Need for Government to Resort to GST Cut

Need for Government to Resort to GST Cut
Need for Government to Resort to GST Cut

Automobiles currently come under the 28 % GST slab

There seems to be no end in sight to the woes of the Indian automotive industry that is passing through a deep sales slowdown. The severity of the downturn appears to have prompted the government to take congnisance of the same and come out with a slew of measures so that some semblance of normalcy is restored in terms of triggering market demand, which has plumbed a new low over the past many months.

The so-called healing measures from the government like hiking the the depreciation cost of automobiles purchased between now and 31 March 2020 to 30 % from present 15 %, putting off jacking up increasing one-time vehicle registration fee until June 2020, besides lifting the ban on government departments to purchase new vehicles to replace their existing fleet of vehicles were aimed at boosting demand. But it does appear the government's demand-boosting measures have not been adequately responded by the market. Further, the Finance Minister's series of announcements on credit availability and reducing credit cost haven't really got down to the NBFCs that serve as a 'big finance helping hand' for the automotive industry. There also appears to be confidence-deficit as well as a wait-and-wait approach among consumers with BS VI kicking in April 2020.

Sales numbers of various Indian auto companies witnessed a 30 % dip in sales of passenger vehicles for the month of August 2019. The prevailing industry scenario thus brings to the fore one thing crystal clear - the government has to do much more than just doling out these measures - quite obviously, when one talks of doing much more by the government it points to the long-standing demand of the industry - GST cut on automobiles from current 28 % to 18 %.

The government has so far distanced itself from making any announcements on the GST cut on automobiles. But Finance Minister Nirmala Sitharaman's recent statement that 'the government is meeting different industry people, listening to their recommendations and responding to them' makes it amply clear that the government is open about slashing the GST cut on automobiles. Even a GST cut as a temporary measure, if not a long-term, one would go a long way in boosting demand in the auto industry, something a top official of a top Indian OEM had suggested recently.

In fact, the government must act promptly to slash GST on automobiles and also mull ways on how to trigger demand for the industry, which has been reeling from the sustained slowdown. Maybe the GST cut is the trigger the auto industry probably needs to get back on its feet.