To kick start the slowing engine of economic growth, the government is planning to dole out incentives to revive the sluggish demand.
To kick start the slowing engine of economic growth, the government is planning to dole out incentives to revive the sluggish demand. With the auto industry in distress due to lack of demand, in order to make people enthusiastic about buying vehicles, the rate of Goods and Services Tax (GST) may be brought down from existing 28 per cent to 18 per cent during the upcoming 37th GST Council meeting scheduled on September 20, 2019.
“The auto industry is demanding a GST rate cut from 28 per cent to 18 per cent. The concerns related to the automobile industry will be taken up in the upcoming council meeting,” said Ankit Agarwal, Managing Director, Alankit Limited.
So, on a vehicle costing Rs 10 lakh, a car buyer would have to pay GST of Rs 1,80,000, instead of Rs 2,80,000, if the GST rate is lowered from 28 per cent to 18 per cent, thus giving a bonanza of Rs 1 lakh. The benefit will be Rs 50,000 on a car costing Rs 5 lakh if the GST rate is lowered as expected.
Lowering of GST on auto sector would not only revive the demands for cars, but would also generate demands for steel and other components needed to manufacture cars and in the process creating more jobs or preventing more job cuts. Higher job creation or lower joblessness on the other hand would generate a higher demand pull to lift the economy.
Another matter of concern is sluggish demand for otherwise evergreen Fast Moving Consumer Goods (FMCG) that includes items of day-to-day use like soap, tooth paste, etc and food items like bread, biscuits, etc. There is dip in demands for such goods this time even in rural segments, where sales usually remain steady even during times of economic slowdown.
“The GST Council could also lower levies on sectors such as biscuits and other FMCG products,” said Agarwal.
Apart from car and FMCG products, people, who like to travel, may have to pay lower hotel bills during their tours on Dussehra/Diwali holidays, as states like Goa and Rajasthan that generate substantial revenue from tourism have been pushing for relief on this front.
“GST council in its upcoming meeting could consider relief for the hotel sector, a proposal that is likely to be backed by states,” said Agarwal, adding, “States are amenable for GST cut on hotel tariffs of Rs 7,500 and more from 28 per cent to 18 per cent or to raise threshold for the higher tax rate.”