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Is GST to be Cut on Car Prices from October 2020. Reality Explained

Is GST to be Cut on Car Prices from October 2020. Reality Explained

Are you Waiting for Car Prices to come down in October to December 2020 in anticipation of News on GST Cut. Here is Reality Explained of GST

 

GST to be Slashed on Cars. Can Car Prices can come down in October 2020 ?

There is a strong news floating of GST to be Slashed in Passenger Cars from 28% to 18% which will lead to cut in Car Prices. Well - how far is it a reality

Firstly, important to understand that last 6 Months seems worst for Passenger Car Sector

  • Maruti Suzuki posed in First ever Quarterly loss in last 15 Years
  • Ban on BS4 which led to heavy discounts from Dealer Showroom to clear stock
  • Sales took a sharp hit in March 2020 of Industry as last week as Financial Year was under Lockdown
  • Zero Sales in April, just around 36000 Units were Sold in May 2020 - unprecedented phenomenon. Infact, seemed Indian Passenger Car Sector slumped 20 years back
  • Revival Started in June but sales was still at lows of 1.17 Lakh Cars sold

Only, things seems back in shape in July and August 2020 with many cars been Unveiled, Launched. 

Now, during SIAM Annual Convention - Shri Prakash Javadekar, Minister of Heavy Industries referred that he is very well aware of Situation of Automobile Sector and already in touch with Finance Ministry and Transport Minister to find ways to boost Automobile Sector 

  • GST Duty Cut: Discussions in advanced stages with Finance Ministry to Cut Down GST Rates from 28% to 18%
  • Scrappage Policy: Also, all approvals done for Vehicle Scrappage Policy and final Nitty Gritty will be anniunced soon. To be noted that Government can come up with a clause where consumers can get GST rebates 

As per Shri Javadekar - he is hopeful announcement will soon be made by Government so as to consider in to boost in Passenger Car Sales 

 

Now Will GST be Slashed on Cars

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Yes - GST Duty if cut from 28% to 18% for even 3 Months will definite bring in a strong Enthusiasm back in Sector and an Unprecedented Sales will come in. So, much so that possibly all records will be broken in Sales Numbers 

Manufacturers and Dealer Showrooms can even also recover in losses as they posed in during Covid Period. However - 10% Duty Cut is like a big ex-chequer loss to Government. Point is Will Government will implement such GST Cut on Cars

  • Government will just lose in upto Rs  60,000 on Cars like Swift to upto 1 Lakh as loss in cars like Hyundai Creta, and almost Rs 2.5 Lakh on Cars like Toyota Fortuner.
  • With Government revenues also took a sharp beating and India is among worst hit with GDP Declined - this would be the last step which Governmeny will take.
  • Also, its not Automobile Stand alone but every other Sector is deeply impacted due to COVID and if Government does a favor to a particular sector, many such voices from other sector will also come in

So - GST rate cut although seems like too much optimism - however, yes Vehicle Scrappage Policy is very much on cars and yes can much be rolled in

 

Details of Vehicle Scappage Policy:- As per Expectations - Consumers who have more than 10 Year Old Cars can opt for Vehicle Scrappage Policy where they can avail GST Duty Waiver on Buying New Cars

Been - this will help in 3 Ways

  • Manufacturer can recycle the Working Parts 
  • Emissions will be Controlled in from these Old Pullting vehicles and be replaced with latest BS6 Compliant Cars having subsequent lower emissions
  • Incremental Sales from Owners of these Old Vehicles to go with New Car and avail GST Waiver - this would just be add on business for both Showroom, Manufacturer and also incremental Tax Collection for Government from consumers who otherwise would have considered running in Old Car 

New Cars

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So, Vehicle Scrappage Policy yes can soon come to Reality, but keeping hope for GST Rate Cut would just be too much of an expectation.

Share your thoughts !!

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Comments 1

Guest - Gautam on Monday, 07 September 2020 20:55

People have been advised to save during the COVID-19 lockdown, so there is no doubt that there is more cash in hand of the Indian consumer now. If the government reduces GST, the following will happen:
1. People will be encouraged to spend on buying new cars. With more money in their hands (as explained above), this will for in a huge boost in sales for car companies
2. The government will make less out of the sale of every car, but with the volume of total sales going up, this impact will not be as huge as it seems. They will have a smaller share of the pie, but with the pie itself becoming bigger, the slice will also get bigger.

There is definitely a merit in reducing GST. If it is reduced for the under-10 Lakh segment and kept at 28% for ₹10 lakh+, the margin of loss in revenue becomes negligible.

People have been advised to save during the COVID-19 lockdown, so there is no doubt that there is more cash in hand of the Indian consumer now. If the government reduces GST, the following will happen: 1. People will be encouraged to spend on buying new cars. With more money in their hands (as explained above), this will for in a huge boost in sales for car companies 2. The government will make less out of the sale of every car, but with the volume of total sales going up, this impact will not be as huge as it seems. They will have a smaller share of the pie, but with the pie itself becoming bigger, the slice will also get bigger. There is definitely a merit in reducing GST. If it is reduced for the under-10 Lakh segment and kept at 28% for ₹10 lakh+, the margin of loss in revenue becomes negligible.
Guest
Sunday, 27 September 2020

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