Govt unlikely to trim GST on automobiles

Our Bureau New Delhi | Updated on August 26, 2021

Top official says sop not needed as sales have picked up, no inventory build-up

The government is unlikely to oblige any time soon the automobile industry’s demand for lowering the Goods & Services Tax (GST) for certain categories of vehicles.

Hinting at no immediate plans, a senior government official said the Centre had considered it some time back but now, with sales picking up and no inventory build-up on account of transition from BS-4 to BS-6 emission norms, it seems unlikely.

In fact, the Revenue Secretary Tarun Bajaj had on Wednesday said the government is open to discussing a rate revision but did not commit to any move to cut.

“I would be very happy to engage with you to see what we can do even on (GST) tax rates, what is the tinkering we can do to see to it that certain (vehicle) segments get the encouragement they deserve,” Bajaj had said at a conference organised by the Society of Indian Automobile Manufacturers (SIAM) on Wednesday.

The tax regime

As on date, barring electric vehicles and ambulances, all automobiles attract GST between 18 per cent and 28 per cent. Then, there is a cess levied in the range of one to 22 per cent. Apart from this, State governments collect a road tax. The GST on electric vehicle is 5 per cent while that on ambulance has been cut to 12 per cent for the period up to September 30.

Exactly a year before, at a meeting organised by an industry chamber, responding to a question about the need for lowering the GST rate on two-wheelers, Finance Minister Nirmala Sitharaman had said this was indeed a good suggestion as this category is neither a luxury nor a sin good. However, the matter could not be taken up to the GST Council until now.

High tax, high prices

At the ongoing SIAM convention, the tax issue was one of key points of discussion.

“I don’t think the car industry would revive either with ICEs (internal combustion engines), CNG, biofuels or EVs unless we address the question of affordability of cars for the customer,” RC Bhargava, Chairman, Maruti Suzuki, had said.

He said the high-tax structure, and the additional costs to meet the new emission and safety norms have turned automobiles pricier, making them unaffordable for many.

2-wheelers at luxury rate

Echoing, Venu Srinivasan, Chairman, TVS Motor Company, said a two-wheeler, which is the basic mode of transportation for the country, is being taxed at 28 per cent GST, the highest level on a par with luxury products. The automobile industry, which provides direct and indirect employment to 30 million, has moved from importing and assembling to designing and making in India with both homegrown firms and MNCs making large investments in design infrastructure, he said.

Published on August 26, 2021

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