Taxation laws in India where purchases of new cars are concerned is well over the top as compared to taxes on cigarettes which are a potent health hazard. These taxes, depending on the models of cars, could vary between 50% and 70%. Giving an example, a car coming out of production plant, which costs Rs 100, will result in a purchase price of INR 150 to INR 175 to the buyer. Besides transportation cost and dealer margins, the rest of the escalated figure was due to extensive taxes in the country which again are not same from state to state.
While VAT is charged at the rate of 12.5% in some states, there are other states where buyers have to shell out 14.5% VAT and while road tax may stand at 4% in some states, 16% is charged in other states. The discrepancy in subsidy of diesel is another factor buyers have to contend with when opting for diesel powered vehicles.
All these factors have a direct bearing on the auto industry while the continuous fluctuation on prices of petrol and diesel also has a direct impact. Despite the fact that Centre Govt. recently introduced excise duty cuts, no immediate growth was noted by automakers and customers are still putting off purchases of new car in view of a more secure government which could bring with it stability in policies.
via Economic Times