“Can’t Grow An Automobile Industry With 50% Taxation”: Maruti Chairman RC Bhargava

Uniform tax on small, big cars will not augur well for growth: Maruti Chairman

The auto sector continues to be heavily taxed, which has affected the industry’s growth, according to Maruti Suzuki India Chairman RC Bhargava, speaking at an event in New Delhi.

“You can’t grow an automobile industry with 50 per cent taxation. Where in the world has an industry like automobiles grown with 50 per cent taxation? (But it’s the) wisdom of the leadership…if they are happy with 4-5 per cent (auto industry) growth, then who am I? All taxation in the motor vehicle industry should be rationalised, in my opinion, ” said Mr Bhargava.

“I’m a big supporter of the government…let me clarify. But in some areas where I think the decisions are not in the best interest, and it can happen because the political system is not given correct information by the bureaucracy and incorrect advice by civil servants etc.,” added the Chairman.

He also said that India has substantially higher car taxes when compared to wealthy nations like Europe and Japan, where the per capita income is significantly higher.

When asked about the implications of the clarification on the classification of SUVs for taxation purposes, he said it “confirms that they should charge 22 per cent (cess) when four conditions are met, which puts it into the 50 per cent kind of tax bracket.”

According to Mr Bhargava, the regulatory load is heaviest on small cars, a key segment of the Indian auto industry, and having a consistent tax structure across all vehicle classes will not bode well for the sector’s future.

For healthy growth of the automobile industry, there “must be a steady increase in the number of new car buyers each year,” said Maruti’s Chairman. “People who were buying small cars are not buying the same level…not a good thing for the industry or the country.”

The manufacturing sector, which “unfortunately” has lagged despite the best efforts of the Narendra Modi-led administration at the Centre because of implementation gaps at the local level, could boost India’s economic growth rate, Mr Bhargava said.

In response to the future of auto industry, he said, “if we continue to do business as usual as you have been doing for 20-40 years, the results won’t be very different.”

“Not only should implementation processes be revamped, but at the same time entrepreneurs should rethink their management systems and how they are running their companies. Indian industry also needs to recognise the great importance of change now. The younger people are doing this…hope more younger people come into management,” added Maruti’s Mr Bhargava.