Government Mulling On Reducing Tax Rates For Passenger Vehicles

There has been no sign of recovery in auto sales and month after month automakers are recording decline in sales. The situation needs government intervention for the market to revive. After reviewing the economic slowdown and the mayhem in the auto sector, the government did announce measures to infuse more capital in the market in a bid to improve the cash flow which would uplift customer sentiments. While those steps may be effective over a period of time, the industry needs an emergency fix to stop further deterioration of volumes and it looks like the government is acknowledging it as well.

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SIAM and several automakers have asked the government to reduce the GST rates on passenger vehicles and peg them under 18 per cent tax slab instead of 28 per cent which is the highest bracket. Speaking to the media in Chennai, Nirmala Sitharaman- Finance Minister of India said, "The tax cut proposal has got to go to the GST Council, where all state finance ministers assemble. It is for them to take a call. I have told them (automakers) that I will take it to the Council but the final decision will be theirs. I will wait for the GST Council to take a call."

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Along with working on improving the liquidity flow in the economy, the government also took some specific measures after delegation from SIAM met the Finance Minister last month. Measures like resuming purchase of new vehicles by government departments, 15 per cent higher depreciation on vehicles and postponing one-time vehicle registration hike to June 2020 were announced. While the measures may help in the long run, carmakers are asking for a reduction in GST rates to keep a check on the prices. Vehicles across segments are likely to become more expensive once BS6 norms kick in April 2020 onwards. Many have already lost their jobs and around 10 lakh jobs are at stake owing to the biggest downturn the industry has seen in almost two decades.