Mahindra SOS to govt: reduce GST, roll back cess to revive auto sector

As a vicious slowdown in the automobile sector puts millions of jobs at risk, Mahindra and Mahindra Ltd (M&M) chairman Anand Mahindra has called for a reduction in various taxes and levies to breathe life back into the industry.

“The most obvious and welcome first aid would be some temporary relief on the GST front, either by modifying the slabs, or, if that is not possible, by removing the cess,” Mahindra said at the company’s 73rd annual general meeting (AGM) in Mumbai. “Another suggestion would be a re-look at the registration fees, which have gone up very substantially and a roll back of the increases in road tax mandated by state governments after the introduction of GST. I’m hopeful that these few actions along with the traditional post-monsoon revival will set us back on track and positively impact the economy.”

However, Mahindra said he understood the government’s scepticism on giving GST concessions. “I can well understand the government’s hesitancy in looking at GST concessions. But there is a paradox here. The auto industry contributes revenues of upwards of ₹180,000 crore to government treasuries. The paradox is that while the government needs to be lauded for its fiscal responsibility, the current slowdown in the auto industry poses a greater threat to the financial arithmetic.”

Highlighting the impact of the auto industry slowdown on tax collection, Mahindra, citing Siam estimates, said, “The slowdown has resulted in an 8% loss in GST collection in the first six months of 2019. Just to catch up with the FY19 GST collections, the auto industry will need to grow at a rate of at least 7% in the remaining eight months of the FY20.”

He called the auto industry “a living, breathing ecosystem that has economic and social repercussions well beyond the number of vehicles sold.”

“In India, it constitutes 7.1% of the GDP, and 49% of the manufacturing GDP. Inclusive of its value chain, it supports almost 37 million jobs. Its ecosystem runs wide and deep,” said Mahindra, stressing the auto sector is a key driver of the economy in almost every country “with a huge multiplier effect”.

Mahindra said a revival of the auto industry would lead to a revival of freight, leading to a revival of truck sales. “All this revival would lead to the revival of jobs and hence, consumption. In a virtuous cycle, that would get us closer to the $5 trillion economy, which is our common goal,” he added.

On the liquidity crunch, difficulties in raising loans, and Wednesday’s cut in the repo rate, Mahindra said the auto industry needs lending support for suppliers as well as the dealers. “On the resource side, we need support for wholesale and retail financing. On this front, I think all the right steps are being taken. The rate cuts necessary for revival have been put in place and the future looks brighter for our stressed NBFCs. I am confident that these measures will bear fruit, creating greater liquidity for NBFCs, which will ultimately make its way into the hands of the consumer. I would appeal to lenders to take a more supportive approach to the suppliers and dealers, who are the backbone of the auto ecosystem,” he remarked.

Mahindra, who has backed the government push on electric vehicle adoption, said making India a global manufacturing hub for EVs is “a clear and achievable goal.”