Finance minister Nirmala Sitharaman on Sunday indicated the government may cut GST automobiles in the near term. Currently, automobiles come under 28 percent GST slab. “The automobile sector was in a transition phase to produce engines and components meeting BS-VI fuel norms (from the earlier BS-IV), which comes into effect from April 1, 2020,” Sitharaman said while responding to reporters here. The minister said it was not the Union government’s decision, but a Supreme Court order two years ago that automobile companies shall not produce any BS-IV vehicle after March 31, 2020, be it scooters or any other vehicle. To a query about the automobile industry seeking a Goods and Service Tax rate cut, she said it should be decided by the GST Council. The finance minister also said the government has recommended the GST council to cut rates on automobiles. “The government has been in consultation with a lot of sectors and we are listening to their inputs,” Sitharaman said.
Several steps have already been taken including steps to enhance liquidity and lending in the market to boost the demand in the automotive sector, Sitharaman said. Regarding job losses, she said that most of the employment in the economic sector is generated by the informal sector which remains undocumented. On confusion on electric vehicles and internal combustion engines, Sitharaman said, “We want all the vehicles to have due market share. We are not pushing one at the cost of others.” On August 23, the government announced a host of measures to boost demand in the auto sector including the depreciation cost of automobiles purchased till 31 March 2020 by corporates will be increased to 30 percent from 15 percent at present, giving a tax incentive on the purchase of vehicles. The ban on government departments to purchase new vehicles to replace their existing fleet of vehicles was lifted to encourage the purchase of vehicles by government departments in a bid to boost demand. The government is also mulling scrappage policy. The increase in the one-time vehicle registration fee will be deferred until June 2020. The recent measures are expected to give impetus to reviving the sector from current slowdown. However, FM neither refuted nor admitted on the current situation as the economic slowdown. On confusion on electric vehicles and internal combustion engines, she stressed, “We want all the vehicles to have due market share. We are not pushing one at the cost of others.”