Government Fiscal Stimulus A Must-Have for Auto Industry

Government Fiscal Stimulus A Must-Have for Auto Industry

Government Fiscal Stimulus A Must-Have for Auto Industry
{data-social}

The auto industry is eagerly awaiting a GST cut on new vehicles from 28 % to 18%

 The Indian automotive industry is passing through an exceedingly challenging phase and its woes do not appear to taper off anytime soon. This precisely explains why the government must promptly intervene and offer a much-needed fiscal stimulus package to the auto industry, which is a crying need to arrest the plunging sales as well as job losses. Further, the wave of floods across many parts of the country as well as the industry’s shift to BS VI from April 2020 has only added to the concerns of the industry.

And to serve the best interests of the Indian auto industry, the government can swing into action and reduce the GST on new vehicles to 18 % from 28 % currently – this has been a long-standing demand from the auto industry and it is about time the government accedes to this ‘GST cut’ demand. If at all, the government is reluctant to keep new vehicle GST in the 18 % bracket, they should at least mull the option of reducing it to 18 % from 28 % as a temporary measure, and can always revert to the 28 % GST slab on new vehicle once the industry get back on its growth feet. Such a move will help revive demand in the auto sector, which has been reeling over the last past few months. As things stand it does appear that the prevailing sales slowdown could be a protracted one, if there are immediate government policy interventions. Besides the GST cut from 28 % to 18 %, the government can announce a vehicle scrappage policy as well as facilitate easy credit availability to the auto sector – all these measures can boost the auto sector in a big way.

Of course, the auto industry has reasons to be optimistic about the government coming to their aid as the latter has taken cognizance of deep automotive sales slowdown in the country. It may be worth recalling here the government had recently slashed GST on electric vehicles from 12 % to 5 % and on electric vehicle chargers from 18 % to 5 %.

The country’s passenger vehicle sales declined 31 % on year in July at 200,790 units, while automobile sales declined 19 % — marking the steepest fall since December 2000. The sales downturn has forced automotive companies to lay off people, especially temporary workers. The country’s leading carmaker has slashed 3,000 temporary jobs – a few others have followed suit. Job losses are more a bigger concern for suppliers and dealers than OEMs for now.