Will the government offer GST concessions to the auto sector now?

The government is unlikely to offer Goods and Services Tax (GST) concessions to the auto sector. The companies under auto-sector are slow in responding to the consumer demand on BS-VI, believes the government. Moreover, such benefits to one sector will drive the demand from other sectors in the industry. 

The banks are being encouraged to boost their lending, which will ensure the availability of funds in the high demand situation. The government is pushing loans and get banks to make up for the shortfall due to the absence of certain NBFCs from the market. 

Since the government is itself facing revenue deficit, the chances of reducing GST rates are slim. The involvement of states to agree on the same in the GST Council is very pressurising on the Central Government. 

With no growth in sale figures and a constant slowdown, the Society of Indian Automobile Manufacturers (SIAM) said that the entire automotive industry is in complete agreement that the GST rates on automobiles should be slashed from 28% to 18% immediately. This will help escalate the sales, thus increasing the revenue of the auto sector.

Also Read: SIAM urges for GST cut on automobiles

The automakers were very late to switch to BS-VI model vehicles, hoping an extension of the deadline from the Supreme Court. But, there is no such sign of any further extension beyond the 1 April 2020. 

The automotive industry should not only focus on GST rate cuts or an extension of the transition of the electric vehicles to BS-VI models. They could have launched the product mix in the market with BS-IV and BS-VI emission standards by now.

This would have helped the industry by boosting the demand for the vehicles, as well as the buyers to choose from the options available. The reason behind slowdown in the growth rate is the buyer’s perception.

Many buyers are reluctant to purchase 2-wheelers and 4-wheelers with current emission standards, as there will be no resale value left in the market once the new standards are launched. 

In such a situation, it is opined that the GST rate cuts should be implemented around the time of launching vehicles with BS-VI emission vehicles, i.e. April 1, 2020. This move is likely to soften the blow of the increased prices of BS-VI models.

The prices of these BS-VI vehicle models will be high, keeping in mind the compliance requirement of the new emission standards.