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In an announcement that could soothe nerves in the stressed auto sector, Road Transport Minister Nitin Gadkari on Thursday said a possible GST cut on vehicles — including hybrid ones — will soon be taken up with Finance Minister Nirmala Sitharaman.
Speaking at the 59th Annual Convention of the Society of Indian Automobile Manufacturers (SIAM), he said the Centre will support the auto sector, including in the form of export incentives.
Auto stocks gain
Further allaying the sector’s fears, he said the Centre does not have any plans to ban sale of petrol and diesel vehicles. Automobile stocks jumped 7.8 per cent on Thursday following Gadkari’s assurances to the auto sector.
The GST Council is scheduled to meet on September 20 in Goa. Though the agenda for the meeting has not been finalised yet, and there is pressure on GST revenue collection, the demand to cut rates is getting stronger. At present, passenger vehicles attract 28 per cent GST. Additionally, there are cesses of 1 per cent to 22 per cent. Thus the effective rates are between 29 per cent and 50 per cent.
Gadkari further said that with the impending vehicle price hikes and the upcoming BS-VI deadline, “it is your (industry’s) demand that there should be a reduction in tax for petrol and diesel vehicles”.
“Your suggestions are good. I will take your message to the Finance Minister,” he added.
“The GST on electric vehicles has been reduced from 12 per cent to 5 per cent. I will propose to the Finance Ministry to make the same benefit available for hybrid vehicles,” he said.
Admitting that the auto industry is going through a downturn, Gadkari said the target should be to boost sales.
He would also speak to Sitharaman about extending export incentives to automakers, as has been done for the sugar industry, the Minister said.
New road projects
Gadkari said his ministry will roll out 68 road projects worth up to ₹5-lakh crore in three months to help generate demand for commercial vehicles.
Speaking at the inaugural session, SIAM Vice-President Kenichi Ayukawa said all stakeholders, including OEMs, suppliers, dealers and banks, need to work together now. “The government is sensitive about the slowdown and its implications. We have to work together to come out of the slowdown,” said Ayukawa, who is also the MD and CEO of Maruti Suzuki.
Uday Kotak, MD and CEO of Kotak Bank, said the auto sector needs to be ready for structural changes. “While the banking sector is ready to finance any type of vehicle, the dependence on individual credit scores is impacting demand,” he said.
Guenter Butschek, MD and CEO, Tata Motors, said the Indian growth story is too big to be washed away by a few quarters of low demand and there needs to be some push to draw customers.
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