Home / Industry / Manufacturing /  Govt looking into GST rate cut for automobile sector

The Union minister of Heavy Industries and Public Enterprises Prakash Javadekar on Friday said the central government is looking into automobile industries recommendation for a reduction in Goods and Services Tax (GST) rates by 10% across all categories of vehicles. The announcement will be made soon, he added.

Speaking at the 60th Annual Convention of industry body Society of Indian Automobile Manufacturers (SIAM), Javadekar said, "We are in discussion with finance minister Nirmala Sitharaman on GST issues."

Commenting vehicle scrappage policy, Union minister said that central government has received all inputs from stakeholders. "Announcement on the scrappage policy will be made soon," Javadekar added.

India's automobile industry has been severely hit by coronavirus outbreak. The pandemic had worsened the demand in the industry, which was already going through a slowdown in last year.

"The passenger vehicle segment witnessed the longest slowdown in the past two decades spanning nine quarters. Similarly, commercial vehicles faced second-longest slowdown in the last 15 years that spanned five quarters," SIAM President Rajan Wadhera said. The two-wheelers segment also saw continuous slowdown for six quarters, he added.

The reduction in GST rate on two-wheelers, which stands at 28% currently, has been a long-standing request from the manufacturers. Recently, finance minister Nirmala Sitharaman also said that the GST Council will look into the proposal of lowering the GST on two-wheelers.

Seeking government support to offer some form of demand boosters, Wadhera said: "We feel that whatever we are talking on reviving demand will provide the required push to consumers to come to dealerships."

He also mentioned that manufacturers were not in a position to invest further in the implementation of upcoming government regulations. "For (implementation of) upcoming regulations, investments are very steep and the commensurate revenues have not been realised by the industry due to lack of consumer demand," Wadhera added.

So, the industry does not have the ability to invest further into the implementation of new regulations like Corporate Average Fuel Efficiency (CAFE) norms from 2022 onwards, he noted. Wadhera also added government support is required to pursue the targets set under the Automotive Mission Plan 2026 (AMP 2026). There should not be an overdose of regulations, he further mentioned.

Talking about the vehicle financing, Uday Kotak, managing director and chief executive officer, Kotak Mahindra Bank, said, "Major investments in infrastructure for long-term foundation of the Auto Sector is required. SIAM needs to partner with the government & lead the way for smooth functioning of the Auto Sector."

(With inputs from agencies)

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