Finance ministry official said that Indian carmakers should reduce  their royalty payments to foreign partners to bring down costs instead of seeking tax cuts, after reports came that Toyota would halt expansion in the country due to high taxes. Toyota Motor Corp won’t expand further in India due to the country’s high tax regime, a setback for Prime Minister Narendra Modi, because everyone is trying to recover their economy after coronavirus pandemic.

Shekar Viswanathan said that the government keeps taxes on cars and motorbikes so high that companies find it hard to build scale, said vice chairman of Toyota’s local unit, Toyota Kirloskar Motor. The high tax also put owning a car out of reach of many consumers, meaning factories are idled and jobs aren’t created, he said. He said that the manufacturer gets only 5-7% on sale of a single car. Whereas the govt gets 28% for doing nothing. In addition, the state governments get road tax, registration tax, etc. There is an element of unfairness for the consumer.

In a meeting, India commerce minister said last month with Indian automakers, including local representatives from Toyota and Maruti Suzuki, that they should find ways to reduce royalty payments to foreign parent companies for use of technology or brand names.

Maruti Suzuki paid 38.2 billion Indian rupees ($518.5 million) in royalties to its Japanese parent Suzuki Motor in the year ending March 31, 2020, amounting to 5% of its revenue, according to its annual report. Privately-owned companies such as Toyota Motor`s India arm paid $88 million or 3.4% of revenue to its Japanese parent, government data shows.