A finance ministry official said on Thursday that Toyota would have to stop expanding in the country due to higher taxes.
Passenger vehicle sales have dropped by 50 percent in the five months through August as a result of the coronavirus epidemic, with automakers lobbying the government to reduce taxes.
But on Tuesday, the world’s largest carmaker, Toyota Motor Corp, issued a statement saying it was committed to the Indian market, as a senior executive at its local unit said automakers would not increase taxes in the country.
The Japanese automaker released another statement on Thursday, stating that it plans to invest more than $ 272 million in India in the coming years.
The tax on cars sold in India is more than 28 percent and may increase to 50 percent for some models after the additional levy.
The Society of Indian Automobile Manufacturers (SIAM) has urged the government to cut taxes on cars, motorbikes and buses by 18 percent, while warning that sales will take three to four years to return to their peak levels of 2018 .
The Finance Ministry official said that the tax policy on automobiles is quite consistent for the last three decades as to allow local investment and encourage local manufacturing by giving proper protection from imports.
Vehicle manufacturers in India are accustomed to the country’s regulatory and taxation environment and have thrived in this regime, the official said, adding that it is clear from the “huge payment in the form of royalty” to their parent companies overseas has been made.
Commerce Minister Piyush Goyal told representatives of automakers in the country that they should find ways to reduce royalty payments to foreign parent companies, Reuters reported last month.
Representatives of the country’s largest carmaker Maruti Suzuki and Toyota were among those who met with the minister. Maruti Suzuki paid Rs 3,820 crore as royalty to its Japanese parent Suzuki Motor in the financial year ending 31 March, which was 5 per cent of its annual income. While Toyota’s India arm paid $ 88 million, or 3.4 percent of revenue, to its Japanese parent, government data show.