No GST rate cut needed for automobiles: Rajiv Bajaj

The automobile sector does not need a goods and services tax (GST) rate cut, Rajiv Bajaj, the managing director of Bajaj Motors, told The Economic Times.

The GST Council will meet on September 20 and decide on a rate cut for automobiles, currently at 28 percent.

“Every industry has its up and down cycles. It may take a year, maybe two, for it to correct,” Bajaj told the publication. “Nobody knows how long this will last, but it certainly doesn't deserve a GST cut.”

The struggles in the sector are largely due to "overproduction and stocking", with the economic slowdown playing a smaller role, according to Bajaj.

Bajaj has previously said that a GST rate cut should be limited to BS-VI compliant vehicles. This is because dealers have already paid full GST while purchasing existing inventory from manufacturers.

Automakers have contributed to the situation by overproducing vehicles based on growth forecasts, Bajaj told The Economic Times.

“They roll the dice sans any logic,” Bajaj said. “The result is a matter of luck-by-chance. We don't waste time or money on forecasts. We simply expand capacity once we're close to full.”

The industry is working towards rectifying the stock levels ahead of the implementation of the BS-VI emission norms and the problem will be sorted by November, he added.

“There's no industry that keeps growing forever without correction, so no point chasing that mirage,” Bajaj told the publication.

“The answer lies in being global so that the company doesn't fall sick if one market catches flu,” he said.

The sector is seeing the worst slump in two decades. In August, domestic passenger vehicle sales fell 31.57 percent year-on-year, according to industry body Society of Indian Automobile Manufacturers (SIAM).