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Budget 2019: Cut GST temporarily to revive auto demand, says Pawan Goenka

The additional income tax deduction for electric vehicle (EV) buyers will incentivise purchase and spur demand

Pawan Goenka  |  New Delhi 

Road ministry wants easier licensing for EVs to boost public transport

There was no big-bang expectation from the budget as the finance minister had very little fiscal headroom. I think the reforms for NBFCs and bank recapitalization will help in reduction of rates and create a demand pull. Even though the fiscal maneuverability is less, given that auto industry is a big contributor to tax and employment, a temporary GST cut will help. The industry does need an external stimulus to get back on the growth path.

The additional income tax deduction for electric vehicle buyers will incentivize purchase and spur demand. However, it is not clear whether it is only applicable to personal buyers or also includes fleet segment. With all the recent initiatives – whether its FAME (faster adoption and manufacture of electric vehicles) IT benefits or exemption from road tax or reduction in import of certain parts that goes into EV, government has done what it can to push EVs, now the onus is on the industry to make it happen.

Pawan Goenka

Pawan Goenka, managing director, Mahindra & Mahindra

The increase in the threshold of 25 per cent corporate tax to Rs 400 crore is a good thing but I still do believe they have to look at all and not just 99.3 per cent. The balance .7 per cent is where the maximum tax collection happens. There is a fairly large section in terms of the number of companies are left out. I am still hoping that it will be addressed in the next budget. It does make large companies incompetitive, particularly in overseas market where others are paying much lesser.

As far as the provision to cut promoter holding is concerned, there are negatives and positives. It's good as it will bring a lot of smaller shareholders into the company and thereby bring more liquidity. The negative is that there are large promoter-led companies with holdings as high as 75 per cent and they may take time to go to 65 per cent. Considering that the government also has a disinvestment target of Rs 1.05 trillion, I don't know whether there will be so much money in the market.

There may be a tendency among MNCs (multi national corporations) to de-list and many may not list. Am not sure what the intent behind levying tax on buyback is. If the intent is to generate revenue, buybacks will stop.

(As told to Shally Seth Mohile)

First Published: Sat, July 06 2019. 01:25 IST