Kerala FM says NO to GST rate cut on cars, bikes

Kerala would oppose any proposal by the Centre to cut GST rate on cars and bikes in the next meeting of GST Council scheduled later in September.

Kerala Finance Minister Thomas Issac said that lowering of tax on automobile would not help and instead result in revenue loss for the states.

He said that the Centre needs to go for fiscal expansion like the one in 2009 to revive the economy and lift market sentiment.

"I don't support the idea (reducing GST rates) at all. The central government can afford to lose revenue but we cannot. They should go for expansion of fiscal policy," Issac said.

"Do you think demand slowdown in the auto sector is because of higher tax? The tax rate has been reduced so much. It has been reduced to 28 per cent. I don't believe this argument," he added.

Even as economy has slowed down with April-June quarter GDP dropping to six-year low of 5 per cent, the Centre has decided to stick to its fiscal deficit target. Presenting the Union Budget on July 5, Finance Minister Nirmala Sitharaman reduced the fiscal deficit target to 3.3 per cent from an earlier 3.4 per cent for 2019-20.

With vehicle sales plunging month after month, the industry has proposed to cut the Goods and Services Tax rate from 28 per cent to 18 per cent to tide over the crisis.

The sharp decline in sales number has continued for nearly 10 straight months. Top carmaker Maruti Suzuki saw a steep 36 per cent fall in its domestic car sales in August. All other manufacturers such as M&M, Hyundai, Tata Motors and Toyota India too, saw their sales plummeting.

The Finance Minister had in August announced a slew of measures to prop up the automobile sector but industry experts have termed them inadequate. As vehicle manufacturers have cut their production capacity to adjust to the tepid demand, massive job losses have been reported across auto value chain.

Rajan Wadhera, President, Society of Indian Automobile Manufacturers (SIAM) has made a strong case for reducing GST on vehicles saying it will significantly reduce the cost of vehicles and in turn create demand.

Pointing to low sales number in the month of August, Wadhera said that it indicates market has still not responded to the various measures initiated by the government.