Auto slowdown: Carmakers may not get tax relief in GST Council meet on September 20

With the slowdown in the domestic automotive industry showing no signs of ebbing, the government on Friday again hinted at a possible GST rate cut from 28 to 18 percent but also added a rider that it may not happen in the next GST council meeting scheduled on September 20 in Goa.

Minister of State for Finance, Anurag Thakur while addressing the ACMA annual conclave said the government has received request from various segments of the industry for a GST rate cut and while it is evaluating the possibility of that, he asked the industry to also reach out to various state finance ministers of the country that are part of the GST council.

"Any rate cut on GST has to be first approved by the GST fitment committee and then it is sent to the council at the next meeting," Thakur said. "We are open to taking it to the council but most decisions there are taken unanimously. I would like the industry to also reach out to individual state finance ministers who are also part of the GST council."

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Sources, however, say that the fitment committee is already looking into the issue of GST rate cut on auto sector.  But many state finance ministers, who are members of the GST Council, have opposed the move to cut auto sector rates and in absence of any consensus within the Council, the latter might send the proposal again to the fitment committee for a further look.

While the industry has been lobbying hard for a tax cut, which it believes will lead to a revival in demand, the uncertainty over whether and when it will happen or not has put it in a tight spot. Dealers across the country said were are witnessing significant postponement of purchases by potential customers in anticipation of a reduction in prices post the rate cut.  

"In order to get out of the current crisis and not miss the festive season, we require clarity from the government, here and now, on GST and scrappage policy," said Guenter Butschek, managing director and CEO, Tata Motors. "If the government does not believe, for whatever reasons, that it will not be able to reduce the GST, then actually let us know it here and now, loud and clear. Because that's the customer expectation at this point of time, and it's the reason why we currently see lots of cancellations of bookings. Why we actually see empty showrooms is because of the fact that customers expect there is a better deal coming, if not tomorrow then after September 20."

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Thakur, however, assured the industry that the government would do whatever was needed to help it to become the third largest industry in the world behind China and US, which in turn would help India become a $ 5 trillion economy - a stated objective of this government.

"This government is with you and we will do whatever it takes," he said. "In the first meeting to address the economic slowdown itself on August 23, we listed a number of initiatives to help the automotive industry. That shows that we treat this industry on priority. If you take one step from your end, I can assure you we will take 4 steps from our side."

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