The tax structure inflates the on-road price of passenger cars by nearly 50% in India, while the same in China is limited to 23-28%, according to a research note published by Citigroup.The Chinese levies include a consumption tax, ranging from 3-20% depending on engine displacement, and around 17% 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 over and above the ex-factory price.The tax burden would increase 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.Since taxes now account for around 35-40% of the sales prices of cars and two wheelers, the new measure, if implemented, would raise selling prices sharply and curb demand especially in an environment of higher interest rates, he added.
