Auto Industry Executives Meet Finance Minister, Demand Cut In GST Rate

Auto industry executives once again put forward their demand before finance minister Nirmala Sitharaman on Wednesday for a cut in the GST rate from 28% to 18% to spur demand. Sitharaman, while listening to their problems, indicated that she will take up the matter with the GST Council.

The auto industry chiefs have for sometime now been urging for reduction in GST rates as demand has been subdued since the second half of the last fiscal on account of rise in prices and costlier finance.

“The matter of GST cut is not directly in the purview of the finance ministry. The GST council has to agree. We will look into that,” Sitharaman told the industry executives, one of the persons told FE.

However, a revenue department official told CNBC TV18 that at current revenue trends, it is difficult to accommodate any GST cut. “Once auto industry associations submit their representations, a call will be taken whether to take forward the proposal to the fitment committee or not,” the official said.

The government fell short of its GST revenue target by `60,000 crore in FY19. During the current fiscal, the government has set a moderate target. “The finance minister was more in a listening mode today,” another person present in the meeting, which was attended by top executives of the auto industry, including Maruti Suzuki chairman RC Bhargava, Hero MotoCorp chairman Pawan Munjal and Siam president Rajan Wadhera, said.

The minister has asked the three auto industry associations, the Society of Indian Automobile Manufacturers, Auto Component Manufacturers Association (Acma) and Federation of Automobile Dealers Associations (FADA) to submit a representation, highlighting the issues in their respective areas. Executives of the three bodies said they will submit the representation in a week’s time.

“Next round of discussions will happen once the ministry goes through the representation in detail and we are hopeful the government will take action as they patiently heard us on Wednesday,” the person said.

Among others, issues such as availability of finance to dealers and customers as well as the scrappage policy were discussed, where state finance ministers, finance secretary, revenue secretary were present along with heavy industries minister Arvind Sawant and officials from the road transport ministry.

The industry growth has remained subdued for around a year now partly due to liquidity crunch among NBFCs post the collapse of IL&FS and DHFL. Banks, too, have been cautious on lending and as a result interest rates have gone up, impacting sales of cars, two-wheelers and commercial vehicles.

As per Siam figures, vehicle wholesale across all the categories declined by 12.35% to 60,85,406 units in April-June against 69,42,742 units a year ago. The industry also apprised the FM about job losses in the sector due to the the ongoing slowdown that has led to companies cutting production and dealerships closing.

While Maruti Suzuki had to let go of around 1,200 contract workers, Honda Motorcycle & Scooter India asked around 700 contract workers to leave. Last month, Acma announced a job loss of 8,000-10,000 people due to low demand from the OEMs while FADA said some 300 dealer showrooms have shut down in the past one year, leading to a job loss of around 30,000 people.