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<ul><li>The sharp slump in car sales has squeezed profits in India’s auto sector, which employs 32 million people. </li><li>Half a million passenger vehicles worth $5 billion, are lying unsold at dealerships. </li><li>The automobile sector currently attracts 28% GST slab. </li><li>Seven of the top ten auto manufacturers like Maruti Suzuki, Tata Motors and Mahindra have announced factory shutdowns. </li></ul>The newly appointed Finance Minister Nirmala Sitharaman is mulling taking a few items off the list which attracts the highest tax under India’s goods and services tax (GST) regime. And, auto sector, which has been weighed down by piling inventory and sales slowdown, is most likely candidate, according to an <a href="https://economictimes.indiatimes.com/news/economy/policy/more-items-likely-to-go-off-highest-gst-slab/articleshow/69718462.cms">ET report</a>. Currently, the automobile sector attracts 28% GST along with personal-use aircrafts, lotteries and five-star hotels and unhealthy foods like aerated water. The sector <a href="https://www.bsmotoring.com/news/domino-effect-of-auto-crisis-livelihoods-indias-gdp-growth-may-take-hit/17095">employs around 32 million people</a> across the country, directly or indirectly, and has been the single-greatest engine of economic growth across the world. Any benefits that flow into the sector, trickles down to every sector. As the government looks to create employment, this sector which is capable of moving the growth engine, is seen as a favourite. Right now, the sector is facing shutdowns after a long spell of slowdown. This will have a much deeper effect on the employment in the sector which employs skilled and unskilled workers. As per the latest data, <a href="https://www.businesstoday.in/sectors/jobs/jobless-in-motown-employment-auto-industry-fell-2017-18/story/336097.html">hiring in the sector</a> went down by 2.5% in 2017-18 annual data. Unsold inventory at $5 bn According to<a href="https://economictimes.indiatimes.com/industry/auto/auto-news/auto-companies-slam-brakes-on-production/articleshow/69718548.cms"> an ET report</a>, seven of the top ten auto manufacturers like Maruti Suzuki, Tata Motors and Mahindra have announced factory shutdowns. Almost half a million passenger vehicles worth $5 billion, are lying unsold at dealerships. As many as 3 million two-wheelers valued at $2.5 billion are unsold too. Auto dealers too have been shuttering down as they are unable to move cars from the showrooms. In the slow lane For the month of April, the Indian auto sales declined by almost 16% annually, according to the Society of Indian Automobile Manufacturers (SIAM). All the segments like commercial and passenger vehicles, two wheelers moved to the red. The wholesale passenger vehicle sales segment went down by 17%, impacted by various factors. “Passenger vehicles sales volume declined due to the weak buyer sentiments on account of higher insurance premiums, the increase in fuel prices as well as the interest costs. Sales were also impacted by various regulatory changes in the industry such as BS-VI, FAME-II as well as alternate mobility. The lack of clarity on the policy front could lead to uncertainty in the demand pattern in 2019-20,” said a report by India Ratings on April sales volume. Little room for a cut The central government led by Narendra Modi, has to walk a tightrope this Budget. The country is on the verge of a slowdown as GDP growth is all set to be lower than the expected 7%. At the same time, their ability to provide sops is also low as tax collections have come in slowed down. The government tax receipts this year <a href="https://www.businessinsider.in/there-is-a-lot-of-bad-news-that-modi-has-to-budget-for-this-year/articleshow/69635372.cms">are 5% lower </a>than what they were last year, throwing government into cost savings mode. SEE ALSO: <a href="https://www.businessinsider.in/there-is-a-lot-of-bad-news-that-modi-has-to-budget-for-this-year/articleshow/69635372.cms" data-type="tilCustomLink">There is a lot of bad news that Modi Government has to budget for, this year</a>

With 32 million jobs at stake in India’s auto sector, the Modi government may ease tax burden on cars

