NEW DELHI: The Government may not be able to give GST tax cuts to automobile manufactures but will try to get the GST Council to agree to rationalize GST on auto components, besides working out ways to reduce automobile loans to pep up demand for the sector.
The Narendra Modi-led Government is working feverishly on a series of packages to revive various sectors of the economy hit by an ongoing slowdown including the automobile sector which along with realty has been accorded top priority.
Top officials said cutting GST taxes on automobiles would be difficult given the fact that state revenues were in a dismal state and tax give-aways were “extremely difficult” and that any “tax cuts in any one sector would also lead to demands from other sectors for similar cuts.”
However, officials said the demand by auto component units who supply to both Indian car-makers as well export globally that instead of taxing some components at the 18 per cent rate and some at 28 per cent, the Government considers taxing all auito components at 18 per cent could be considered.
Said Sumit Dutt Majumder, former Chairman of the Central Board of Direct Taxes, “the demand for rationalizing taxes on auto components, has some logic as it is the aim of tax authorities to remove taxation anomalies.” Officials said the demands would be placed before the next GSDT Council meeting, and said they were hopeful of the auto component makers’ case being taken up.
Officials also said that while a number of steps have been taken to increase liquidity in the NBFC sector which finances much of India’s car and truck sales, and whose poor health is believed to be one of the causes for shrinking automobile sales, “more are likely.”
Automobile barons had met finance minister last week as well as PMO officials with their demands for tax cuts and duty reliefs. While the finance minister had not committed herself to any course of action, North Bloc officials said they were asked to address the issues raised.
The auto sector is facing its worst crisis in two decades and the industry has already reported losses of over 2 lakh jobns in the automobile, ancillary and car dealer showrooms. The sector reported on Tuesday that passenger vehicle sales had shrunk by 35.95 per cent in July this year, with truck sales – seen as an indicator of economic well being of an economy – shrinking by 26 per cent.
India's economic growth has slowed to 6.8 per cent in 2018-19 - the slowest pace since 2014-15, while the country’s growth in the January-March 2019 was a mere 5.8 per cent. The slowdown which started with Real estate sector and auto sector, has now spilled over to other industries as well, including steel and consumer goods.