Govt un­likely to of­fer GST con­ces­sions to auto cos

Feels Slow­down A Re­sult Of Higher Growth In Last Few Yrs

The Times of India (New Delhi edition) - - Times Global - Sid­[email protected] times­group.com

New Delhi: The gov­ern­ment is un­likely to of­fer GST con­ces­sions to the auto sec­tor as it be­lieves that the cur­rent slow­down is the re­sult of higher growth in the last few years, although pres­sure started build­ing up in the sec­ond half of the last fis­cal.

Of­fi­cials said while auto sales were down over 17% in the first quar­ter of the cur­rent fi­nan­cial year, it was the high base that may have been re­spon­si­ble for it, as there was an over 18% jump dur­ing April-June 2018. “The in­dus­try had main­tained good prof­itabil­ity for the last three-four years and like in any busi­ness there are pe­ri­ods of highs and low. It does not mean that we keep chang­ing tax rates ac­cord­ing to the in­dus­try cy­cle,” an officer told TOI.

Of­fi­cials said sev­eral other coun­tries are see­ing muted de­mand and there ha

Pas­sen­ger Ve­hi­cles

HCV/MCV/LCV

2-Wheel­ers

3-Wheel­ers

To­tal Sales

ve been in­stances in 2009 and 2014 when there was pres­sure on sales for a few quar­ters.

Last week, a com­mit­tee of of­fi­cers has re­jected a de­mand for a GST rate cut from 28% to 18%, ar­gu­ing that it was not jus­ti­fied and it would be tough to re­vert to the orig­i­nal rate once the levy is low­ered. A re­duc­tion in rates for au­to­mo­biles will have to be ac­com­pa­nied by a sim­i­lar low­er­ing for the com­po­nents sec­tor, which will together cost the ex­che­quer Rs 5500060,000 crore an­nu­ally.

Besides, a re­duc­tion in one sec­tor can trig­ger sim­i­lar de­mands from oth­ers, who have been lob­by­ing for a cut for years.

In any case, as re­ported by TOI on Thurs­day, the gov­ern­ment has lit­tle fis­cal space to re­duce rates, which may re­sult in a higher cess on cars or broad-bas­ing it to in­clude more prod­ucts.

A higher cess may ac­tu­ally im­pact two wheel­ers and smaller cars more as they ac­count for over 90% of the sales in the coun­try. It is the larger cars that face 43% burden, which inl­cudes a 15% cess over the 28% GST.

The sec­tion of the auto in­dus­try has ar­gued that the cur­rent tax rate is “ex­ces­sive” and needs to be pared, although in­dus­try lead­ers such as Maruti Suzuki and Ba­jaj Auto have been more cau­tious with the de­mand.

Apart from weak con­sumer sen­ti­ment, the in­dus­try has blamed mul­ti­ple fac­tors for the slow­down, in­clud­ing weak loan flow fol­low­ing the NBFC crisis, given that nearly 80% of the ve­hi­cles in In­dia are fi­nanced.

In ad­di­tion, the weak de­mand in ru­ral mar­kets, higher cost due to roll­out of BSVI and in­crease in ini­tial in­sur­ance outgo due to manda­tory pur­chase of third-party cov­ers have been blamed for a sharp fall in de­mand. But sev­eral auto makers, led by the likes of Toy­ota, have put the blame on GST.

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