At present, the auto industry is grappling with the worst slump, with passenger vehicle sales fell 31.57 per cent year-on-year to 196,524 units in August
NEW DELHI: The ailing auto industry must prepare for hard times as the Goods and Services Tax (GST) fitment committee would restrain from giving the green signal to reduce GST rate from 28 per cent to 18 per cent as GST revenue collections have dipped below the Rs 1-lakh-crore mark in August.
Last week, Road Transport Minister Nitin Gadkari said he would urge Finance Minister Nirmala Sitharaman to slash GST rates on automobiles temporarily in order to help revive the industry.
“With the revenue situation quite grim, one cannot recommend a rate cut on autos at this stage, which is one of the highest revenue contributors. In fact, the panel has not made any recommendation but only placed on record the revenue loss it will entail,” a financial daily quoted an unnamed state government official and pane member as saying.
The fitment committee mentioned that such a reduction would end up incurring a potential revenue loss of approximately Rs 50,000 crore per year. Also, of this number, Rs 22,000 crore is for auto parts alone. Worth mentioning here is that the overall revenue from the auto industry comes to approximately Rs 3 lakh crore per year.
News reports suggest that several state governments are expected to oppose the move to bring down tax rates at the GST Council meeting in Goa on September 20. Finance ministry officials, however, pin hopes on the forthcoming Council meeting for a rate cut ahead of the festive season when cars sales get a boost.
The auto industry — the fourth largest in the world — is currently grappling with the worst downturn, with passenger vehicle sales plummeted 31.57 per cent year-on-year to 196,524 units in August, declining for the 10th straight month, as per the Society of Indian Automobile Manufacturers (Siam) data. More importantly, the auto component sector currently employs 50 lakh people and contributes 2.3 per cent to India’s gross domestic product (GDP). It is worth noting that sales of automobiles started to fall since July last year following the liquidity crisis in NBFCs.
Minister of State for Finance and Corporate Affairs Anurag Thakur last week asked the auto majors to reach out to the state finance ministers, who are part of the GST Council, to take a decision, adding that any rate cut needs to be first approved by the fitment committee, then by the GST Council.
Last month, Finance Minister Sitharaman had unveiled a slew of measures to boost demand ahead of the festival season. The government had raised the depreciation benefit on all vehicles to 30 per cent from 15 per cent, deferred a proposed multi-fold hike in the registration fee and reversed a five-year-old ban on government purchases.
Source- Times Now.