Around the last leg of 2019, the SIAM (Society of Indian Automobile Manufacturers) requested a drop in the GST rates for the automobile sector. This request was put forth as a mitigation measure to the rapidly declining market performance in the automobile sector. Over the past few years, the sales graph in the automobile industry has been eventful, to say the least. While there was a promise for growth in the sector towards the end of 2019, unfortunately, it was short-lived.
The 2020 Scenario
Ever since the corona-virus pandemic struck India in the first quarter of 2020, the horizons started looking bleak for India’s carmakers. In a way, the pandemic and subsequent lockdown in India has impacted the automobile sector adversely. This slump has caused a new record of a slowdown within a period of 10 years (and even beyond).
– Passenger automobiles
– The two-wheeler sector
– Industrial-grade vehicles
All these sectors within the Indian automobile industry faced the brunt of the economic slowdown. Quarter after quarter, the industry has witnessed a slow but steady fluctuation in the sales numbers towards the downside. The lockdown has only fuelled the fire even further, as the common man has shifted his focus to essential commodities. There needs to be some leeway somewhere, right?
GST Reduction Talks
The SIAM met recently this month at the 60th Annual Convention. The Union Minister for Heavy Industries And Public Enterprises, Mr. Prakash Javdekar was also present at the meet. At the convention, car maker representatives made their case for how the slump had affected the sector as a whole. As a united front, they stated that the only reprieve in this testing situation was to enforce lesser taxation on the automobile sector.
Note that the automobile industry is actually among the higher echelons of GST taxation. However, these regulations do not hold water in a global economic crisis such as the current situation. With the existing restrictions, the cost of automobile manufacturing has also skyrocketed. Therefore, to keep their operations running, car makers in India need some assistance from the government, by means of lower taxation.
In response to the carmaker consortium’s plea, the Union Minister stated that the government would rally in support of the industry. As per his statement, the government would be willing to offer a 10% reduction in GST rates across all vehicle divisions.
GST Reduction Benefits
We’ve already seen the general opinion of the Indian car makers on this issue. However, the carmaker’s problems are just one side of the story. The consumer’s end of the tale also needs to be accounted for. For one, the automobile manufacturers are ready to rise to the occasion and deliver once the relaxed taxes are in effect. How would the automobile sector benefit from something as meager as a 10% GST reduction?
– Interest Revival. There is a lot of work that needs to be done on the customer front. To revive potential customers’ interest in the sector, GST relaxation is needed to reduce prices. The reduction in GST will open up investment opportunities for customers.
– Greater Revenue. The Indian automobile sector needs money, and it needs it fast. It’s self-explanatory that having a higher budget to work with will obviously offer more leeway for car manufacturers to keep their operations running smoothly.
– To Cope With Fuel Prices. Another factor to take into account here is the fuel pricing deterrent among the public. If cars were more affordable, then public opinion would shift towards investing in cars. It will be an uphill task, but this GST reduction is a step in the right direction!
– More Foreign Investment. In the past year, many foreign car makers have made their foray into the Indian market. To encourage more foreign investment in this arena, lower taxes can help rake in more profits for the Indian economy. Foreign investment keeps the car scenario in India active and creates healthy competition!
– Steady Growth. The sector itself could benefit from a spike in growth, especially with the new BS norms coming around. The only way to ride through the pandemic with a promising future on the horizon is with a little help from the government.
2020 has not exactly been a promising year for the automobile sector in India. However, with some assistance from the government, the automobile industry can get right back on its feet. The request to reduce the GST is the first step towards growth in the sector. Let’s hope for the best as we ride towards new horizons!