[speedmiester]

Blaming just GST for the slowdown in automobile sales is highly incorrect.
This is a global phenomenon and there are multiple reasons. Auto Sales are down in all major markets.
1. Availability of ride hailing services
2. Mindset of younger population
3. Reliable cars which can run for longer and stronger for many years compared to their predecessors
4. The advent of EVs and many people holding off purchases as good EV launches are on the horizon ( I fall into this category)
5. Uncertain times in many job sectors
and many more.

[ramzsys]

Ignoring economic downturn, if people aren't buying cars due to

1) Huge traffic congestion, lack of parking space.
2) High insurance and upkeep costs.
3) Presence of uber/ola/eats
4) Emission norms and EV.

How will reduction of GST, or for that matter, reduction of ex-showroom price help?

[gopalnt]

In the current environment, the bank interest for deposits have become too low and stock market returns have become stagnant (impacting SIPs). People who are planning to buy a car on loan will be feeling that their savings are not yielding any returns that can buffer the EMIs they would be paying on car loan. So at this point of time, EMIs have become an unnecessary burden than something that can be tolerated.

[GrammarNazi]

Cutting GST from 28% to 18% is an atrocious demand. When GST was introduced, the cloth market in Surat City was closed and they protested for 20 days when textiles were brought into taxation. So believe me, rate cut will not happen without serious protests / unpopular scathing reactions from all other industries that are facing challenges in the economy.

The Auto industry needs to off-load the massive stock-pile it is presently squatting on before the April 2020 BS-IV deadline and are refusing to take the hit of the price cut which they will be forced to swallow in the present scenario.

Frankly car-makers had a very good run but were simply outplayed by both under-performance & external factors. Industries survive by building & evolving products that would adapt to external factors and stimulate their growth. IMO It's largely a business under-performance due to which the consumer demand has slumped.

Anyway, who is to quantify how's much of the slowdown is due to economic issues, and how much is due to consumers having found viable alternatives ? Intra-City commute is solved by app based taxi aggregators. Inter city travel is resolved by other means of transport. IMHO People aren't as much deprived of means of commute since consumers have largely found suitable alternatives that are reasonably comfortable, safe and fast.

In this scenario, it's hard to consider changing taxation norms & de-regulating an industry that's facing what is IMO a very fair correction by markets. It is here to stay until automakers become competitive and innovative.

Further, instead of cutting taxes for those who are perceived to be rich car-makers, if any Govt wants to allay criticism about the taxation system and the state of the economy, then they'll reduce penalties/late fees for regular filers (LINK) who've not completed formalities. It'll yield a better PR outreach & even decent revenues. Who doesn't want that ?

[giri1.8]

Originally Posted by oxyzen

To everyone complaining to reduce prices instead of reducing taxes, here is a chart showing how much money the Govt Makes vs how much money the car manufacturers make for the sale of a car.

And to think of it, this is just the base price of car ownership After purchase, we need to pay Toll charges, parking charges(which also has GST), Yearly insurance, endless supply of spares(Tyres, brakepads, battery, alignment, engine oil and other consumables!!!!).


On top of this, most of the cars are depreciation disasters after few years, we won't even get our rate of interest and service cost back.


No wonder sales are crashing down!

[truezealous]

Government unlikely to offer GST concessions to auto firms

The government is unlikely to offer goods and services tax (GST) concessions to the auto sector as it believes that companies have been slow in responding to consumer demand on BS-VI. Besides, it fears that sops to one sector will open the floodgates to demands from other sectors.

While acknowledging that lending is an issue, sources said the government is making efforts to push loans and get banks to make up for the deficit due to the absence of some of the NBFCs from the market.
With the government itself is facing pressure on the revenue front, chances of a GST reduction are remote, especially when states too have to agree to it in the GST Council. Several auto industry leaders have suggested that a tax cut could provide the necessary stimulus.

source

[ashlil]

Originally Posted by nakul0888

What about 48 percent GST? What about the near 20 percent road taxes?
Sure , it’s not the govts job to ensure profitability of private businesses, but that doesn’t mean taxing the crap out of them.

