FM Sitharaman hints at no GST rate cut on automobiles

Indicating that there may not be any tax cut on automobiles at the September 20 GST Council meeting, Finance Minister Nirmala Sitharaman Tuesday said the sector has enjoyed good times till about two years ago and the current problems are not totally related to high GST rates.

“Automobile sector is impacted by a set of problems such as a shift from BS-IV to BS-VI, the high registration fee, which the government has now postponed and, a change in mindset of millennial generation... there are a whole lot of factors,” the finance minister said while addressing a press conference on 100 days of Modi 2.0 government in Chennai.

“The auto sector did have its good times till about two years ago,” she said.

The minister, however, said that the government was conscious of the need to respond to the slowdown in auto sector and was taking measures through other routes than a GST rate cut at present.

Sitharaman said the government has decided to front-load spending from the Rs 100 lakh crore Budget-proposed infrastructure fund to boost consumption.

Though she spoke on a host of political, social and other achievements of the government in the past 100 days, most of the questions fielded to the minister were related to auto sector slowdown and an overall economic downturn that has been impacting jobs.

Auto sector at present attract a peak GST rate of 28% with additional cess ranging from 1% to 22%, depending on the length, engine size and type of the vehicle. For example, the total tax incidence on sports utility vehicles (SUVs) is 50%, large cars, 48% and mid-sized cars, 45%.

While the states are demanding that the Centre to reduce the cess on them and bring the total tax incidence to 28% across the segments, the Centre is wary of losing a chunk of revenue if it forgoes cess.

Certain states like Kerala and Tamil Nadu are vehemently opposing any GST rate cut on automobiles.

A meeting of GST Council in Goa on September 20 is expected to discuss the auto sector woes amid problems of falling GST revenues month after month. At a little above Rs 98,000 crore, the GST collection has grown only 4.5% year-on-year in the month of August. This is the slowest pace of GST revenue growth in any given month.

The finance minister expressed concern over falling GST revenues.

To a question on a dip in economic growth to 5% in the April-June quarter, she said it was a part of the process.

“Such dips in GDP growth do happen,” she said.