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auto | IST

GST rate cut could be the right trigger the auto industry needs, says Nikunj Sanghi

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The crisis that has engulfed India's automobile industry is only worsening. Auto sales in August contracted for the ninth straight month and the slump is the worst in two decades. Car sales saw the sharpest fall of over 41 percent. To discuss the issue, CNBC-TV18 spoke to Nikunj Sanghi, chairman of Automotive Skill Development Council and former president of FADA.

The crisis that has engulfed India's automobile industry is only worsening. Auto sales in August contracted for the ninth straight month and the slump is the worst in two decades. Car sales saw the sharpest fall of over 41 percent.
However, Niti Aayog Vice-chairman Rajiv Kumar believes the recent measures announced by the finance minister should spark a recovery.
The GST Council-nominated fitment committee has expressed its reservations on slashing tax rates for automobiles to 18 percent from the current 28 percent. The fitment committee is of the view that a cut in GST rate would lead to a revenue loss of around Rs 50,000 crore annually.
Kerala's finance minister Thomas Isaac also says that GST has not triggered the crisis in motown and warns against any "knee-jerk" rate reductions.
Taking to Twitter, Isaac said, "It is not high GST rate that has caused auto crisis. Pre-GST combined tax excluding service tax ranged between 32 percent and 54 percent. Now tax including compensation cess ranges from 29 percent to 46 percent only. If the Centre is keen to reduce it further, abolish the cess, the rate would come down to 28 percent."
To discuss the developments, CNBC-TV18 spoke to Nikunj Sanghi, chairman of Automotive Skill Development Council and former president of FADA.
According to Sanghi, GST rate cut is the trigger that the auto industry has been waiting for. "There have been continuous price increases because of various safety norms. Once in every 2 or 3 months, a new safety norm has come in and insurance rates have increased. So, cumulatively they have had a huge impact on the price of vehicles starting from two-wheelers to commercial vehicles. Therefore, somewhere in this slowed down economy, the price increase has hit the demand. There is BS-VI coming, which will further increase prices, so this GST cut could probably be the right trigger. This is not really for supporting the auto industry, this is more for supporting the economy. As a sector which is contributing 49 percent to the manufacturing GDP, the entire economy gets impacted if the auto sector is hit," he observed.
Sanghi said the customers were waiting for the outcome of the GST Council meeting. "In the present circumstances, a lot of customers are delaying their buying decision in the absence of a clear mandate in terms of GST rate cut. Everybody is very hopeful that the GST rates would be cut. The footfalls remain positive which always happens prior to a festival season. But we are extremely concerned that if this decision is not taken, if GST rates do not come down, then there are people who might not buy a vehicle at all," he said,