companies. The minister pointed out that reduction in royalty can help them reduce the cash outflow and bring down the vehicle prices and boost domestic sales as well.

Goyal said automakers should find out innovative finance options which would in turn attract financiers to lend money and attract buyers as well. “India is willing to provide a very facilitative environment to companies, looking for a more trusting trade partner and a better supply chain. We have to look at sectors where we have the edge over other countries,” he said. “We have engaged with many companies who are looking for more resilient value chains. We have to identify sectors where we have a comparative and competitive edge over other countries.”


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