Parliamentary panel suggests lower GST rate for auto sector

The automobile industry in India provides about 37 million direct and indirect jobs and 15 percent of total GST collection amounting to Rs 1.5 lakh crore.
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A parliamentary panel on Tuesday suggested lower GST rate for the automobile segment at least till the revival of the sector, and uniform road tax across all states against the backdrop of negative growth in the automobile production since July 2018.

A parliamentary panel had examined the Demands for Grants 2020-21 of Department of Heavy Industry (DHI) and tabled its report in Parliament.

The automobile industry in India is one of the largest and fastest-growing sectors and constitutes 27 percent of industrial gross domestic product (GDP) and 49 percent of manufacturing GDP. It provides about 37 million direct and indirect jobs and 15 percent of total GST collection amounting to Rs 1.5 lakh crore.

"But the committee observes that, of late, there is a negative growth in the automobile production since July 2018," said the report.


The committee noted that some of the factors that contributed to a slowdown are 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 five years, the introduction of BS-VI vehicles from April 2020; and a higher rate of GST on automobiles and components.

Amidst the slowdown in the sector, the committee, among other things, recommended to either suspend or postpone the upfront payment of insurance for five years for the time being and reduction in GST rate to a lower slab "at least till the revival of the auto sector".

Further, it made a case for introduction of incentive-based scrappage policy for creating purchase demand for new vehicles, reduction in import duty on lithium-ion cell battery, which is used for operating the e-vehicles and levy of uniform road tax across all states.

The report said the committee "is pleased to note" that the Delhi-Chandigarh highway has been declared as the first e-vehicle friendly expressway of the country.

It desires that other expressways, including Delhi-Jaipur and Mumbai-Pune expressways, may also be made completely e-vehicle friendly soon with charging infrastructure in place at regular and frequent intervals.

(Edited by Saheli Sen Gupta)