<ul><li>Foreign investors had pulled out billions from India's equity market ever since the tax surcharge was announced in the latest budget.</li><li>The Narendra Modi government also announced a slew of measures including tax reforms to revive a sluggish economy.</li><li><keyword id="7706673" type="UNKNOWN" weightage="20" keywordseo="finance-minister-nirmala-sitharaman">Finance Minister Nirmala Sitharaman</keyword> and her team addressed a press conference to restore the faith in the economy and the government.</li><li>Reform is a continuous process, she said in her opening remarks.</li></ul>In a bid to restore the faith in the Indian economy and the Narendra Modi government, Finance Minister Nirmala Sitharaman assured the investors that the government respects wealth creators and declared that the surcharge on foreign and domestic equity investors has been rolled back. The latest budget for the financial year ending March 2020 imposed an additional tax on the country's super rich and foreign portfolio investors (FPIs) got caught in the crossfire. The subsequent anger and market sell-off has wiped off billions of rupees in share market wealth since then as foreign investors rushed for the exit. Most foreign portfolio investors in India operate as non-corporate entities such as trusts and associations, which are taxed like individuals and therefore the additional tax would fall on them. The government will lose ₹1,400 crore by rolling back the additional surcharge imposed in the latest budget. Not just the surcharge on capital gains, there are other tax reforms too All pending tax notices in India will be cleared by October 1, Finance Minister Nirmala Sitharaman declared. If any case must continue, the notice will have to renewed once again after October 1 for it to be applicable. All refunds of the goods and services tax (GST) pending so far will be cleared within the next 30 days. All future refunds will have to paid within 60 days. "Reform is a continuous process," she said in her opening remarks adding that tax scrutiny will be 'faceless' from Vijaya Dashami day, the last day of the Indian festival of Dussehra. The idea is to ensure there is no physical interface between the taxman and the assessee to avoid any harassment of the taxpayer. "We are inclined to move from the prosecution route to more humane approach. I want companies and the media to see that at no point, the intention of the government is to take the prosecution route," Sitharaman said. "Issue of IT orders -- notices, summons, etc-- will go through a centralised computer system from October 1," she said. This would mean that any tax demand will be approved by a central authority. "Any notice issued with a computer generated unique document identification (DIN) number will not be valid," she said. India moves to make home loans cheaper and easier The National Housing Board will given additional ₹20,000 crore to be further lent to housing finance company. The government will release the ₹70,000 crore to state-owned banks, which will allow for more credit and lower lending rates. The banks have also been asked to pass on every fall in the cost of funds to the consumers. The government wants people to get cheaper loans for homes and cars as demand took a nosedive in recent months. Government wants to make more money to be available for credit The government will take steps to create a credit default swap market in India in consultation with the Reserve Bank of India and the Securities and Exchange Board of India. A credit default swap (CDS) is a way for a lender to hedge against a loan turning bad. "For example, if a lender is worried that a borrower is going to <a href="https://www.investopedia.com/terms/d/default2.asp" data-type="internalLink">default</a> on a loan, the lender could use a CDS to offset or swap that risk. To swap the risk of default, the lender buys a CDS from another investor who agrees to reimburse the lender in the case the borrower defaults. Most CDS will require an ongoing <a href="https://www.investopedia.com/terms/p/premium.asp" data-type="internalLink">premium</a> payment to maintain the contract, which is like an insurance policy," according to Investopedia. The government sets up a dedicated panel to make infrastructure development faster An inter-ministerial task force will be set up to expedite the proposed government investments in infrastructure. The government had announced earlier that it would invest ₹100 lakh crore in infrastructure projects in the next five years. Automobile sector "BS-IV vehicles purchased until March 30, 2020 will be allowed to run on the roads for the duration of the registration," the Finance Minister said. Any vehicle will bought from now until March 2020 will be eligible for 30% depreciation, double