The Finance Minister has been meeting representatives of various sectors to understand the issues concerning them even as several key agencies have lowered growth projection for India.
Meeting representatives of Auto sector is a part of a series of sessions lined up by the Finance Minister with important stakeholders up to August 11 to come up with plans for critical sectors amid fears that the economy might be slipping into a sustained slowdown.
On Wednesday, this was the third meeting in the series, which was attended by RC Bhargawa, Chairman, Maruti Suzuki; Pawan Munjal, CMD, Hero Motors; Nirmal Mind, CMD, Uno Minda; Gurpratap Bopara, MD, Skoda India; besides the Presidents of three industry bodies — SIAM, ACMA and FADA.
During the meeting with FM, representatives of the automobile industry have asked for a lower Goods & Services Tax (GST) and a higher depreciation rate to come over the current crisis.
The GST rate of 28% plus cess is already a challenge for sales. Hence, have been demanding a reduction, at least temporarily.
However, according to a Finance Ministry official, the problem is that collection from the GST is already below expectations and any reduction now will further complicate matters
Reduction in growth and 2 lakh workers laid off
As the auto industry’s growth has been slow down from the last one year. The sale of passenger vehicles declined by 18.42 per cent in April-June 2019 over the same period last year.
Within the passenger vehicles category, sale of passenger cars, utility vehicle and vans declined 23.32 per cent, 4.53 per cent and 25.66 per cent, respectively, in April-June 2019 over the same period last year.
Also, according to the Federation of Automobile Dealers Associations (FADA), around two lakh people have been laid off across automobile dealerships in the country in the last three months.
Consequences of higher depreciation rate:
Auto companies also want the depreciation rate raised from the present 15 per cent. A higher depreciation rate will have three consequences:
- First, the resale value will come down faster, which, in turn, will prompt the customer to replace the car sooner.
- Second, a higher depreciation rate will bring down the insurance premium from the second year and
- Higher depreciation will allow businesses to claim higher business expenses and thus lead to more tax benefits.