While the industry has been pressing for a GST cut on automobiles to boost demand, the government has so far been non-committal on the reduction.
To boost demand for commercial vehicles, the government will commission 68 road construction projects worth Rs 5 lakh crore in the next three months, Union minister Nitin Gadkari said on Thursday, while reiterating that petrol and diesel-engine vehicles will not be banned even as the country’s huge crude oil import and inflated levels of pollution remain a concern.
Speaking at the Society of Indian Automobile Manufacturers (Siam) conclave, the minister of road transport and highways said the road projects will generate demand for construction equipment and heavy commercial vehicles, sales of which has remained subdued for the past eight to nine months. Commercial vehicle sales plunged by a massive 40% y-o-y in August, the eighth consecutive month of fall, impacted by the revised axle-load norms and halt in several infrastructure projects.
The government last year hiked the loading limit for CVs by 15-20%, as a result of which fleet operators got more bandwidth to load goods impacting the new purchases.
Acknowledging that the auto sector needs the government’s help, the minister said he will propose reduction of GST on vehicles, even if for a temporary period, to the finance ministry. “The ongoing slowdown in the domestic auto industry is not just a worry for the vehicle manufacturers but also for the government and the country,” he added.
While the industry has been pressing for a GST cut on automobiles to boost demand, the government has so far been non-committal on the reduction. Finance minister Nirmala Sitharaman said last week the Centre alone cannot take the decision on the cut and the GST Council will have to be roped in. Automobiles currently attract the highest tax rate of 28%, apart from a cess in the range of 1-15%.
However, a 10% GST cut on automobiles could cost the government Rs 45,000 crore, as per a Kotak Institutional Equities report, which said the companies must look into self help rather than relying too much on the government. “The OEMs may want to consider price cuts to stimulate demand in case the government is unable or unwilling to reduce GST rates,” the report said last month.
On the Niti Aayog’s proposal to ban electric two and three wheelers by 2025, Gadkari said the government doesn’t plan any ban on petrol or diesel vehicles, although it is very concerned about rising pollution and high oil imports.
The auto industry should look to adopt cleaner fuel as pollution and oil imports of Rs 6-7 lakh core remain big issues for the country, he said, but clarified that there will be no complete ban on existing petrol and diesel engine vehicles.