Changing cess above 15% will need amendment in GST council law: Pawan Goenka

According to him, these are all speculations and it is not right to cause such speculations. It should be done only when there is a clear-cut statement made by the GST council, he added.

Below is the verbatim transcript of the interview.

Latha: You must have read the reports. It is not a done deal, as the Karnataka Agriculture Minister told us on the record, but it is something they are contemplating. What may be the impact if it is indeed passed?

A: Let me say that I really do not want to react to this sort of news item because right now it appears to be some kind of unnamed person who has said something. And I think it is really in a way, not good for the industry that such things appear in headlines because it causes a lot of disruptions in the mind pattern and I would want to react only if there is an announcement by the GST Council to this effect.

Having said that, I want to make a couple of observations. First of all, changing stress beyond 15 percent requires a change in this GST law. And it is not something that can be done easily. So there is a long process that will be involved. Second, I do believe that 43 percent is high enough GST rate and to go beyond 43 percent for any good appears to be a bit of an overkill, luxury or no luxury. Third, I would hope that luxury, if it is so, is defined properly.

Like in our previous regime, Bolero attracted amongst the highest excise rate, so I hope that it will not go back to that kind of definition of luxury and defined clearly. But my real wish will be that whatever has to be done should be done quickly because these uncertainties again make people wait and watch, which is not good for the industry. We were hoping that after July 1, everything is done and now, we can get back to running our business.

Latha: Two questions because of that. One, you will be living in this state of suspended animation till September 9, only then we are going to know yes or know. And secondly, how price sensitive is the market?

A: If it is 10 percent, that is a lot of honey. I mean you sweat to increase prices by 1-2 percent and 10 percent is huge.

Latha: I think maybe it is 6 percent. That is the cess rate, 15-25, I believe the overall rate will go up from 47 to 53 is what we are given to understand.

A: No, it is 43 percent right now. So I am hearing numbers like 52, I think these are all speculation and it is not right to cause such speculation. It should be done only when there is a clear cut statement made by the GST Council and therefore, there is nothing that we are going to do. In the meantime, there is nothing that we can do. We are going to make our cars, we are going to sell our cars and if something changes, something changes. There is nothing we can do about it.

Reema: What was the extent of discounts that you offered post GST and if indeed, the taxation goes up, will you be passing on the increased burden and again, as Latha was asking, how price sensitive is the market?

A: Just like we passed on the GST rate, we have to pass on the increase also. It is not something where we can absorb these things. Profit margins for auto industry are 7-10 percent at best. And there, to absorb any kind of such change is not possible to the best of my understanding, for various companies.

As far as discounts are concerned, after July 1, discounts have come back to the normal discount that one would have in this way. Clearly, in the month of June, discounts were higher because of the GST rates, because the prices coming down post GST and we had to more or less match the expected price post GST before June 30. And that is the only reason discounts were higher in June. Now they are back to normal discounts.