Auto sector crisis: Rajiv Bajaj against GST cut for industry even as automakers look for respite from govt to tide over slowdown

  • The ongoing problem will be sorted by November as the auto sector is correcting the stock levels for Bharat Stage-VI emission norm, Bajaj said

  • Early this month, Gadkari had assured the crisis-hit automobile industry of all possible support from the government

  • The auto components industry sought uniform 18% GST to help companies with their working capital borrowing

The domestic auto industry, which is facing the worst-ever slowdown due to slump in demand, is looking at the government for more stimulus to revive the sector. The slump in the auto industry has triggered around 3.5 lakh job losses not only in the sector but its allied sectors as well.

Experts from the auto sector are of the opinion that the government should consider two things that have been put forward by the vehicle manufacturers: A cut in the Goods and Services Tax (GST) and scrappage policy, said a report in CNBC TV18.

The government should bring in a common GST rate of 18 percent for the entire the auto sector including the component-making industry, NK Minda, chairman of Minda Industries, was quoted as saying in the report.

A cut in GST rate on vehicles will spur demand as people would consider buying vehicles ahead of a price hike owing to the BS-VI transition, said the report quoting Nikunj Sanghi, chairman at Automotive Skills Development Council.

 Auto sector crisis: Rajiv Bajaj against GST cut for industry even as automakers look for respite from govt to tide over slowdown

Representational image. Reuters

Meanwhile, Bajaj Auto's Managing Director Rajiv Bajaj believes the ongoing slump in the auto industry is mainly due to overproduction and there is no need for a tax cut at this juncture.

While the auto sector has been urging the government to reduce GST, Bajaj Auto's Rajiv Bajaj has come out with a view that the cause of the current crisis is mainly due to overproduction by vehicle makers and GST cut is not necessary at this stage to boost demand, according to a report in The Economic Times.

Bajaj feels the problem will be sorted by November as the automobile sector is now correcting the stock levels for Bharat Stage-VI emission norms, the report said.

On 10 September, industry body Society of Indian Automobile Manufacturers (SIAM) said that India’s monthly passenger vehicle and car sales recorded their steepest fall ever in August.

Domestic passenger vehicle sales fell for the tenth straight month in August, declining 31.57 percent to 1,96,524 units from 2,87,198 units in the year-ago period.

Already, 15,000 contractual jobs have been lost in the automobile manufacturing and around 2.8 lakh in dealerships, while components manufacturers are staring at 1 million job losses if the downturn continues.

Countering Finance Minister Nirmala Sitharaman's view, market leader Maruti Suzuki India said millennials opting for ride-hailing services like Ola and Uber may not be that strong a factor for the current slowdown in automobile sales. A detailed study is needed to arrive at any conclusion on the contrary, according to a top official of the country's largest carmaker Maruti Suzuki India.

On 10 September, Sitharaman had said a change in the mindset of millennials, who now prefer taxi aggregators like Ola and Uber instead of committing to monthly instalments to own a car, was among one of the many factors responsible for the slowdown in the automobile sector.

Early this month, Union Minister Nitin Gadkari had assured the crisis-hit automobile industry of all possible support from the government, including taking up the demand of GST reduction with the finance minister.

 

With inputs from agencies

Updated Date: Sep 13, 2019 15:13:47 IST