With automobile sales falling to a record low in 2019 and showing no sign of recovery in near future, automakers have once again asked the central government to bring down the GST rate on vehicles from 28 per cent to 18 per cent. According to automakers, the auto sales will take a big hit in coming months due to higher prices of BS-VI compliant vehicles, which in turn will adversely impact the demand.
“The government should also look at offsetting the increase in GST costs due to the recently-introduced BS-VI norms to stimulate the market demand for ICE (internal combustion engine) vehicles,” said Rajeev Chaba, president and MD, MG Motor India. However, sources in the finance ministry have indicated that they are not in a position to go for such a big cut.
Automakers and industry body Society of Indian Automobile Manufacturers (SIAM) had earlier lobbied hard before the GST Council for a 10 per cent cut, but could not avail it. Further, Y S Guleria, senior VP, marketing and sales, HMSI, is not very hopeful about the government giving any concession to the auto industry over GST rates. However, he added that if this happens, it will definitely help from a customer point of view.
“In the near future, we do not see any positive revival coming in the market, and after some time in the longterm ... But for the next two quarters, we are not that upbeat because there is a transition which is going to happen from April 1,” Guleria said, referring to the BS-VI emission norms becoming mandatory.
According to SIAM president Rajan Wadhera, prices of BS-VI compliant commercial vehicles can go up by 8-10 per cent and prices of BS-VI compliant passenger vehicles can go up by 3-7 per cent. “Most automakers will be passing on this increased cost to consumers. We have seen when prices go up to this extent, demand is impacted.
The government should lower GST so that auto sales do not get affected,” Wadhera said, releasing December auto sales figure. Besides rate cut, SIAM is said to have proposed the government to offer an incentive-based vehicle scrappage policy to boost demand. Reeling under major slowdown for over a year now, India’s auto industry recorded its worst-ever sales decline in two decades in 2019.
According to the SIAM data, overall auto sales in 2019 declined by 13.77 per cent at 2,30,73,438 units as against 2,67,58,787 units in 2018, as vehicle prices witnessed a significant hike in the last 18 months, economic activity slowed down and rural consumption fell to a record low. Automakers want the government to make electric vehicles (EVs) popular. “We hope the government provides the right policy, incentives, charging infrastructure to put more EVs on roads,” said Chaba.