NEW DELHI: The country’s largest carmaker, Maruti Suzuki India (MSIL), said it is hopeful that the Prime Minister's proposal will reduce the GST on small cars to 18%. MSIL chairman RC Bhargava said it is a matter of happiness that the Government has recognised that there are a large number of consumers at the lower end of the market, and they need some help in these difficult times.
“We have talked in the past about the concern about the growth rate of the car industry. I won't dwell on this any further because I need to or we all need to see what the consequences of the new GST would be and how it will help to revive the car market. My hope and my expectation are that subject to approvals by the GST Council, we will see a revival of the small car market” said Bhargava during MSIL’s 44th annual general meeting.
The Goods and Services Tax (GST) Council will meet for a two-day session starting September 3. Headed by Finance Minister Nirmala Sitharaman, the council is expected to implement the new tax slab in the next couple of weeks.
At present, vehicles are taxed under multiple slabs combining GST and cess. Small cars are taxed at 28%, whereas large cars (above 4 meters in length and 1200cc in engine size) are taxed (including cess) in the range of 43-50%.
He stated that the GST rate cut will lead to an overall faster growth of the car industry and they will see more industrial activity and a larger generation of employment opportunities. “I think all of this is needed in the coming times when the talent problems are creating a different situation in other parts of the economy,” said Bhargava.
Bhargava stated that the rare earth magnet problem, caused by restrictions on its supply by China, is a warning signal to us. “It also seems that with government intervention the problem is likely to be solved shortly. Our government has entered into a landmark free trade agreement with the United Kingdom, and this could form a template for future agreements,” he stated.
He added that US President Donald Trump has in many ways, forced nations to think as beyond conventional policies and relationships, the use of tariffs in diplomacy is being seen for the first time. “Our tariff rates have gone up to 50% and I believe it is our duty as Indians to do our very best to support the Government and maintain our dignity and respect and not give in to any kind of bullying in this matter,” he said.
He also pitched for having relaxed tax norms for all the technologies that reduce carbon emissions.
“The GST system presently recognizes electric vehicles as the only technology which will lead us to net-zero and help us attain our sustainability goals. Worldwide hybrid cars and electric cars are being used whether it's the United States, whether it's Europe, whether it's China or whether it's Korea, everywhere electric cars and hybrid cars are growing together. In fact, in Europe and USA, hybrid cars are marginally ahead of electric cars. The taxation on electric cars and hybrid cars also in Europe and the United States is very similar,” said Bhargava.
He added, “In India, we believe that there is a need for technologies to be encouraged by the taxation system, not only electric vehicle technology but any technology which leads to cleaner cars, reduction of oil consumption, reduction of pollution in the air and which leads us towards net-zero. I think we need to widen our scope and treat technology as the means of getting to net zero and technology of any kind whether its electric, hybrid, biogas, ethanol doesn't matter. All technologies depending on their contribution towards moving to net-zero should be incentivized.”