Decision on GST rate deduction for automobiles for FinMin, state government to decide: Nitin Gadkari

  • Gadkari, the Road Transport and Highways Minister said a scrappage policy, which also includes two-wheelers, is in the works and will be launched soon

  • The auto components industry recently sought uniform 18 percent GST in order to help companies with their working capital borrowings which could be used to invest in long-term assets.

  • Last week at the SIAM annual convention, Gadkari assured the auto industry that he would take up the issue of GST reduction for automobiles to 18% from 28%

Union minister Nitin Gadkari said it is up to the finance ministry along with state governments and GST Council to decide on reduction in GST rate for automobiles and that he has already spoken to the finance minister in this regard.

The auto components industry recently sought uniform 18 percent GST in order to help companies with their working capital borrowings which could be used to invest in long-term assets.

"While the captains of our domestic original equipment manufacturers (OEMs) are ably representing the interventions that would be required to stimulate demand, we in the component sector seek assistance by way of a uniform goods and services tax (GST) rate of 18 percent," Automotive Component Manufacturers Association of India (ACMA) President Ram Venkataramani said.

Gadkari, the Road Transport and Highways Minister also said a scrappage policy, which also includes two-wheelers, is in the works and will be launched soon.

Last week at the SIAM annual convention, Gadkari assured the auto industry that he would take up the issue of GST reduction for automobiles to 18 percent from 28 percent.

"I have already discussed with the finance minister. But ultimately if the FM has to take any decision it must be with the consultation with state finance ministers and GST Council," Gadkari said here at the launch of a BS-VI scooter by Honda Motorcycle and Scooter India.

He further said, currently the ball is in the court of the finance ministry and he is confident that the ministry in consultation with state governments will take a positive decision.

Commenting on vehicle scrappage policy, Gadkari said a draft has already been prepared.

 Decision on GST rate deduction for automobiles for FinMin, state government to decide: Nitin Gadkari

File image of Union Transport Minister Nitin Gadkari. AP

"But there are still problems related with various stakeholders. We need cooperation from the manufacturers as well as the finance ministry," he added.

Some of the issues are related with tax while some are related with state governments, he said.

When asked how soon such a policy could become a reality, he said,"we are ready with the process. My ministry is trying to get it cleared as early as possible and I am confident that in the limited short time we would come to a conclusion and we will launch the policy."

He said such a policy would also include old two-wheelers and "if the two-wheeler industry wants to suggest anything we are going to listen to it with an open mind".

Acknowledging the current distress in the auto industry the minister said the reasons could be myriad due to demand and supply issues, global economic slowdown or due to business cycle.

He, however, exuded confidence that within five to six years, India will become a global manufacturing hub for automobiles.

The growth of the automobile industry is very important for India's overall economic growth and employment generation, he added.

When asked for comments on various states, including BJP-ruled Gujarat, refusing to implement the new motor vehicles law due to hefty penalties, Gadkari said since it was in the concurrent list, states were free to take their own decision.

He, however, said that the intent of heavy fines was not to create additional revenue but to prevent accidents and save lives.

Moreover, he said the fines that were fixed 30 years ago would also need to be updated according to the current situation.

Earlier,  Biocon Chairperson and Managing Director Kiran Mazumdar Shaw said measures are required to save jobs in the automotive sector which represents 50 percent of the manufacturing sector jobs in the country.

Shaw's reaction on twitter came after automobile sale in India witnessed its worst-ever drop in August with despatches in all segments, including passenger vehicles and two-wheelers, plummeting to an all-time low.

"Passenger Vehicle Sales See Worst Ever Monthly Drop Since 1997-98 - we need measures that r not abt saving auto sector but abt saving 50% of manufacturing jobs in the country which is what Auto sector represents," Shaw said in a tweet, tagging Finance Minister Nirmala Sitharaman and Gadkari.

In another tweet, she said: "Passenger Vehicle Sales See Worst Ever Monthly Drop Since 1997-98 - it wd be good to see GST collections in each slab to evaluate impact of tinkering with 28 percent rate. Consumer sentiments need to be boosted by changing perception."

With prolonged slump in sales, automobile and component manufacturers have been seeking GST cut on automobiles to 18 percent from 28 percent to help the sector come out of a prolonged slump that has resulted in job losses.

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.
-- With PTI inputs

Updated Date: Sep 12, 2019 10:52:00 IST