Government is not taxing the "crap" out of them. Government is taxing the "crap" out of us. There is a difference. Government is actually very lenient on corporates . Please don't mix issues. I would gladly participate in a debate about corporate tax and individual tax, but this is not the thread for that.

Originally Posted by nakul0888

And as for the “greed”of car companies. I mean doesn’t every business exist to make money? Car companies weren’t selling cars prior to 2010 for charity. They were just as greedy then too. And again as I have said before in an earlier post in another thread. This entire car companies ganging up like super villains to hurt the consumer theory is far fetched at best. I mean really which do you think makes more sense? The entire car industry from Maruti to Mercedes Benz colluding and conspiring to jack up prices to rip off the Indian consumer or that the economy has fundamental issues like inflation, weakening currency, a public finance sector that’s neck deep in bad assets, high taxes and regulations and so on.

Taxes were no less in pre GST era than now, at least on cars. VAT and sales tax came to about the same as GST now. GST is better since it is value-add. They should actually pass that GST credit benefit to customers. If they are there to make profit, sure make profit. Dont blame government, regulations, supreme court, God and public for your failures.



Economics is very simple. If supply exceeds demand, reduce price. Government reducing the GST lets the car companies off the hook. It should not. The price reduction must come from car companies. Premium pricing is bad business strategy and this lesson must be driven home by economics. I make a bad investment strategy, I suffer. I don't go crying to the government. I don't see why it should be any different for a corporate.

[nakul0888]

Originally Posted by ashlil

Government is not taxing the "crap" out of them. Government is taxing the "crap" out of us. There is a difference. Government is actually very lenient on corporates . Please don't mix issues. I would gladly participate in a debate about corporate tax and individual tax, but this is not the thread for that.

Indirect Taxes Do have a significant effect on business performance. When you jack up taxes on goods , sure the companies simply pass them on to customers. But the goods themselves become artificially more expensive and hence less people end up buying them. Less sales = Less profit, less growth, less employees. This is obvious. Are you saying there wouldn't be any difference if GST rates are jacked up again from where they are now?

And no, the government is not that lenient on corporate either. Net profit of companies are taxed at 30% flat. If then the same already taxed income is given to its shareholders it again gets taxed at 20% via Dividend distribution tax. Effectively its 50% income tax by the book. And no they cant simply jack prices by 50% whenever they feel like it to pass the income tax also on the consumer as well. There is only so much price hike that the market can actually take, beyond that you start losing sales.

Originally Posted by ashlil

Taxes were no less in pre GST era than now, at least on cars. VAT and sales tax came to about the same as GST now. GST is better since it is value-add. They should actually pass that GST credit benefit to customers. If they are there to make profit, sure make profit. Dont blame government, regulations, supreme court, God and public for your failures.

Yeah and it was wrong to tax that much before GST and its still wrong now. Taxes were just as high before the slump in economy and the price hikes, but that doesn't justify it being high. Imagine how much better the auto sector would have been if it were reasonably taxed during then too?Also in what world is a 50-60% tax on anything moral? I dont get it.

Your argument of just do business and dont go crying to government would have made sense if we had a business friendly free market where the government doesnt interfere much in the private sector. Clearly we dont have that. On a global ease of doing business index India is anything but competitive. We rank near the bottom. The government has significant control over the finance sector, real estate sector, labour market. And when it screws up we are not justified in complaining about it? You wouldn't take this approach with a private company, would you? So why let the government off the hook?

When what you make gets taxed exorbitantly as is the case with automobiles, it is a genuine hardship. For both the maker and the consumer.And also who is to blame for the present economic downturn? The eroding away of rupees value? the crumbling roads and infrastructure? the slump in the financial sector? Last time I checked these things weren't left alone to the market. And nobody should complain about any of this? We have to just look the other way, pretend that these problems created by govt dont exist?

Originally Posted by ashlil

Economics is very simple. If supply exceeds demand, reduce price. Government reducing the GST lets the car companies off the hook. It should not. The price reduction must come from car companies. Premium pricing is bad business strategy and this lesson must be driven home by economics. I make a bad investment strategy, I suffer. I don't go crying to the government. I don't see why it should be any different for a corporate.

