The Modi Government has left no stone unturned in inviting foreign investors with claims of an improved business environment backed by unprecedented reforms in the past six years, but what many industry players face is a different story altogether.
From high tax levies to retrospective applicability of taxation, companies including multinational corporations (MNC) face a number of obstacles in running and expanding their businesses in India, nonetheless they continue to operate in the country, given the large market it offers to them. There are a host of global giants including Vodafone Group, Cairn Energy and Walmart which had to face regulatory issues in the country.
Noting that for foreign investments to come in, it is essential that appropriate incentives, single window clearance among other incentives are provided, Sumit Batra, Partner at India Law Alliance, says that India has not been able to provide such comfort to foreign investors. “Issues such as retrospective applicability of tax laws, change in overall business sentiments, tedious compliances and an era ushered by ordinances, has made things difficult,” Batra told IANS.
Several bigwigs have from time to time raised their concerns regarding the issues faced in the one of the largest consumer markets in the world, the latest being Shekar Viswanathan, Vice Chairman of Toyota Kirloskar Motor, the Indian unit of Toyota. In a recent interview Viswanathan said that Toyota Motor Corp will not expand further in India due to the high tax regime in the country, adding that apart from impacting expansion plans, high levies also impact demand and eventually halt job creation.
Later, in a statement, Toyota Kirloskar Motor said that it continues to be committed to the Indian market and operations here are an “ingteral part” of its global strategy. It, however, added: “In wake of the slowdown that has been exaggerated by the COVID-19 impact, the auto industry has been requesting the government for support to sustain the industry through a viable tax structure. We remain confident that the government will do everything possible to support industry and employment.”
According to Suman Chowdhury, Chief Analytical Officer at Acuite Ratings and Research, while the GST applicable for vehicles is pegged at 28 per cent, the purchase taxes on cars in India have been historically high and given the fiscal compulsions, the government may not be in a position to reduce the taxation rates in the current scenario.
“With regards to policies, what can possibly help the sector is the introduction of the scrappage policy to ensure removal of polluting vehicles on the road and its replacement by new BS-VI models,” Chowdhury told IANS.
According to Sridhar V, Partner with Grant Thornton Bharat LLP: “Some of the policies like End Of Life for vehicles they believe could trigger a fresh demand across but more so in the truck segment.