As the auto industry battles a deep slowdown — pressure on sales of all segments over the last 12-month, manufacturers going for production cuts and job losses across the value chain— M&M chairman Anand Mahindra called for a temporary relief on the Goods and Services Tax (GST) by way of modification in slab or removal of cess to set the industry back on track.
He also said that while the industry needs support for both wholesale and retail financing and the rate cuts necessary for revival have been put in place, he asked the lenders to be more supportive to the suppliers and dealers.
“The most obvious and welcome first aid would be some temporary relief on the GST front, either by modifying the slabs, or, if that is not possible, by removing the cess. Another suggestion would be a re-look at the registration fees which have gone up very substantially and a roll back of the increases in road tax mandated by state governments… these few actions along with the traditional post monsoon revival will set us back on track and positively impact the economy,” said Mahindra in his statement at the 73rd AGM of Mahindra & Mahindra (M&M).
While all segments of the automobile industry including cars, two wheelers, commercial vehicles and tractor sales are witnessing decline in sales, SIAM data shows passenger vehicles have witnessed a fall in 11 out of the last 12 months between July 2018 and June 2019, with October 2018 being the only exception.
As auto industry contributes revenues of over of Rs 180,000 crore to government treasuries, Mahindra said that the current slowdown in the auto industry poses a greater threat to the financial arithmetic of the government.
“According to SIAM estimates, the slowdown has resulted in an 8 per cent loss in GST collection in the first 6 months of 2019. Just to catch up with the FY19 GST collections, the auto industry will need to grow at a rate of at least 7 per cent in the remaining 8 months of the FY20. I do believe that kick starting the auto industry with a few short-term measures will serve a greater national purpose,” said Mahindra.
Hinting that decline in auto sector may hurt the economy, Mahindra said that the sector has a huge multiplier effect. He said that the auto sector constitutes 7.1 per cent of the GDP, and 49 per cent of the manufacturing GDP in the country and it supports almost 37 million jobs (inclusive of its value chain).
He said that re-energising the auto industry will have a ripple effect in achieving the goal of $5 trillion economy. Stating that revival of the auto industry would lead to the revival of freight which in turn will lead to revival of trucks, “all this revival would lead to the revival of jobs; revival of employment would lead to a revival of consumption. And so on, in a virtuous cycle that would get us closer to the 5 trillion economy that is our common goal.”