Hero MotoCorp asks govt for phased GST reduction to avoid revenue losses

International News

Hero MotoCorp on Thursday urged the government to consider a phase-wise reduction in GST on automobiles, cutting rates for two-wheelers in the first stage, and deferring tax cut on four-wheelers to a later stage.
The country's largest two-wheeler maker said the move would help the government contain potential revenue loss, and at the same time provide relief to around 20 million probable two-wheeler buyers across the country.
"I understand that potential adverse impact on government revenue is becoming a constraint (for GST rate cut). While increased sales should take care of that, even if we assume a shortfall in revenue, a resolution can be found if we approach this topic in phases," Hero MotoCorp CFO Niranjan Gupta told PTI.
The government may look at reducing the GST for only two-wheelers as the first step and defer it for four-wheelers, he added.
"This will contain the potential revenue loss, and also cover around 20 million buyers," Gupta said.
To begin with, the government can even look at bringing two-wheelers up to 150 cc into the 18 per cent goods and services tax (GST) slab, he said, adding that this will provide relief to almost 16 million probable customers - mostly in small towns and rural areas - with minimal revenue impact.
"Thereafter, the same can be extended to other segments, basis the outcome and fiscal space that the government may have," Gupta said.

 The two-wheeler market in India is pegged at around 20 million units per year with lower than 150-cc bikes accounting for the bulk of sales...Read More

Auto stocks slide on report GST Council unlikely to back tax cut for sector

International News

Shares of automobile companies, including auto ancillary firms, traded lower on Wednesday on report that the goods and services tax (GST) panel is unlikely to approve lowering the tax for the sector this week, as a study has warned of major revenue losses.
According to this Reuters report, a government study, attached to the agenda of a September 20 GST panel meeting, has said the total annual revenue loss could be as much as Rs 50,000 crore ($6.95 billion), if the panel decided to lower tax rates for the auto sector to 18 per cent from 28 per cent.
Another report by The Economic Times said the government body blamed the current liquidity crisis and troubles of non-bank lenders for the woes of the automobile sector.
Meanwhile, state officials in Kerala, Punjab and West Bengal say they are also opposed to any cut in tax rates in the autos sector, or even consumer goods, because of lacklustre tax collections this fiscal year.
Consequently, the Nifty Auto index dipped nearly 1 per cent on Wednesday as compared to a flat benchmark index Nifty50. Among individual stocks, Hero MotoCorp, Escorts Limited, Tata Motors, and Bosch dipped in the range of 1-2 per cent. Maruti Suzuki India slip 2.3 per cent while Ashok Leyland was down as much as 4.2 per cent on the National Stock Exchange (NSE).
The automobile industry has been facing challenges since past three quarters in terms of additional burden of new insurance policy, constraints on loan disbursement from financial institutions and higher axle load norm impacting commercial vehicle (CV) sales, say experts.

 The sector has pushed for a lowering of tax rates at the September 20 GST panel meeting, in a bid to revive vehicle demand.

GST rate cut must to revive auto demand, says M&M MD Pawan Goenka

Current Affairs

Mahindra & Mahindra’s Managing Director (MD) Pawan Goenka said on Thursday automakers had taken every step to revive consumer sentiment, but only a goods and services tax (GST) rate cut would boost demand. “I think the industry has done whatever it could. An intervention from the government can only revive the demand,” he said, adding: “It’s not good to ask for a cut in GST rate, but we are now in a situation where only that can help us.”
M&M has decided to defer capacity expenditure by at least 15-20 per cent in light of the slowdown. A lending crisis among the country’s shadow banks, which fund nearly 55-60 per cent of commercial vehicles and 30 per cent of passenger cars, has led to automakers, including M&M, Maruti Suzuki India, and Tata Motors, to either cut production or temporarily close plants.
Goenka said things could become worse if the expected festive season demand doesn’t pick up in the next 10 days. “Right now, we are not even thinking in terms of year, we are thinking what would happen in the next ten days and if it remains subdued, I am afraid manpower has to be rationalised to align with capacity cut,” he said, when asked about if there would be further job loss.
M&M has retrenched about 1,500 temporary workers since April 1. “No one wants to cut jobs, but there are no other options in unprecedented times,” he said.

 Auto 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 three months, Siam reported earlier this month. However, Goenka was enthusiastic about the future of electric vehicle and said that the company has recongnised electric and not hybrid as the future of mobility....Read More