Finance Minister Nirmala Sitharaman on Tuesday said the government would respond to the demands of the automobile industry, which is facing the worst slump in two decades. Sitharaman’s assurance to the auto industry came ahead of the GST Council meeting, slated for September 20.
The FM, while speaking to the media here on 100 days of the Modi government 2.0, said, “We are conscious that we need to respond.” When asked about a possible rate cut on cars, Sitharaman said that call would be taken by the GST Council at its meeting in Goa next week. She, however, added that some of the industry suggestions had already been considered.
Domestic sales of passenger vehicles fell 31.6 per cent year-on-year to 196,524 units in August, according to the data released by the Society of Indian Automobile Manufacturers (Siam). The tenth straight month of decline was also the steepest since 1997-98 when Siam started recording industry data. The industry has been demanding a GST rate cut from the current peak rate of 28 per cent.
According to the fitment committee's estimates, there will be a potential revenue loss of around Rs 50,000 crore annually in case the GST rate in the auto sector is reduced from 28 per cent to 18 per cent.
The fitment committee, comprising state and central officers, met last week and estimated that of the overall sum, Rs 22,000 crore will be lost if the rate is cut for auto parts alone.
The total revenue from the auto sector is pegged at about Rs 3 trillion annually.
The fitment committee refrained from recommending any cut in view of the revenue implications of such a move, leaving the rate reduction call to the political class at the GST Council.
At the media briefing in Chennai on Tuesday, Sitharaman also said the GST revenue collection needed attention. "Need to widen the scope and task," she added.
The GST collections failed to touch the targeted Rs 1-trillion mark in August. The collections for the month stood at Rs 98,202 crore, after breaching the Rs 1-trillion figure in July. This was the second month in the current financial year that the collections fell short of Rs 1 trillion.
“The auto sector, which had good times till two years ago, is affected because of various other issues too," said the Finance Minister. She listed out switch over to BS VI emission norms and registration fee related matter (which the government postponed later) as reasons for the auto sector slowdown. Also, she cited surveys to point out that millennials like to use Ola, Uber or Metro rail, rather than committing EMIs towards automobile. In the passenger vehicle segment, market leader Maruti Suzuki India posted 36.14 per cent decline in its August sales at 93,173 units.
According to data released by SIAM, two-wheeler sales — a key barometer of the rural economy — also dropped by 22.24 per cent to 1,514,196 units against 1,947,304 units in the same period last year. Wary of piling inventory, companies resorted to holding onto their stock. They also cut production, which led to a decline in dispatch to dealers.
"We are working with all the sectors across the country to understand the problem and taking measures also. This government listens to everyone and we are also taking measures. Two major announcements were made in August and September and two more are expected", she said.
Last month, the FM had announced several steps including making BS IV vehicles purchased up to March 2020 operational for the entire period of registration. Also she lifted the ban on purchase of vehicles by government departments and allowed additional 15 per cent depreciation on vehicles acquired till March 2020.
On the dip in GDP growth, she said, ‘’I am not underestimating it or sitting here without responding to do something to boost it to grow better. But it does happen.’’ Pointing out that it’s part of the growth cycle, the FM said, ‘’I am not going to harp on the earlier times when it has happened. …. Sometimes it dips in some quarter and rises again. Our efforts now are to see how to rise in the next quarter".
Responding to the criticism of the government accessing the accumulated reserves of the Reserve Bank of India, she said it had been accessed by the governments in the past too. It’s based on a formula that has been arrived at by the relevant committees, she said.
While stating that bank mergers were announced for the banks to benefit from each other, the FM said the date of merger had to be decided by the boards of respective banks.
On the removal of Article 370, to withdraw the special status of Jammu & Kashmir, the minister said it was a long-time dream of the BJP.