Economics is simple indeed. When you tax goods exorbitantly, price of goods are artificially inflated. When your government creates a poor market environment through its populist policies economy stops growing, people stay poor, goods and services become out of reach for the consumers, and businesses lose money and shut shop. If we had an actual free market, we know that the government didnt have any role to play in a downturned situation and it was entirely because of the policies of the players and unfortunate external factor. When that happens, I am right beside you when you say "I make a bad investment strategy, I suffer. I don't go crying to the government." Till then I dont plan on stopping the Ayn rand rants anytime soon. Sorry fellow bhpians Ha ha

[Thermodynamics]

Originally Posted by oxyzen

To everyone complaining to reduce prices instead of reducing taxes, here is a chart showing how much money the Govt Makes vs how much money the car manufacturers make for the sale of a car.

Thanks for bringing the breakup.

For all the comments that say car prices have increased 40% 50 % or even 70%, dont know where they get these numbers from.

Here is the fact. If we consider indexing or correction to inflation 1.05^10 = 1.63 or 63% costlier than what they were 10 years ago.

But in reality, Swift VDI in 2011 costed 8 Lakhs OTR, today it sells at about 8.5 Lakhs OTR. considering inflation, higher taxes and the fact the newer cars come with ABS and dual airbags, I think the manufaturers have done a commendable Job

No company would stop production or go after mass layoff if there was a scope to reduce 10% in margin and sustain. These are last resort options. Despite being one of the heavily taxed countries, India still sold the cheapest car on planet. Abeit the Nano price tag was close to 3 Lakhs, it was a loss making product. Now Alto isnt far from 3 Lakhs and this is a tight reply to all those thinking the automakers enjoy "Exorbitant" margins. At the same time I agree some products such as Innova did increase exorbitantly but they are outliers which enjoy monopoly. But majority of segments have had fierce competition with VFM benchmark being revised frequently.

Year after year, Budget after Budget, we have increased taxes. Now time has come we can no more milk this cash cow. It has shown signs to give up.

Originally Posted by speedmiester

Instead of asking the Govt to cut the tax, why can't manufacturers cut the prices by 10%, this will have the same effect.

Originally Posted by amit1agrawal

I find it amusing that carmakers have jacked up prices by up to 50% in last 4-5 years

Originally Posted by twin_turbo

Cost of the car has increased at least 60-70% in the last 10 years

[sprocket]

Originally Posted by Thermodynamics

Year after year, Budget after Budget, we have increased taxes. Now time has come we can no more milk this cash cow. It has shown signs to give up.

I think its time the government decided to come up with more/better ideas to increase the IT base rather than milk the working class. Every one of my salaried colleagues (pre Uber/Ola people) can easily choose to buy bigger, better cars, houses, etc but have decided not to.

Don't get me wrong (in case the finance ministry is reading), they want to contribute their share towards nation building, being privileged and all. They also want other's who are able to, to do the same. Its a shame that IT compliance is at what @ 2.5%?

[avira_tk]

Originally Posted by sprocket

I think its time the government decided to come up with more/better ideas to increase the IT base rather than milk the working class. Every one of my salaried colleagues (pre Uber/Ola people) can easily choose to buy bigger, better cars, houses, etc but have decided not to.

Don't get me wrong (in case the finance ministry is reading), they want to contribute their share towards nation building, being privileged and all. They also want other's who are able to, to do the same. Its a shame that IT compliance is at what @ 2.5%?

IT compliance is as high as it can be, the problem with this myth is that it is never backed up by any numbers. The threshold to be in the tax net is at 2.5 lakhs,that's an average income of 20k a month, outside urban areas that's possible only if you own your own business or work in the government. Mean income is at 1 lakh a year, unless wages increase we won't see better compliance. The current spate of mass reduction in the labor force means even less tax payers next fiscal.

[ashlil]

Originally Posted by nakul0888

And no, the government is not that lenient on corporate either. Net profit of companies are taxed at 30% flat. If then the same already taxed income is given to its shareholders it again gets taxed at 20% via Dividend distribution tax. Effectively its 50% income tax by the book. And no they cant simply jack prices by 50% whenever they feel like it to pass the income tax also on the consumer as well. There is only so much price hike that the market can actually take, beyond that you start losing sales.

