Government looking at GST rate cut for automobile sector

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The Centre on Friday assured support to leaders of the auto industry which has been severely hit by the pandemic. At the 60th annual conclave of the Society of Indian Automobile Manufacturers (Siam), Union Cabinet ministers including Nitin Gadkari, Piyush Goyal and Prakash Javadekar listed out a series of possible measures such as a scrappage incentive scheme and reduction in the goods and services tax (GST) rate to revive the auto sector.

“The demand push has to be done immediately. The GST Council will have to take into account the revenue impact and other factors. I hope you get some good news very soon,” Prakash Javadekar, Union Minister of Heavy Industries and Public Enterprises, told captains of the industry at the virtual meet. He indicated the Council would consider the industry demand of 10 per cent GST cut across categories of vehicles. The GST slabs range from 5 to 28 per cent in the sector depending on the type of vehicle.

His comments came after Rajan Wadhera, president, Siam, made a strong pitch for incentives that could boost demand ahead of the festive season. India’s auto sales, which used to be the fifth largest till FY19, have slid back to almost a decade ago due to a combination of factors including an over dose of regulations, a slowing economy, liquidity issues and now the pandemic, Wadhera said.

The Street reacted positively to the assurance by the ministers. On a day when the broader Sensex dropped by 1.66 per cent, the auto index declined by only 0.61 per cent.India sold 2.7 million cars and utility vehicles in fiscal 2019-20. That’s almost at the level of fiscal 2011 when it sold 2.5 million units“The Indian auto industry is facing one of the toughest times in history and needs government support through reduction of GST and incentive-based scrappage policy,” Maruti Suzuki India Managing Director and CEO Kenichi Ayukawa said.Ayukawa, the president-elect of auto industry body SIAM, said the sector had been “set back by many years’’. The growth witnessed in the last couple of months is on a very low base of last year and the industry is not sure whether this is sustainable in future.

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Among other steps, the government is likely to include auto components under the production linked incentive (PLI) scheme. For large units, the scheme proposes financial incentives to boost domestic manufacturing and attract large investments.“It will be a good idea to include auto components under the PLI scheme. This will boost local manufacturing,” said commerce and industry minister Piyush Goyal while promising to reduce imports in the automobile industry and increase localisation.

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