Urging the government to take a few measures to revive the auto sector, Mahindra & Mahindra (M&M) Chairman Anand Mahindra has pitched for revising the Goods and Services Tax (GST) and rolling back the hike in road tax mandated by state governments. The company is fully committed to realise the government’s ambitious electric vehicle (EV) goals and suggested that banks should pass the benefit of rate cuts to borrowers.
“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. Another suggestion would be a re-look at the registration fees which have gone up very substantially and a roll back of the hike in road tax mandated by state governments after the introduction of GST,” Mahindra said at company’s annual general meeting in Mumbai.
Further, Industry association bodies such as Society of Indian Automobile Manufacturers (SIAM), Automotive Component Manufacturers Association and Federation of Automobile Dealers Associations have requested to slash GST rate from 28 to 18 per cent.
The auto industry has also requested the government to roll back its proposal to hike registration fees. However, the government is unlikely to go for a GST cut as it fears a fall in revenue collection, according to experts.
Mahindra, however, feels, there is a paradox here. “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 industry poses a greater threat to the financial arithmetic.”
Citing SIAM data, he said: “The slowdown has resulted in 8 per cent 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 per cent in the remaining eight months of the FY20. I do believe that kick starting the auto industry with a few short-term measures will serve a greater national purpose.”
According to him, the auto sector, in almost every country, is a key driver of the economy, with a huge multiplier effect and India is no different. “In India it constitutes 7.1 per cent of the GDP, and 49 per cent of the manufacturing GDP. Inclusive of its value chain, it supports almost 37 million jobs. Its ecosystem runs wide and deep.”