According to R C Bhargava, chairman of Maruti, the auto sector cannot expand with a 50% car tax

R. C. Bhargava, chairman of Maruti Suzuki, the largest manufacturer in the nation, has argued for tax reform for the automotive industry, claiming that a 50% tax rate on cars will prevent the sector from expanding.

Bhargava also pointed out that despite the Modi administration’s concentration on reforms, India’s manufacturing sector is still lagging behind, mostly as a result of the failure of the nation’s “implementation machinery.”

“Throughout our history, all motor vehicles, whether it’s SUVs, MUVs or anything else… have been in the highest tax brackets. The taxes on motor vehicles in India have historically been among the highest in the world. All taxation on the motor industry should be rationalised. It should be treated like it is in the rest of the world,” Bhargava said at a press meet Monday evening.

He added: “How can the industry grow with a 50% tax rate on cars? But if it is the wisdom of the policy makers and the political leadership… If they don’t want the industry to grow and they are happy with a 5-6 percent growth.”

Currently, automobiles are taxed at 28 per cent GST with additional cess ranging from 1 to 22 per cent depending on the type of vehicle.

The auto industry veteran added that the Indian economy can grow higher than the 7 per cent growth forecast for FY23 if manufacturing in India can gather steam. “Unfortunately, manufacturing in India has still been a laggard. Mr Modi has given great emphasis on a whole lot of reforms… But for some reason, we are not able to make the progress we should be making,” he said.

Bhargava emphasised that there has been a significant discrepancy between the intended goals of policies established over the past 70 years and their consequences in response to a question about the sluggish rate of industrial expansion. He continued by saying that the goal of initiatives like Make in India, Ease of Doing Business, GST, and the Bankruptcy Law was to turn India into a desirable, globally competitive manufacturing location. That, however, has not taken place because “the government’s objective is not getting translated into ground reality.”

Importance of putting policy into action

Bhargava emphasised the need of putting policies into action and emphasised how, depending on how they are carried out, “excellent policies can become disastrous policies.”

“One of the things that we learnt from the Japanese was that it is better if your policy is not even the best, but if you implement it fully and correctly. A good policy can become a bad policy if it is not properly implemented. An average policy can still become a good policy if it is well implemented. And I think where we’ve been lacking all these years is in the implementational machinery in the country,” he said.

Stressing that he is a big supporter of the government, he noted that in some areas the best decisions are not taken because the political system is not given the correct information by the bureaucracy.

“In some areas, policies are not being done correctly because of incorrect advice being given or lack of understanding…I think in today’s complicated world of economic development, improving manufacturing and other areas, there is a great deal of requirement for real knowledge of the sector, of skill and knowledge what is happening. Without that, if you just look, Oh! Europe does this, so let’s do that. …But we are…in so many major respects, different from Europe,” he remarked.

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