The automotive industry had already raised red flags on the sales hitting an all time low in the country and this at a time when the BS6 transition was just around the corner. The industry knew, that it would face a lot of problems with BS4 inventory and hence had recommended to the Finance Ministry as also the GST Council to reduce the GST rates on cars from 28 per cent to 18 per cent. The GST Council met in Goa today and all eyes were on rates coming down, which would have helped the cause of the automotive industry. However, there's no such relief provided.
Also Read: Auto Industry Reacts To Finance Minister's Proposal To Reduce Corporate Tax
There were no GST rate cuts announced and that means there will be no change in the price of cars and bikes. In a press conference yesterday, Guenter Butschek, Managing Director, Tata Motors 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."
We had told you just this week that the GST Fitment Committee (a panel of officials from the GST Council, which discusses requests from various industries for GST reduction), said that reduction on GST rates for automobiles will lead to a major loss in revenue and that to the tune of Rs. 50,000 crore. Out of this amount, Rs. 22,000 crore will be the result of cutting GST rates for auto components. According to the committee, the total revenue from India's auto industry is close to Rs. 3 trillion, annually.
SIAM President, Mr Rajan Wadhera, stated that the auto industry was very hopeful of GST reduction and now the company has to find its own way to combat the slowdown. 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."
However, it's not all bad news for the auto sector. The Finance Minister has proposed reduction in the corporate tax rate to 22 per cent from 30 per cent and eliminated the minimum alternate tax for companies that are not availing incentives under the income tax act thus giving a big boost to Make-In-India as also the automobile industry.
Reacting on the move, Wadhera had 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."
