Taxes beating down sales of even low-end vehicles, the ramifications of continued auto-sector pain on jobs are seriousThe state governments, too, should realise that even low-end vehicles are now out of reach of the common man, and the stratospheric high prices of petrol and diesel are making it worse. It is critical to make products a lot more affordable; levying the same GST rates for two-wheelers and high-end cars is irrational. The current GST levy for cars, two-wheelers and trucks is 28%, but after other taxes, the total incidence, in some cases, is around 40%.
It is not surprising that retail sales volumes of two-wheelers fell 32% in FY21 and were the worst in about a decade; between July 2020 and March 2021, volumes increased only in one month. Again, retail volumes for passenger vehicles saw a fall of 14% in FY21. To be sure, FY21 was a year of disruption, but there is no denying high prices slowed down purchases. The trend in the current year so far appears encouraging only because of the base effect.
For sure, the rebate should be restricted to vehicles below a certain price level; those that can afford to pick up vehicles that cost `20 lakh can afford to pay the GST. As it is, the industry hasn’t been given enough of a heads up on transitioning to an EV regime; expecting companies to make big investments in their plants and then springing a nasty surprise is not fair. It is nobody’s case that the environment should not be protected, but, right now, the only priority for any government should be to protect and create jobs. Revenue secretary Tarun Bajaj’s query on whether the tax rates prevailing pre-GST were lower or higher is not really pertinent in the current environment when the economy is reeling from the pandemic. The point is the high levies are stymieing sales and the government must cut them, even if it for a temporary period, say, a year