Government unlikely to offer GST concessions to auto firms
- The government is unlikely to offer goods and services tax (GST) concessions to the auto sector
- The reason for this is that the government believes that companies have been slow in responding to consumer demand on BS-VI
Banks are, however, being encouraged to step up lending to ensure that absence of a fund flow does not choke demand. While acknowledging that lending is an issue, sources said the government is making efforts to push loans and get banks to make up for the deficit due to the absence of some of the NBFCs from the market.
With the government itself is facing pressure on the revenue front, chances of a GST reduction are remote, especially when states too have to agree to it in the GST Council. Several auto industry leaders have suggested that a tax cut could provide the necessary stimulus.
“There was a demand from the real estate sector so the GST Council lowered the levy but it did not result in a pick-up because the problem lay elsewhere,” said a source. The view in government is that auto makers cut their plans to switch to BS-VI too late, hoping to wrangle an extension in deadline from the courts. There is no sign that the Supreme Court could entertain an extension beyond the April 1, 2020 deadline for introduction of cleaner fuel and consumers have become chary of purchasing BS-IV vehicles.
While the government has held consultations with the auto industry and other sectors, sources said, companies need to consider the full picture and not focus only on the lower demand to seek concessions and a postponement of the transition to electric vehicles. They said many buyers are reluctant to purchase bikes and cars with current emission standards as they fear that the resale value will come down once the new standard kicks in from April.
Companies should already have put in place a product mix which allowed consumers to choose between BS-IV and BS-VI emission standards. “This is taking the ‘Just in Time’ model a bit too far. You can’t get all your BS-VI models close to the switch-over date,” said a source.