What happens when, on one side, you’re trying to attract global players to boost the manufacturing sector, and on the other side, one of the biggest names in the automobile world says “ In the absence of any reforms, we won’t exit India, but we won’t scale up”? The answer is simple – it builds quite an awkward situation for India and the central government.

Shekhar Viswanathan, who is the vice-chairman at Toyota Kirloskar Motor (TKM), says that courtesy of steep tax slabs for automobiles in India, the company has decided to apply brakes on its expansion plans. He went on to state that the high taxes make it hard for companies to build scale. They also put owning a car out of reach of a huge chunk of customers, and that, in turn, idles factories and reduces job creations.

Viswanathan further added: “The message we are getting, after we have come here and invested money, is that we don’t want you.” Putting an analogy on how high the tax slabs are, he went on to say: “You’d think the auto sector is making drugs or liquor”.

He also said: “Market India always has to precede Factory India, and this is something the politicians and bureaucrats don’t understand. At the slightest sign of a product doing well, they slap it with a higher and higher tax rate.”

Viswanathan is part of a company which began operations in India in 1997. Toyota Motor Corporation, which is one of the largest automobile names in the world, owns 89 per cent of TKM. Data shows that in August 2020, Toyota had a market share of only 2.6 per cent, down from nearly 5 per cent a year ago.

Is he talking sense? All passenger vehicles, including private and commercial, fall under the 28 per cent GST slab. Based on what type of vehicle it is, each one attracts additional cess on top of that. Here’s how the table looks like:

Pure-electric vehicles, or EVs, currently fall in the 5 per cent GST slab.

Story source: Bloomberg