Honda, General Motors, Mercedes-Benz, Ford and Suzuki have come under Indian tax authorities’ lens for paying less tax by selling few of their cars at discounted price. The excise paid on the cars sold for a loss is lower than the tax liability as per the sticker price.
The manufactures at times are forced to sell their cars below the tag price and at times even at loss due to low demand. The car makers need moving capital and hence at times it becomes imperative that the inventory is cleared even at prices below cost.
The Indian manufacturers currently pay excise duty on the transaction cost of a car, whereas the tax authorities want the duty to be paid with respect to the normal market value irrespective of the actual sale price. General Motors and Ford said they are cooperating with the tax officials however Mercedes-Benz, Honda and Suzuki declined to comment.
"Whatever price you want to sell, please sell, but pay the excise duty on the normal price, whether you are into automobile, textile or something else. Why should the department get penalised for that? It's your own choice." said a senior tax official to ET.
The standard practice around the world is to tax the commodity on the actual transaction value. We understand the government is looking to generate additional revenue to limit the fiscal deficits, but we don’t think this way of taxing the already burdened automobile industry is the best option.