There is no need for an immediate cut in Goods and Services Tax (GST) on automobiles since demand is upbeat, said Chairman of Maruti Suzuki RC Bhargava. The Delhi-based car maker sold nearly 10,000 cars every day during the ten days of Navratri and Dussera festivities.
While official sales data for October will be shared by the auto companies next week, initial reports state that demand across almost all segments of the industry picked up robustly with a few companies even managing to sell more this year than the festive ten days of last year.
“The auto industry has done pretty well in the second quarter and I don’t think that anybody has said that they have suffered due to lack of demand. In fact production capacity, more than anything else, is still being built up due to various constraints. Therefore if I was in the government at this point when there is no lack of demand for what can be produced, giving relief at this stage will be quite unnecessary,” Bhargava said.
The auto industry has been lobbying to bring down the GST on vehicles for several months in the hope that the government will come out with a stimulus package to spur automobile demand. Though on a temporary basis, a cut in GST to 18 percent from 28 percent was one of the several demands put forward by the auto industry.
But with demand returning to pre-COVID-19 levels for most companies the expectation of a GST cut has started to fade away. India’s largest two-wheeler maker Hero MotoCorp, for instance, recorded 96 percent sales during the ten days of Navratri and Dussera compared to the same period last year.
Factories of most automakers have been running at 70-75 percent utilisation levels in the past two months, the frequency of component supplies showed.
“Today I am selling everything I can produce. If the GST went down and demand increased by another 30 percent I would not have cars to sell,” added Bhargava.
The industry fears that upward trend in demand may not sustain beyond the festive days and may sputter in the final quarter of the year. "At that time the government can relook at the demand of cutting GST," said Bhargava.
“The present situation is that we did okay business in Q2 and Q3, the market situation looks quite adequate and we will not have a situation where we will have surplus stock available with us. At this point, any GST impact in the third quarter does not arise. The question is what steps will the government take when demand starts falling off some time next year. I have no reason to say it will but the government would like to take a view of what they can do or would like to do at that time,” added Bhargava.