Indian auto market suffers from diversity of taxes in different states. This diversity prevents auto makers and customers to fully benefit from central sops like duty cuts, etc. For example, the excise duty on automobiles has been reduced from 16 percent to 10 percent which was earlier rolled back even to 8 percent considering poor economic conditions in 2008. Even though duty has fallen from 16 percent, nevertheless, other charges such as sales tax, road tax, entry tax, hypothecation fees, etc. has led to an increase in car prices.
Moreover, rising inputs costs as well as new emission norms have further escalated car prices. Auto industry has proposed to the government to have uniformity of taxes across the country as there is huge difference in local taxes charged by various states in India.
“Every time the Centre cuts excise duties, state governments hike road tax or registration tax,” said a senior executive at a top small car company. This eventually leads ownership of automobiles expensive for the customers prevent sales growth. Sales tax in various states varies from 12.5 percent to 15 percent while registration fee has escalated from 4 percent to up to 7-8 percent. Tamil Nadu tops the list with its road tax being levied up to whopping 17 percent. Apart from the road tax, entry tax and hypothecation fee also adds to the cost.
Thus, car makers are asking the government to levy uniform tax across the country to make car ownership an easier and more manageable for the customers which help the auto industry to post healthy sales growth as well.
