Limited-period GST relief for small cars?

THE STOCK MARKET ENDED HIGHER ON FRIDAY, LED BY AGGRESSIVE BUYING IN AUTO STOCKS

NEWDELHI: Theclamourforlowering the Goods and Services Tax (GST) rate for the auto industry, followingthemassiveslowdown in the sector, may prompt the GST Council to announce a rate cut for automobile components and sub-four metre cars when it meets on September 20.

However,thetaxbreakwillbe a short-term stimulus to boost demand, and the GST rate cut maybeannouncedonlyforalimited period. The current rates may be restored after about six months, two officials familiar withthediscussionsbetweenthe central and state governments said,requestinganonymity.This isbecauseraisingtaxratesonceit isreducedisapoliticallydifficult call, the officials added.

TheCentreisalsoconsidering giving some relief to other sectors, especially in the unorganised segment, but a tight fiscal positionmaynotallowittogofor a liberal rate cut across industries, theofficialssaid. Itremains to be seen if cement and larger cars will get any tax relief, they added.Discussionsarebeingheld onwhethertocutbothGSTrates and the cess on automobiles and autocomponents.Cars,bikesand mopeds at presentattract a peak GST rate of 28% with additional cess ranging from 1% to 22%, depending on the length, engine size and type of the vehicle.

Investorshopingforaareductionintaxesbythegovernmentto spurdemandinasloweconomy, helped the stock market end higher on Friday, led by aggressive buying in auto stocks. The Sensex ended at 36,981.77, up 337.35 points, or 0.92%, while the 50-share index Nifty was at 10,946.20, up 98.30 points, or 0.91%. The BSE Auto index climbed 2.54% higher at closing.

Meanwhile, Maruti Suzuki andTataMotorshaveurgedauto component suppliers to build capabilities by investing in R&D and ensure zero defect products. Addressing the suppliers at the 59thannualsessionorganizedby the Automotive Component Manufacturers Association of India inDelhi,thevehiclemanufacturers asked suppliers to pay greater attention to quality, as the auto industry prepares for a transition to new safety measures and BS-VIemission norms.