When purchasing cars, Indians fork out nearly double the amount of duties and taxes that Chinese citizens pay over and above the actual vehicle cost.
In India, the overall tax structure inflates the on-road price of passenger cars by nearly 50 per cent, while the same in China is only 23-28 per cent, according to a new research note published by global financial services major Citigroup.
The Chinese structure comprises of a consumption tax, ranging from 3-20 per cent depending on engine displacement, and around 17 per cent VAT.
The tax structure while purchasing passenger cars in India consist of excise duty, other central government duties, sales tax, other local taxes, insurance and road tax ? which need to be paid over and above the ex-factory price.
On the other hand, China follows a two-level duty structure — a consumption tax and a Value Added Tax (VAT), according to Citigroup.
The tax burden would increase even further if the reported government move for an additional cess on passenger cars and two-wheelers goes through, Citigroup’s India-based auto analyst Jamshed Dadabhoy wrote in the report.
“Assuming this proposal is confirmed by the government over the next few days, sales of cars and two-wheelers should rise over the immediate term, as consumers accelerate purchases,” Dadabhoy said.
However, since taxes now account for around 35-40 per cent of the sales prices of cars and two wheelers ? if implemented, this measure would raise selling prices sharply and curb demand, especially in an environment of higher interest rates, he added.