{"id":136842,"date":"2021-08-26T09:43:04","date_gmt":"2021-08-26T09:43:04","guid":{"rendered":"https:\/\/precoinnews.com\/?p=136842"},"modified":"2021-08-26T09:43:04","modified_gmt":"2021-08-26T09:43:04","slug":"does-the-govt-really-intend-to-revive-the-auto-sector","status":"publish","type":"post","link":"https:\/\/precoinnews.com\/business\/does-the-govt-really-intend-to-revive-the-auto-sector\/","title":{"rendered":"Does the govt really intend to revive the auto sector?"},"content":{"rendered":"
While auto majors are asking for reduction in taxes, FinMin says these companies should reduce royalty payments to parents abroad.<\/strong><\/p>\n <\/strong><\/p>\n In a rare face off, captains of the auto industry have hit out at the government for not walking the talk.<\/p>\n At an industry event in the capital on Wednesday, R C Bhargava, chairman of India’s largest carmaker Maruti Suzuki, and Venu Srinivasan, chairman of TVS Motor, questioned the government’s intent to support the auto sector.<\/p>\n Revenue secretary Tarun Bajaj sat in the audience listening, before his turn came to counter them.<\/p>\n Calling for a reduction in taxes, the auto majors expressed frustration that the contribution of the industry towards India’s growth was perhaps not being recognised by policymakers as cars were still being considered a luxury only the rich can afford.<\/p>\n “There have been a lot of statements made on the importance of the auto industry.<\/p>\n “But in terms of concrete action, which would reverse the decline in trend, I haven’t seen any on the ground. I am afraid words don’t get us very much in terms of extra sales,” said Bhargava.<\/p>\n It was seemingly directed at Bajaj, who, as head of the Department of Revenue, exercises control related to direct and indirect tax of the union.<\/p>\n Industry lobby group Society of Indian Automobile Manufacturers (Siam) said the overall auto volumes in 2020-21 (FY21) in the domestic market pushed the industry back by six years.<\/p>\n Passenger vehicle volumes in FY21 were the lowest since 2015-16; two-wheeler volumes the lowest since 2014-15.<\/p>\n Sales of commercial vehicles in FY21 were the worst in 11 years; for three-wheelers, they were the lowest in 19 years.<\/p>\n Siam blamed the increased cost of ownership due to the high goods and services tax (GST) and a hike in road tax as the killjoys.<\/p>\n Srinivasan echoed Bhargava, saying while India’s two-wheeler industry is the largest in the world and largely considered a common man’s mode of transport, the GST rates are similar to those for luxury cars.<\/p>\n “The price of the moped has gone up 45-50 per cent.<\/p>\n “The GST on two-wheelers is the same as a luxury-level product.<\/p>\n “Is the auto sector being recognised for what it has contributed to the environment, to revenue, and to foreign exchange earnings?<\/p>\n “That is the question R C Bhargava has raised,” said Srinivasan.<\/p>\n When his turn came, Bajaj asked if taxation was the reason why industry growth was impeded.<\/p>\n “I want to understand, before GST came, what was the taxation structure in large auto markets?<\/p>\n “Was the taxation structure any lesser? I think it might have been a little higher.<\/p>\n “We can’t decrease taxes without knowing whether that will actually lead to a corresponding increase in auto sales,” he said.<\/p>\n He pointed out that the sales of sport utility vehicles (SUVs) are rising when sales in other segments are not.<\/p>\n “I am keen to understand the reason behind the fall in numbers after 2017-18 for a sector that promised high growth a few years back,” said Bajaj, adding that if taxes are reduced, it will force the government to borrow more.<\/p>\n This can have a negative impact on the macroeconomy.<\/p>\n “A 360-degree view must be taken before making a decision,” said Bajaj.<\/p>\n Bhargava retorted saying the growth of SUV as a metric is not the correct way since most buyers prefer entry-level models whose prices have gone up by Rs 45,000-50,000 due to the new safety and emission norms, rising insurance, and road tax.<\/p>\n “Those earning better have graduated to an SUV. But for a large section, like the buyer of an Alto or WagonR, an increase of Rs 45-50,000 is enormous.<\/p>\n “At the lower end, most can barely afford a car. Please keep the affordability factor in mind,” he cautioned.<\/p>\n This is the second time that a difference in opinion between the industry and the government has arisen.<\/p>\n Last year, Shekar Viswanathan, former vice-chairman of Toyota Kirloskar Motor, had said the government keeps taxes on cars and motorbikes so high that his company finds it difficult to expand.<\/p>\n But the finance ministry countered saying auto companies should reduce royalty payments to parents abroad instead of seeking tax cuts.<\/p>\n