 "Keep pace with changing technology: Revenue Secretary to automakers")
Revenue Secretary Tarun Bajaj on Wednesday asked automakers to do a deeper analysis on why car sales are not going up even though income levels of people are rising, and exhorted the industry to keep pace with changing technology.
Addressing the SIAM annual conference, Bajaj said there are contradictions in 'economic terms' in the SUV sales going up by a higher percentage, compared to smaller cars, and questioned whether it is the overall economy, the COVID and other things that have disturbed the functioning of the auto sector and not the existing tax rates.
"We would love to see this industry growing and moving with technology. If the technology is going to move from ICE (internal combustion engine) to another mode, I think this industry has to move with it, otherwise, we will lose pace. We have gained a lot in certain industries and over the years just because, we have not moved with time, we have lost those opportunities, we could not achieve what we should have achieved.
I am sure the auto industry in India, both at the component level and at your level, has matured enough, is also clued in with the rest of the world where you export your stuffSo I'm sure as technology moves, you will also move in that direction," Bajaj said.
Stating that 2017-18 and 2018-19 have been "glorious years" for the auto industry, Bajaj said except for passenger vehicles, sales of commercial vehicles were up 10 per cent, 3 wheelers were up 30 per cent and two-wheelers were up 16 per cent.
Observing that the industry was doing well a few years back, Bajaj sought to know what so drastic has happened after 2017-18 that the sales have come down or the growth is not as much as one would expect it to be.
Is it the GST rates, as high rates as you call, that came in 2017-18? I also want to understand, before GST came in the major states where cars are sold, like Maharashtra, Tamil Nadu, Karnataka, Delhi, -- what was the taxation structure at that stage? Was the taxation structure any lesser? I think it might have been a little higher, he said.
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Referring to the point that the industry made about high price elasticity, he said, If it is so high, then why the sales of SUVs go up by a higher percentage and the smaller cars don't go up by a higher percentage. So, all these are contradictions in the economic term.
Bajaj further said there was a need for a deeper look into the auto sector as to what the industry or the government has to do, or is it the overall economy, the COVID and other things that have disturbed the functioning.
GST rates vary from 28 per cent for a small hybrid vehicle, going up "very high" for SUV, along with compensation cess, he said.
The secretary said, even though car sales are recovering, commercial vehicles and the three-wheelers are facing the "maximum brunt" and sales are not recovering, even though direct tax collections are rising.
This year direct tax collection is growing by a robust 40-50 per cent and collections are expected to be better, he said.
While there has been some unemployment, I'm not denying that, in a class of people which would be your buyers, the income levels are going up. If the income levels of people are going up, why is it that the car sales are not happening? Whether it is just the price elasticity or whether there is anything else? I think the SIAM should do a deeper analysis of this fact and come back to us to say what changes you require," Bajaj added.
On high excise duties on fuel, Bajaj said the government is facing a lot of flak, but it also needs revenue to balance its budget, as it cannot afford to continue with high levels of borrowing.
"If we continue to borrow this money and give relaxation in other fields, it will come back to haunt us at a later stage, inflation will be so high, prices will go up. You will then notice that your raw material prices which have already gone up, the commodity prices will go up further," Bajaj added.
He said it is not a "simple intervention" of reducing the taxes that will benefit and there is a need to take the 360-degree view of what policies are needed to support this industry.
"I can say that we are interested in this industry to go up. We look at the figures every month to see how the economy is doing... The fact is that the focus of any policy can just not be only on the fact that we want the auto industry sales to go up not even knowing whether changing this would actually increase the sales of the auto industry," Bajaj noted.
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