Impact of GST on BS-VI Implementation by the Government

The Government of India has planned to implement BS-VI from 1st April 2020 as the Supreme Court bans the sale and registration BS-IV vehicles from 1st April 2020.

In a press conference, Smt. Nirmala Sitharaman, the Hon’ble Union Finance Minister said that the BS-VI implementation all over India from April 2020 is one of the struggling reasons of the automobile sector.

She also informed that there was a week-long consultation in August with all the sectors where there was already a discussion with both the automobile component manufacturers and automobile manufacturers. In a particular meeting with the automobile industry on the 1st of September 2019, some representations made by the sector were taken into consideration.

The consumers are also in the view that if they can wait for some time, they can get new BS-VI vehicles and this is resulting in piling up of inventory. The Central Government has allowed an additional 15% depreciation for the vehicles, purchased from now onwards till 31st of March 2020.

It will benefit the automobile industry for clearing the piled up inventory with the dealers. Now the total depreciation on vehicles along with additional depreciation comes to 30%, thereby benefiting the business.

Also Read: Finance Minister to Propose GST Reduction on Automobiles

The Automotive Component Manufacturers Association of India (ACMA) is also demanding a uniform GST rate of 18% for all automobile components. Currently, high-value parts attracting a higher GST rate of 28%. GST rate cut will also impact BS-VI implementation as it is one of the issues faced by the sector in the current scenario and it is the continuous demand from the industry from the past few months.

Hon’ble Union Finance Minister said that any decision regarding GST rate cut has to be discussed in the GST council and a decision to be taken there. She also informed that she will take the GST rate cut issue to GST Council but the final decision will be taken by the Council. She also raises a point that there are different dimensions for various issues in the sector which are to be carefully addressed. The next GST Council meeting is to be held on the 20th of September 2019.

Auto industry body Society of Indian Automobile Manufacturers (SIAM) said to the industry that there is difficult road ahead due to transition to BS-VI emission norm from BS-IV by April 2020.

Mr Rajan Wadhera, President, Society of Indian Automobile Manufacturers (SIAM) is of the view that the GST rate cut will significantly reduce the cost of vehicles and in turn increases the demand. Mr.Nitin Gadkari, Hon’ble Road Transport Minister at the 59th convention of said that he will request the Finance Ministry for the GST rate cut.

The Kerala State Finance Minister Mr.Thomas Issac has a different view on GST rate cut. He argues that only the GST rate cut is not the solution for the automobile sector but the Central Government has to go for expansion of fiscal policy. He is concerned about revenue loss due to GST rate cut as Central Government may afford it but the State Government’s can not afford the revenue loss.

Apart from the GST rate cut, there are other challenges to the industry like upgrading their technologies to produce BS-VI emission norms within a short time. Automobile industry experts and manufacturers are rising various concerns along with GST issues. The Government has to make positive moves to help the automobile industry for the smooth implementation of BS-VI emission norms in their production.