India’s Tax System Limits Bringing In Global Best-sellers: Honda

Rooting for higher uniformity in differential tax structures for Indian automobiles, Japanese carmaker Honda has blamed the ‘unique’ nature of this system for not being able to bring globally best-selling cars to India. Honda Cars India Ltd. (HCIL) has also raised concerns over the lack of clarity on GST rates and held it responsible for the difficulty in chalking out future strategies in advance for the country.

"A lot of cars are sold in India but variety is not there. Car models which are selling are quite limited. It may be because of the unique tax structure, maybe it's the government policy to promote small cars," HCIL president and CEO, Yoichiro Ueno said.

He further lamented the lack of a consistent tax structure in India, in comparison to other major markets, as a result of which the portfolio of global brands has to remain restricted. “Because of that unique restriction, it is difficult. If the government can moderate the differentiation, automobile manufacturers can implement more variety of models which will benefit customers,” he added.

Citing Honda’s own example, he said, globally the company’s top four best-selling models are the Jazz, the Accord, the Civic and the CR-V but the company is selling only the Jazz and the CR-V in India. “Even in CR-V, we are selling a very small number,” he said.

To put things into perspective, the automotive industry in India functions under four different slabs of excise duty, based on the dimensions of the car and its engine capacity. Smaller cars under the length of 4 metre, attract a 12.5 per cent excise duty while the longer ones are levied a 24 per cent duty, provided they are fitted with engines under 1.5-litre displacement.

However, a car larger than 4 metre in length but with a 1500cc-plus engine will be slapped with a total of 27 per cent in excise duties. Further, a car with ground clearance north of 170mm will attract, the maximum, 30 per cent excise duty.

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India’s Tax System Limits Bringing In Global Best-sellers: Honda