Auto sector appeals for a lower GST and a higher depreciation rate

On 7 August, representatives of the auto industry met the Financial Minister (FM) seeking an increase in the depreciation rate and lower GST. The representatives appealed to address the current crisis.

Since last year, the auto sector has been on a slow track. The representatives also presented a list of other measures to the FM to help the auto industry get rid of the crisis it is currently undergoing.

The attendees for the Wednesday’s meeting included – Pawan Munjal, CMD, Hero Motors; C Bhargawa, Chairman, Maruti Suzuki; Gurpratap Bopara, MD, Skoda India; and Nirmal Mind, CMD, Uno Minda.

The Presidents of three industry bodies — Society of Indian Automobile Manufacturers (SIAM), The Automotive Component Manufacturers Association of India (ACMA), and Federation Of Automobile Dealers Associations (FADA) attended the meeting too.

The passenger vehicle sales have gone down by 18.42% between April and June 2019 in comparison to the same period last year. Sale of vans, passenger cars, and utility vehicles reduced by 25.66%, 23.32%, and 4.53% respectively between April and June 2019 in comparison to the same period last year.

Also Read: The Journey of GST in India

The Federation of Automobile Dealers Associations (FADA) has indicated that over the previous three months, nearly two lakh individuals across various automobile dealerships have been laid off.

Automobile companies are of the opinion that 28% GST plus cess is bringing down the sales number. They have been demanding for a GST reduction at least on a temporary basis.

Also, automobile companies are seeking an increase in the depreciation rate. Currently, the depreciation rate stands at 15%. An increased depreciation rate will result in three consequences:

• The resale value will reduce at a faster rate; thereby, customers will be prompted to go for a car replacement sooner.
• The insurance premium will reduce from the second year.
• Businesses will get to claim higher business expenses and thus results in increased tax benefits.

However, an official from the Finance Ministry believes that GST is already under-performing and any further GST reduction will complicate matters further.