CHENNAI: If the government provides Goods and Service Tax cuts for auto component sector and injects liquidity into non-banking financial companies to lower auto financing rates, will it prop up the struggling automobile sector?
Automobile makers say the move may not provide a stimulus to the sector until Goods and service Tax is reduced from 28 per cent to 18 per cent for automobile manufacturers also.
BC Datta, vice-president of Hyundai, said, “Uniform GST rate for auto component manufacturers and injecting liquidity into NBFCs is a positive move but we feel the government should have considered the auto manufacturers’ request as it will reduce the prices of passenger cars and could have wooed customers.”
The concern of auto manufacturers is echoed by auto component manufacturers also. Auto-makers’ overall share is 10 per cent in the global automobile sector and leaving out the Original Equipment Manufacturers (OEMs) is like leaving out the mother from the stimulus package, says a car component maker.
“We will be approaching the Finance Minister again with our request if it is turned down,” said Datta. Explaining how the 10 per cent GST reduction would be passed on to the customers, he said the i10 brand of Hyundai priced at `3.5 lakh would become cheaper by 35,000 for consumer if the GST rate was reduced from 28 pc to 18 pc. “This will woo more consumers,” he said. If the government is considering tax cut for auto component makers, it will benefit them as they will have to pay less for the purchases they are making. But it will not have any impact on the prices of vehicles and as a result, the production in the plant will not increase, said Dutta, whose company has cut down the production by 10 per cent.
An auto component manufacturer said that currently the production cut across India was 22 pc to 25 pc, impacting over 20,000 auto component manufacturers. This is apart from the 830 registered members who come under Automobile Component Manufacturers Association.
Currently, one lakh people in auto component industry have lost jobs, 2.5 lakh people in the dealerships and 15,000 in the vehicle industry, an auto component manufacturer claimed.
It is learnt that auto component manufacturers demanded a uniform GST of 18 per cent besides improving liquidity and scrapping or recycling policy for vehicles in India.
“Until we get the notification on GST cuts and infusing of liquidity into NBFCs, we won’t comment on whether the government is considering reduction of GST or not,” an auto component manufacturer said.