This is going OT and I intend to stop OT post henceforth. But, I will respond this once. Government is lenient on corporates, in the sense that their expenses are deductible. My income tax does not take into account my expenses. Now is the government not lenient on corporates?

Originally Posted by nakul0888

Yeah and it was wrong to tax that much before GST and its still wrong now. Taxes were just as high before the slump in economy and the price hikes, but that doesn't justify it being high. Imagine how much better the auto sector would have been if it were reasonably taxed during then too?Also in what world is a 50-60% tax on anything moral? I dont get it.

My point was totally wasted on you. If the same taxes were not be credited for the boom in the car sales, how come the same taxes have suddenly become the villain and are being blamed for all the ills in the car sales?

Originally Posted by nakul0888

Your argument of just do business and dont go crying to government would have made sense if we had a business friendly free market where the government doesnt interfere much in the private sector. Clearly we dont have that. On a global ease of doing business index India is anything but competitive. We rank near the bottom. The government has significant control over the finance sector, real estate sector, labour market. And when it screws up we are not justified in complaining about it? You wouldn't take this approach with a private company, would you? So why let the government off the hook?

When business was flourishing, did these companies go the government asking to increase the taxes? If no, why should they now demand reduction? Hence my argument stands. You cannot blame anybody but yourselves. It is entirely different matter as to the overall tax burden on individuals and how it is being utilized. I am with you on that. We pay more taxes than the Europeans and we don't get any social guarantees in exchange of that taxes. I demand a drastic reduction in income tax or social guarantee. (And after the car companies have rationalized the prices, I will be with you demanding reduction on GST.)

Originally Posted by nakul0888

When what you make gets taxed exorbitantly as is the case with automobiles, it is a genuine hardship. For both the maker and the consumer.And also who is to blame for the present economic downturn? The eroding away of rupees value? the crumbling roads and infrastructure? the slump in the financial sector? Last time I checked these things weren't left alone to the market. And nobody should complain about any of this? We have to just look the other way, pretend that these problems created by govt dont exist?

If the government reduces the GST to 10% today, what is the assurance that the car companies won't increase their prices tomorrow? If because of the high prices again people are unwilling to buy cars, should we reduce the GST to 0%?

Originally Posted by nakul0888

Economics is simple indeed. When you tax goods exorbitantly, price of goods are artificially inflated. When your government creates a poor market environment through its populist policies economy stops growing, people stay poor, goods and services become out of reach for the consumers, and businesses lose money and shut shop. If we had an actual free market, we know that the government didnt have any role to play in a downturned situation and it was entirely because of the policies of the players and unfortunate external factor. When that happens, I am right beside you when you say "I make a bad investment strategy, I suffer. I don't go crying to the government." Till then I dont plan on stopping the Ayn rand rants anytime soon. Sorry fellow bhpians Ha ha

Quite simple. Car companies need to reduce price to boost sales. After that, I will be demanding rationalization of GST. And I assure you Ayn Rand will not influence my rants or praises. No more OT from my side.

[aniyo]

Not sure if this has been discussed on other forum, but I have been curious for sometime.
On what value is the GST calculated on cars. Is it
1. MFG cost+MFG profit
2. MFG cost only
3. MFG cost+ MFG profit+Logistic cost.

I am sure dealer margin are not taken into account for GST calculation.
Also ex-showroom is MFG cost+MFG profit+GST+Logistics charges+ dealer margin?

[DaptChatterjee]

Originally Posted by aniyo

On what value is the GST calculated on cars. Is it
1. MFG cost+MFG profit
2. MFG cost only
3. MFG cost+ MFG profit+Logistic cost.

I am sure dealer margin are not taken into account for GST calculation.
Also ex-showroom is MFG cost+MFG profit+GST+Logistics charges+ dealer margin?

Like all other products, GST is calculated on the final price which includes profits and other cost.

[gb97ce6]

If the situation is that bad, how come there are no ad blitzes with good offers ? It is not raining deals or is it ?