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Reason to cheer for auto firms: Pmt. moots GST cut

The country’s auto industry has a reason to rejoice! On Tuesday, after perusing Demands for Grants 2020-21 of Department of Heavy Industry (DHI), a parliamentary panel suggested lower GST rate for the automobile segment at least until it revives. Another recommendation proffered was uniform road tax across all states. It also endorsed suspension or postponement of the upfront payment of insurance for 5 years for the time being and reduction in GST rate to a lower slab.

While the automobile industry in India is one of the largest and fastest-growing sector and creates 27% of industrial gross domestic product (GDP) and 49% of manufacturing GDP, it has negative growth in the automobile production since July 2018. Non-availability of credit facility to consumers, stringent rules for loan sanction by banks, rise in price due to the upfront payment of third-party insurance for 5 years, introduction of BS-VI vehicles from April 2020; and higher rate of GST on automobiles and components are some of the reasons that have led to the slowdown in the sector.

The sector is critical since it provides about 37 million direct and indirect jobs and accounts for 15% of total GST collection amounting to INR 1.5 lakh crore.