As predicted, monsoon is bringing lots of cheers to some sections of the automotive industry. The government is also optimistic about getting the Goods and Services Tax (GST) Bill through Parliament by the end of the current monsoon session. If the Bill is passed it will be, along with a good monsoon, double delight to the automotive industry. GST’s game changing indirect tax reform and its implementation will have a positive impact on the industry in the long-term. GST will be good for the automotive sector mainly owing to the removal of the cascading effect of taxation on it. Currently the manufacturers have to pay 2% Central Sales Tax (CST) to procure components or raw materials. If GST is implemented this will not happen.
The opposition to GST by States like Tamil Nadu is based on the fear of losing revenue. Another reason is that some States give huge incentives to investors. These incentives are based on the Value Added Tax (VAT) and CST that they pay. When GST comes, CST will go. These States will have to carry out their commitments of incentives from what they collect. They expect the Centre to compensate.
For the last 1 month everyone has been discussing Brexit and its impact on India. It will be too early to comment on it as the revised UK-EU relationship is yet to be defined. Early this month, the Union Commerce and Industry Minister, Nirmala Sitharaman, had said India and the UK were exploring the possibility of a free-trade agreement. Is it a welcome move? We have to wait and see.
In this issue we have focused on the auto components industry in the Southern States. With the futuristic and investor-friendly policies, they have made the region the automotive industry hub of India. Almost all the global automotive OEMs and component manufacturers have their base in the South. They have ushered in the global technologies and innovations to the Indian automotive industry. The State Governments of Tamil Nadu, Karnataka, Andhra Pradesh and the newlyformed Telangana are vying with one another to expand their industrial base. The logistics support from well-connected roads and highly competent ports are added attractions for the national and international investors who have also export plans.
In our Cover story we have highlighted some the home-grown and multinationals that are transforming the auto component industry landscape in the country. We also recently visted Rane TRW Steering Systems Viralimalai plant near Trichy in Tamil Nadu to know how quality products are manufactured. It was a delightful watch, hope you will also enjoy reading about it in the Shopfloor Sojourn.
Wishing you happy reading.