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Centre looks to cut GST rates on cars amid sharp decline in sales

Finance Minister Nirmala Sitharaman kindled hopes of a GST rate cut on the same day that several leading auto players announced dismal sales figures for August. The auto industry has long called for a reduction in the GST rate from 28 per cent to 18 per cent to accommodate the downturn.


twitter-logo BusinessToday.In        Last Updated: September 2, 2019  | 12:26 IST
Centre looks to cut GST rates on cars amid sharp decline in sales
FM Nirmala Sitharaman announced a slew of measures, including hiking depreciation benefit, on August 23 to give a boost to the domestic automobile industry

Against the backdrop of the 10th straight month of declining  auto sales and the increasingly loud clamour for a GST rate cut for the sector, the government may finally be ready to deliver some good news. Finance Minister Nirmala Sitharaman on Sunday hinted that the government has made a proposal to the GST Council to bring down the tax rate from the highest slab of 28 per cent.

According to her, the government has met up with stakeholders of various industries that are seeking relief, including the auto sector, and is addressing their issues and recommendations. "One of the suggestions was the reduction of GST rate for the automobile sector," IANS quoted her as saying, but she emphasised that the authority lies with the GST Council, which is scheduled to meet in Goa on September 20.

Incidentally, the FM rekindled hopes of a GST rate cut on the same day that several leading auto players announced dismal sales figures for August. The cumulative sales of the top six carmakers in the country showed a decline of over 29 per cent (year-on-year) in August 2019.

India's largest carmaker Maruti Suzuki posted a steep 36 per cent decline in sales last month at 93,173 units compared to 145,895 units in the same month last year. This was the second month in a row that Maruti has dispatched less than 100,000 cars to dealerships.

Similarly, Hyundai Motor India and Mahindra and Mahindra (M&M) registered a 16.6 per cent and 31.6 per cent dip in sales, respectively, despite multiple new launches in the past year for cushion. Those without the luxury of new products fared worse. Honda Cars saw its sales slide by 51.3 per cent, Tata Motors by 58 per cent and Toyota witnessed a 24.1 per cent dip.

In April, May, June and July this year, passenger vehicle sales in the country declined by 17.07, 20.55, 17.54 and 31 per cent, respectively. The outlook here on continues to be grim due to uncertainty over how customers will react in the run up to the switch from BS IV to VI emission norms in April 2020.

To revive the sector, Sitharaman on August 23 announced a slew of measures including hiking depreciation benefit on all vehicles from 15 to 30 per cent, deferring a proposed multi-fold increase in registration fee and reversing a five-year old ban on government purchases to provide a boost to the domestic automobile industry, which has been battling an unprecedented and protracted slowdown in the domestic market. She also deferred the proposed hike on registration fee of vehicles till June 2020.

While the auto players are now hoping that sales will pick up in the coming festive season. A GST cut would be the trigger to reverse the consumer sentiment.  

Also read: Slowdown Blues: Car sales crash 29% in August; all eyes on Sep 20 GST meet

Also read: Higher depreciation, reversal of ban on purchases, deferment of registration fee hike announced to boost auto sector

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