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No GST cut on cars even as the FM brings in measure to boost demand

The govt announced a slew of measures to kick start the auto sector, which has been going through a slump.

ET Online|
Updated: Aug 24, 2019, 09.06 AM IST
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Govt unveils measures to support auto sector, boost demand: FM Nirmala Sitharaman
Govt unveils measures to support auto sector, boost demand: FM Nirmala Sitharaman
Finance Minister Nirmala Sitharaman said that to boost demand in the automobile sector several temporary relief measures will be introduced including an increased depreciation cost for automobiles for corporates and businesses, however, she stopped short of giving a GST cut for automobiles, something the industry has been lobbying for.

All BS-IV vehicles purchased upto March 2020 will remain operational for their entire period of registration, the Finance Minister said at a press meet today.

An additional 15 percent depreciation will be provided on vehicles acquired from now till March 2020, taking the total depreciation to 30 percent.

The government announced a slew of measures to kick start India's auto sector, which has been going through a slump for the past nine consecutive months, up until July.

The finance minister said that the government will also consider a 'scrappage policy', something which the automobile industry has been advocating for, to get unfit vehicles off the roads and thus increase the demand for new vehicles. However, she said that scrapping infrastructure is required to put such a policy in place and the government will first try and get that in place.

Further, the increase in the one-time vehicle registration fee, which the government had earlier mooted, will be deferred until June 2020. The automobile industry had argued that an increase in the vehicle registration fee would further hurt demand.

The automobile industry had also been lobbying for a stimulus in terms of a GST reduction on vehicles to improve consumer sentiment. However, no such move was announced by the minister.

The Indian automobile industry is going through a prolonged slowdown for the past twelve months. Monthly sales have seen the worst decline in the past two decades.

In response to the slowdown, the companies have resorted to job cuts and production cuts to keep costs in check.

Automobile sales in India witnessed its sharpest decline in nearly 19 years in July, dropping 18.71 per cent, rendering almost 15,000 workers jobless over the past two-three months.

The previous biggest decline across overall domestic automobile sales was recorded in December 2000 when it fell 21.81 per cent.

Similarly, domestic passenger vehicle (PV) sales also saw the biggest fall in nearly 19 years, slumping by 30.98 per cent to 2,00,790 units in July as compared with 2,90,931 units in the corresponding month a year ago. Previously, the worst decline was registered in December 2000, when wholesale figures had fallen 35.22 per cent.

The fall in PV sales in July was also the ninth consecutive month of the decline. With prolonged slowdown in sales, the automobile industry has been demanding reduction in GST rate from the current 28 per cent to 18 per cent.

With inputs from Nehal Chaliawala, ET Bureau
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