Carmakers demand GST cut before festive season

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Updated: September 6, 2019 7:16:14 AM

The industry has been for long seeking reduction in GST rates. Guenter Butschek, CEO and managing director at Tata Motors, said while the GST cut is extremely important to combat the slowdown, it’s more important that the government clarifies if there will be a cut or not.

Auto industry, Auto industry news, Auto industry slowdown, Auto industry news 2019Pawan Goenka, managing director at Mahindra & Mahindra (M&M), said whenever there was a slowdown in auto sales in the past, a cut in taxes has helped in revival.

Auto industry executives on Thursday made a strong case for an immediate cut in GST on automobile products, stating that if it is not done before the festive season, there could be more job losses due to frequent production cuts.

Pawan Goenka, managing director at Mahindra & Mahindra (M&M), said whenever there was a slowdown in auto sales in the past, a cut in taxes has helped in revival. “When the 2013-14 slowdown happened, there was a 4% reduction in excise duty, in 2008-09, it was a 6% cut. Data says immediately after the reduction, volumes went up,” Goenka said at a round-table with the media at the sidelines of the Siam annual convention.

The industry has been for long seeking reduction in GST rates. Guenter Butschek, CEO and managing director at Tata Motors, said while the GST cut is extremely important to combat the slowdown, it’s more important that the government clarifies if there will be a cut or not. “If it is possible to let us know here and now loud and clear because the customer expectation this time is high and it is also a reason we have seen lots of booking cancellations, Butschek said.

He added that showrooms are empty because the customer is expecting a better deal after the GST cut. “Customers are expecting that after September 20, they will get a good deal but if we miss this, we will miss the festive season. If there is no change in GST, we would have lost four weeks,” Butschek said.

TVS Motor Company chairman Venu Srinavasan said in the last two years, two-wheeler prices have gone up by 35% as all the regulatory changes occurred in a short span of time, which has kept customers on the back foot. “A 28% GST in line with cars and luxury vehicles on even mopeds and motorcycles of 100 cc and scooter was unviable. All compounded together and caused progressive downturn in two-wheeler sales,” Srinavasan said, stressing that a GST cut will boost demand especially during the festive season.

Auto sales across segments fell 20% year-on-year (y-o-y) in August, another sharpest monthly decline in nearly two decades. While passenger vehicle sales dropped by a sharp 34% year-on-year (y-o-y), falling for 13 out of the last 14 months, two-wheeler volumes fell around 20% y-o-y in August. Commercial vehicle sales plunged by a massive 40% y-o-y as poor retail sales due to weak consumer demand has left dealers saddled with high inventory.

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