Automobile industry should consider reducing their royalty payments to foreign parent companies instead of seeking tax cuts from the government, reports said on Thursday, which cited sources from finance ministry.

The response comes days after the criticism from Toyota India, which highlighted that higher tax rates were hurting the automotive sector.

An IANS report on Thursday quoted a source from finance ministry as saying, “The industry has on its part delivered. It has contributed by way of large investments and employment. All of a sudden, dissent in some quarters on tax rates on automobile is surprising. 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.”

The automobile sector has suffered massively during COVID-19 pandemic-induced lockdown period. During the past five months the sector has witnessed a 50 per cent fall in passenger vehicle sales. As a result, automakers tried to lobby the government to lower tax rates, reported Reuters on Thursday.

The Finance Minister Nirmala Sitharaman had recently said that concerns of the automakers in GST would be taken to the GST Council.

However, the same IANS report quoted sources as saying that the GST Council is unlikely to accept a cut in rates as most states are not in favour in tampering with the tax rates during the current pandemic. The Council is now focused on GST compensation and how to mobilise resources to bridge the gap between expected and actual GST collection this year.

Vehicles in India are sold as high as 28 per cent and after additional levies, it can go up to 50 per cent for few models.