No GST reduction for the auto industry: Decrease in corporate tax rate welcomed

The corporate tax rate will be reduced to 22 per cent from the prevailing 30 while the Minimum Alternate Tax scheme will be removed for those companies who weren't taking incentives from the Income Tax Act.

By: | Updated: September 21, 2019 1:49 PM

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The auto industry was in high spirits leading to the GST council meeting. After all, the industry was (still is) in doldrums about the lower sales plus unscheduled plant shutdowns. Moreover, earlier in the day, the finance minister proposed that the corporate tax rate be reduced to 22 per cent from the prevailing 30. She also said that the Minimum Alternate Tax scheme will be removed for those companies who weren't taking incentives from the Income Tax Act. The FM's decision only added fuel to the fire that GST will be reduced for automobiles. However, as things stand now, the finance minister has said that there will be no GST reduction for the auto industry. This in short means that the car as well as motorcycle prices are going to remain the same as they were last night. Perhaps, few manufacturers may even raise the prices to offset the upcoming upgradation cost to BS-VI.

The auto industry lobby had said that GST rates be lowered to 18 per cent from the prevailing 28. The GST Fitment committee had mentioned a couple of days back that reducing the GST on automobiles means a huge loss to the ex-chequer. However, given now that there is no change in the same, auto industry has given out mixed reactions. SIAM president, Rajan Wadhera, said that, "The sub-segment of 10-13 seaters, which is of less than 4 meters, has seen reduction in GST Compensation cess, which is a long pending request of SIAM and is a positive step by the Government. SIAM had requested for abolishing compensation cess for the whole segment of 10-13 seaters vehicles, however, the benefit has been partially met.

Shekhar Vishwanathan, director and vice-chairman, Toyota India, in the meanwhile said, "As announced by the honorable finance minister of India, we are pleased to note that the corporate tax rate for large domestic companies has been slashed from 30 per cent to 22 per cent without incentive or exemption and that of new local manufacturing companies in India has been further lowered to 15% without incentive or exemption. It is also welcome that Minimum Alternative Tax (MAT) will not be applicable when adopting corporate tax under this new provision. This is a welcome structural change and comes as a great respite to corporates. This positive move from the Government of India will lead to further investments in the country as well as create more business opportunities. The ‘Make in India’ initiative will thus get a further impetus.

As far as automotive sector is concerned, we believe that on a mid to long term basis, the government should consider the merits of moving towards a carbon (fuel efficiency)-based GST taxation policy which will not only lead to huge fossil fuel savings but will also help in lowering emissions."

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