Reduce GST, create separate department for auto sector: Parliamentary panel to Centre

A parliamentary panel has recommended reduction in GST, mechanism for overseas promotion of Indian brands and a separate department for automobiles to address issues faced by Indian automotive industry, and assist building domestic capacity and attract investment. It also expressed concern over slow pace of sales of electric vehicles.

The panel - Department Related Parliamentary Standing Committee on Commerce - wants the rate of GST to be reduced from 28 per cent to 18 per cent for all categories of vehicles and auto components in addition to incentive-based vehicle scrappage scheme.

The suggestions are reflected in the 158th report of the Department Related Parliamentary Standing Committee on Commerce on 'Attracting Investment in post-Covid Economy: Challenges and Opportunities for India' tabled in both houses of the Parliament on February 10.

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The committee wanted the government to invest in brand building and promote Indian brands in the international market. It also called for exploring and pursuing prospective markets such as Algeria, Nigeria, Uganda, Kenya, South Africa, Egypt, Ethiopia, Indonesia, Vietnam, etc. and signing free trade agreements with these countries. "Supporting countries in developing an automotive industry policy, technical regulations and testing facilities for vehicles will give India an advantage in these markets," it said.

The panel preferred equal or higher level of tax reimbursements for export of automobiles under the new Remission of Duties and Taxes on Exported Products (RoDTEP) scheme than what has been provided earlier. It also wanted the government to continue dialogue with policymakers of countries such as Bangladesh, Nepal, Sri Lanka and many African countries which are importers of second-hand vehicles to highlight concerns about using refurbished vehicles and dissuading them from importing such vehicles.

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The committee said the performance of the Faster Adoption and Manufacturing of Electric Vehicles in India (FAME India Phase-II) has not been satisfactory. It wanted the Department of Heavy Industry to furnish reasons for poor performance of the scheme and take a concerted effort to achieve the intended target within the specified time frame. It felt that the current installation of charging infrastructure is far from adequate to meet the charging requirement of the expanding EV sector.

In order to generate demand volume for the EV battery systems, the panel recommended increased uptake of EVs in the public transportation system. It called for a battery/cell manufacturing policy to provide a stable and long term road map for the manufacturing of batteries. The committee also wanted the government to incentivise the development and manufacture of EV parts and charging systems, including various electronic components.

The committee looked closely at the automobile industry as it found that the key driver of the economy registered a negative growth rate for five quarters in a row during 2019-20 and 2020-21. The panel is chaired by YSR Congress Party leader V. Vijayasai Reddy.

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