Auto firms should cut royalty payment to parent cos: FinMin

New Delhi, September 17

Auto companies should cut costs by reducing royalty payments to their parent companies abroad instead of asking the government to reduce GST, Finance Ministry sources said on Thursday, responding to criticism on high taxes in India.

Most globally established companies in the sector have flourished in the current taxation and regulatory regime, which is evident from the huge royalty payouts made by Indian partners to their foreign parent firms, they added.

Toyota Motor Corp is not looking at further expansion in India due to the country’s high taxes, the firm’s vice-chairman of India unit Shekar Viswanathan had reportedly said in an interview earlier this week.

The Finance Ministry sources said India’s tax policy regarding the automobile sector has been quite consistent for the past three decades now in the form of allowing foreign investment and incentivising domestic manufacturing.

GST rates on automobiles are less than what VAT and excise duty rates used to be in the pre-GST times. All of a sudden, dissent in some quarters on tax rates on automobiles is surprising, they added.

“In fact, these companies should cut down their costs of manufacturing by cutting down the royalty payments to their parent companies abroad instead of asking the government to reduce GST,” a source said. — PTI