What Effect Would GST Cut Rate Have On Auto Sector?

FM mentioned that proposal has been submitted to GST council for bringing down the tax rate higher from 28 percent

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Against the backdrop of declining auto sales and increasing disturbance in the auto sector, government has decided to deliver some better news. According to the Finance Minister, government has set up a meeting with the stakeholders of various industries seeking relief and sharing its recommendation including the auto sector and related.


"One of the suggestions was the reduction of GST rate for the automobile sector," IANS quoted her as saying, but she emphasized that the authority lies with the GST Council, which is scheduled to meet in Goa on September 20”.

Reduction in Vehicle Prices

Lower tax rate would directly reduce the vehicle prices of the company which in return will attract more buyers for the vehicles. Domestic sales of the companies related to the auto sector went down to 30% in the month of August. To revive the sales, auto sector proposed government to curb down the rates in the GST slab so as to provide margin in the vehicle prices which will boost up the consumer’s sentiments.

Increase in Auto Employment

Curbing down GST rate will give rise to the hiring scale of automobile sector. Hyundai Motor India and Mahindra and Mahindra (M&M) registered a 16.6 per cent and 31.6 per cent dip in sales, respectively, despite multiple new launches in the past year for cushion. This has led to the blockage of hiring and firing in the industry affecting thousands of employees and their lives. GST Rate would give margin to the industry to raise employment for fulfilling the manpower.

While the auto players are now hoping that sales will pick up in the coming festive season. A GST cut would be the trigger to reverse the consumer sentiment.  

Anand Mahindra, Chairman, Mahindra & Mahindra, said the most obvious and welcome first-aid would be some temporary relief on the GST front, either by modifying the slabs or by removing the cess. “I would appeal to lenders to take a more supportive approach to the suppliers and dealers, who are the backbone of the auto ecosystem”.

FADA president Ashish Kale said “We will get to know by the end of the month if the measures announced by the government are helping (revive demand) In terms of discounts, automakers have done whatever they can. If GST also goes down, then affordability of vehicles will improve significantly.”