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May 19, 2017 09:19 AM IST | Source:

Truck, bus makers may find relief under GST as scrappage policy enters last mile

Tax exemptions for the proposed scrappage scheme for old trucks and buses was being worked upon by the GST council

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Though the Goods and Services Tax (GST) will not drive down prices of new cars it will, however, provide assistance to existing truck owners to upgrade to a cleaner emission commercial vehicle.

Tax exemptions for the proposed scrappage scheme for old trucks and buses are being worked upon by the GST Council, according to a senior minister.

The exemptions would help reduce the acquisition cost of new trucks, boost production and sales of new trucks, reduce emissions, boost fuel-efficiency, minimise fuel consumption and also cut down instances of vehicle break-downs.

The Nitin Gadkari-led Ministry of Road Transport and Highways (MoRTH) had proposed a total monetary benefit of nearly Rs 5 lakh per truck of which half would come from state and central governments.

“The vehicle scraping policy will go the Cabinet Secretary and then tax exemptions on it will be worked upon by the GST Council,” said Gadkari speaking to Moneycontrol at a recent CII-sponsored event.

The ministry had proposed surrender of commercial vehicles which are more than 15 years old. As per estimates there are several more than 15-year-old buses running on Indian roads which need urgent scrapping. Fleet operators and state transport undertakings need to replace these ageing fleets on an urgent basis.

While some of these vehicles are of Bharat Stage I emission standard many are from the period when India did not have an emission standard. India has reached BS-IV emission level and hopes to upgrade to BS-VI from April 1, 2020.

Following demonetization and slowdown in infrastructure spending, commercial vehicle makers struggled to push volumes for the entire period of last year.

According to data shared by the Society of Indian Automobile Manufacturers (SIAM) sales of medium and heavy commercial vehicles (goods carrying) dipped by 1.25 percent last year. Sales fell to 2.55 lakh as against 2.58 lakh sold in 2015-16.

However, the fall was even severe last month. In April, MHCV (both goods and passenger carriers) sales dipped by 55 percent to 10,602 units as compared to 23,515 units sold in the same month last year.

Tata Motors, the country's largest commercial vehicle maker, posted a decline of 60 percent in April while Chennai-based CV maker Ashok Leyland said its sales crashed 47 percent during the same month.

The reason behind the fall is the Supreme Court ruling that barred sales of BS-III vehicles after March 31. This led to liquidation of BS-III stocks through heavy discounting as dealers desperately looked to reduce inventories.

Sales of MHCV are expected to remain subdued due to fear of GST implementation among dealers as well as slowing replacement demand, weak industrial activity, rising diesel prices and overcapacity, says India Ratings and Research (India Ratings).
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