FM Pressing for GST Rate Cut On Automobiles: Raising Hope of Revival for Auto Players

GST Rates Automobile Industry

Finance Minister Nirmala Sitharaman has shown a beacon of hope for the automobile dealer regarding the alteration of the GST rate on automobiles as an attempt to piece down the gloomy and stagnant scenario of automobile industries.

The industry had been putting up a howl for bringing down the GST rate from 28% to 18% on automobiles. It’s been 10 months that industry is facing downward slope and many imminent automobile dealers are encountering disheartening sales figures.
On Sunday, FM Nirmala Sitharaman presented a squad of measures which includes hiking depreciation benefit to encourage the domestic automobile industry. The government has set forth a proposal to the GST Council to cut down the tax rate from the highest tax bracket of 28 per cent – a measure to deal with the automobile plunge.

The aggregate sales of the top six car manufacturers of India has showcased a drop of more than 29 per cent (year-on-year) in August 2019. Maruti Suzuki, India’s largest carmaker has shown a decline in sales by 36 per cent with 93,173 units of August 2019 in relation to sales of 145,895 units in August 2018. In last both the months i.e. July & August, Maruti has sent less than 100,000 cars to dealerships.
Other five top carmakers – Hyundai Motor India, Mahindra and Mahindra (M&M), Honda Cars, Tata Motors and Toyota has also registered a decline in sales by 16.6 %, 31.6%, 51.3%, 58% and 24.1%, respectively.
Last four months of April, May, June and July of the year 2019 have been the breakdown phase for the automobile industry with the constant decline in sales figure by 17.07, 20.55, 17.54 and 31 per cent, respectively.

Read Also: GST Impact on Automobile and Spare Parts Industry in India

To breathe new life into the sector, few measures have been declared by our Finance Minister on 23rd August. The measures include increment in depreciation benefit on all automobiles from 15 to 30%, holding off the elevation in the registration fee (as proposed) till June 2020 and backpedalling a five-year-old ban on government purchases.

The concern regarding the unanticipated & chronic downturn in the domestic auto market sustains until the customer reaction on introduction to the shift from BS-IV to VI emission regulation in April 2020.

According to FM, the government has foregathered with stakeholders of different industries, including the auto industry, which is behesting assistance and the government is trying to resolve their issues and implement their suggestions. She said, “One of the suggestions was the reduction of GST rate for the automobile sector,”. She also informed that such authorities are in the hand of the GST Council and the next GST council is going to 37th meet on 20th September in Goa.

After the 10th consecutive month of depressing auto sales and the intensifying outcry for a GST rate cut by the auto industry, the government may take a decision that would prove to be good news for auto players. The automobile industrialists are expecting to encounter higher sales in the forthcoming festive season and envisioning GST rate cut as a sales booster.

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