The GST council met to discuss the requests of the automotive industry but decided not to reduce GST on cars and bikes as that would lead to substantial loss in revenue.
The automotive industry had been requesting for relief measures to help dwindling sales from the government for a long time now. One of them was of course a reduction in the GST rates. And this particularly is happening at the time when cars are going through a BS-VI transition, leaving manufacturers with a huge inventory of BS-IV vehicles. The automobile industry had requested for a reduction from 28% to 18% GST. The GST Council met in Goa last Friday and while all were expecting the rates to go down, the council has unfortunately not reduced the GST on cars and bikes.
With no reduction of GST on cars and bikes, the prices of them will continue to remain the same, perhaps increase further over time. Guenter Butschek, Managing Director, Tata Motors, in a press conference said, “The recommended drop in the GST rates would be a welcome solution and given that the festive season is here, our discounts plus the cut in the GST would certainly boost sales for manufacturers.”
As memnbers of the GST council met to discuss the requests from various industries for GST reduction, it said that reduction of GST on cars and bikes would lead to a major loss in revenue for the government which could amount to as much as Rs. 50,000 crore. Out of this, Rs. 22,000 crore would be lost just from auto components industry if there was a rate in reduction GST. The committee said that the total revenue from the Indian auto industry is close to 3 million annually.
SIAM President, Mr Rajan Wadhera, said that the auto industry was very hopeful about the council granting some GST reduction but now the industry will have to seek measures on its own. He said, “It is clear that there is no reduction of GST rate on vehicles, from 28 per cent to 18 per cent. The sub-segment of 10-13 seaters, which is of less than 4 meters, has seen reduction in GST Compensation cess, which is a long pending request of SIAM and is a positive step by the Government. SIAM had requested for abolishing compensation cess for the whole segment of 10-13 seaters vehicles, however, the benefit has been partially met. The industry has to find its own balance to enhance demand. We hope the festive season with positive Financial market boost noticed, will bring positive consumer sentiments.”
There has been some positive measure though. The Finance Ministry has proposed to reduce the corporate tax from 30% to 22% and also eliminate the minimum alternate tax for companies that are not availing incentives under the income tax act. To this, Wadhera said, “The reduction of corporate tax to 15 per cent for new companies making fresh investments from 1st October 2019, will support investment and also FDI in the auto sector. This is expected to give a big boost to Make in India for automobile industry.”