Kerala Finance Minister disfavour the idea of dwindling GST rate on automobiles as a measure to lift the economic health of Nation, instead, he is making recommendations for fiscal expansion.
According to Kerala FM Thomas Issac, GST rate cut on automobiles will not be profitable and it will only lead to revenue loss for the states and the states can not afford such losses. He also suggested that the Centre should opt for fiscal expansion similar to the one in 2009 to resurrect the Indian economy and market sentiment.
“I don’t support the idea (reducing GST rates) at all. The central government can afford to lose revenue but we cannot. They should go for expansion of fiscal policy,” Issac made a statement.
All these recommendations by Kerala FM make it quite apparent that the Centre’s recommendation to lower down the GST on automobiles is going to be discarded by Kerala in the upcoming 37th GST Council meeting which is going to be held later in September.
Even as the economy has slowed down with April-June quarter GDP dropping to a six-year low of 5 per cent, the Centre has decided to stick to its fiscal deficit target. Presenting the Union Budget on July 5, Finance Minister Nirmala Sitharaman reduced the fiscal deficit target to 3.3 per cent from an earlier 3.4 per cent for 2019-20.
Continually decelerating vehicle sales made the auto sectors’ outcry for GST rate cut from 28% to 18% on automobiles increasingly louder. But according to Kerala FM, the GST has already been reduced to a great extent and higher tax rate is not the reason behind dismal sales figures.
He said, “Do you think demand slowdown in the auto sector is because of higher taxes? The tax rate has been reduced so much. It has been reduced to 28 per cent. I don’t believe this argument,”.
The severe downturn in sales figures remained constant for almost 10 consecutive months. Top car manufacturers like Maruti Suzuki, M&M, Hyundai, Tata Motors has witnessed a collapse in this period. The domestic sale of Maruti Suzuki went down by 36 per cent in August.
The Finance Minister put forth a bunch of measures which includes cutting down of GST on automobiles, to combat the declining phase of the automobile industry and to revive it again, in the month of August. But the measures seems deficient to industry experts.
The carmakers have brought down their production capacity, to deal with the half-hearted demands for cars & bikes, it has lead to employees’ termination & job losses throughout the auto value chain.
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Rajan Wadhera, President, Society of Indian Automobile Manufacturers (SIAM) shed light on the murky sales number of August and tried to prove that the government’s measures to reinvigorate the automobile sector were not sufficient enough to get an apparent response from the market.
He is positively disposed towards lowering down GST on vehicles and according to him, it will considerably lower down the price of vehicles which will generate demands for the same.
