Urge for Accelerated Scheduling of GST Council Meeting and Swift Execution of New Tax Rates by FADA
The Federation of Automobile Dealers Association (FADA) has called for the advancement of the upcoming GST Council meeting, scheduled for September 3 and 4, in a bid to speed up the implementation of the proposed GST rationalization reforms. This move aims to prevent a potential decline in festive season auto sales, as customers are delaying purchases in anticipation of GST cuts.
The approaching festive season has led to a delay in car purchases, with customers waiting for potential reductions in the current GST rate of 28% for passenger vehicles, plus a compensation cess of 1% to 22% based on engine capacity, length, and body type, which can raise the total tax payable to as much as 50%.
Two-wheelers in India are currently taxed at 28%, with models up to 350cc having no compensation cess, while those over 350cc have a 3% cess. On the other hand, electric cars are taxed at a lower rate of 5% with no compensation cess. However, some sin goods, such as luxury cars, may be subject to a 40% tax under the revised GST structure, if the reforms are implemented.
FADA has expressed concerns about potential financial stress among automobile dealerships due to increased inventory levels, caused by the delay in sales. The association has urged for the proposed low GST rates on non-premium cars to be implemented before Diwali, citing pent-up demand during the festive period.
The GST Council is expected to introduce new tax slabs around September 22 to boost India's festive demand, according to government sources. The Council will consider a proposal from the Finance Ministry for two GST rates of 5% and 18% across all goods, which would replace the existing four slab structure. If approved, this would eliminate the 12% and 28% slabs, benefiting mass-market cars and two-wheelers.
The proposed GST reforms are expected to have a significant impact on car sales during the festive season. The delays could turn the festive sales period into a "whitewash" period, according to a report by NDTV Profit. The Finance Ministry has proposed these reforms as part of the GST rationalisation, aiming to simplify the tax structure and boost economic growth.
The GST Council meeting will also address the issue of how the accumulated cess will be utilised after its removal, a question that remains unanswered. The council's decision is eagerly awaited by the automobile industry, as it could potentially revive sales during the festive season and beyond.
