It is not high GST rate that has caused auto crisis, says Kerala Finance Minister

Pre GST combined tax excluding Service Tax ranged between 32% to 54%. Now tax including Compensation Cess ranges from 29 % to 46% only. If Centre is keen to reduce it further, abolish Cess, Kerala Finance Minister Thomas Isaac tweeted.

By: | Updated: September 9, 2019 1:35 PM

Auto sales, Auto sales india, Auto sales slump, Auto sales decline, gst auto sector, gst rate on auto

Amidst major concerns in the automobile industry over a major sales slowdown, manufacturers have collectively asked the government for a reduction in GST to help revive the slump. The Indian automobile industry body SIAM has been asking the government for long to have GST reduced on automobiles. Before the next GST Council meeting takes place later in September, Kerala Finance Minister Thomas Isaac has said that it is not the high rate of GST that has caused the auto crisis and that Kerala would oppose any proposal by the Centre to reduce GST on cars and two-wheelers.

“It is not high GST rate that has caused auto crisis. Pre GST combined tax excluding Service Tax ranged between 32% to 54%. Now tax including Compensation Cess ranges from 29 % to 46% only. If Centre is keen to reduce it further, abolish Cess. The rate would come down to 28%,” Isaac wrote in his latest tweet.

“If the Centre is keen on reviving the auto demand ensure liberal credit with interest subvention for the rest of the year. Let the governments and RTCs make advance purchases of autos as in 2010. Stop the knee jerk reductions in GST rates.”

Earlier this month, Issac said that reduction in tax on automobiles would not help and instead it would hurt the state's revenue earnings. He suggests that the instead of lowering GST on auto, teh government should go for fiscal expansion like it did in 2009.

With the Indian automobile industry facing the worst sales slump in August this year with a 32 percent decline in passenger vehicle sales, SIAM has suggested to the government that GST be further reduced from the current 28 percent to 18 percent to help revive the industry.

32 percent drop in passenger vehicle sales in August worst ever: SIAM

Recently, auto manufacturers have had to cut production to match the tapering demand which has resulted in massive job losses. The finance minister had previously suggested some measures that would help the auto sector regain momentum but industry experts had termed them as inadequate.

The industry produced a total 12,020,944 vehicles including Passenger Vehicles, Commercial Vehicles, Three Wheelers, Two Wheelers and Quadricycle in April-August 2019 as against 13,699,848 in April-August 2018, registering a de-growth (-) 12.25 percent over the same period last year.

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