that of the current rate of 15%. "That will largely benefit commercial vehicle segment. In the case of cars, only companies buying cars will benefit and that doesn't affect us," RC Bhargava, Chairman, Maruti Suzuki, the country's largest car maker told CNBC-TV18. Government departments have been told to actively replace the old vehicles. Until now, there was a ban on the government offices from retiring their old vehicles as part of a cost control initiative. The stimulus hopes to boost India's sluggish economy Indian economy has slowed down sharply leading to millions of job As many as <a href="https://www.businessinsider.in/news/a-startup-that-bets-on-packaged-keto-snacks-and-chocolates-raises-seed-funding/articleshow/70784578.cms" data-type="tilCustomLink" target="_blank">30 million jobs in the textile sector</a> and 350,000 people in the automobile sector have lost their jobs. However, the Finance Minister started her address citing the slowdown in economies around the world and highlighting that India is faring much better than many others. The minister blamed the impact of <keyword id="3987248" type="PERSON" weightage="20" keywordseo="us-china-trade-war">US-China trade war</keyword> for the current sluggishness in the economy. The slowdown in India has raised questions about the government's ability to meet its fiscal targets. However, the Finance Minister denied any pressure. "I have met tax authorities in three different places and I do not get the feeling that the tax collection targets are unrealistic," she said adding that the taxmen have been specifically told not to overreach and harass the taxpayer in a bid to meet their targets . SEE ALSO: <a href="https://www.businessinsider.in/job-cuts-at-parle-and-britannia-sales-show-indian-economy-is-in-dire-straits/articleshow/70766429.cms" data-type="tilCustomLink" target="_blank">India’s biscuit crisis shows slowdown is hurting the poor more — and job losses are making it worse</a> <a href="https://www.businessinsider.in/epfo-wont-lend-money-to-private-companies/articleshow/70785890.cms" data-type="tilCustomLink" target="_blank">Indian pension fund says it won’t lend money to private companies</a>

India unveils economic stimulus-- from homes to cars to banks to infrastructure to equity markets

The Good and Service Tax has been rolled out. Finance Minister Arun Jaitley had stated that those food items which were imposed an average of 12.5% under the VAT laws will subsequently be cut-down to 5% under the new GST regime. As per the GST law, all items falling under its regime will be imposed tax rates at 5%, 8%, 18% and 28%. GST will not have any impact on the list of products and services which come below the term ‘Essential’, and this list will have zero tax rate. A survey by All India ITR shows that personal care products, entertainment activities and household items under GST will become cheaper than its current rate. However, many of the services such as mobile phone services, healthcare services as well as transportation charges are expected to attract a tax rate of 18%, which is 3% more than its current 15% tax rate. Once the new rates will come into action, your monthly household budget will also be impacted. The analysis shows that entertainment tax rate under GST will successively be reduced to a 28% tax rate as against its current 30% tax rate. The effect of GST on the current tax rate To keep a surveillance of the goods manufacturers and service providers, the GST council has also taken the resolution to form an anti-profiteering committee. This committee will be the authority responsible for taking care of the grievances to ensure that the benefit of GST upon the lower tax rates doesn't get tampered. It has been declared that the committee will be formed by officials of the central and state revenue departments. <table> <tbody><tr> <td> Goods and Services </td> <td> The Impact of GST </td> </tr> <tr> <td> GST Tax Rate on Automobiles: </td> <td> The GST rate will be higher for SUVs (55% to 43%) as compared to smaller cars (30% to 29%). </td> </tr> <tr> <td> GST Tax Rate on Beauty and Makeup Products: </td> <td> The current tax rate of 26% on these items will increase to 28% (applicable on items like perfumes, skin care products, shampoos etc.). </td> </tr> <tr> <td> GST Tax Rate on Gold Ornaments: </td> <td> The tax rate on gold metal will be 3% while 5% rate will be imposed on making charges. </td> </tr> <tr> <td> GST Tax Rate on Hotel Stay: </td> <td> GST is not applicable for hotel rooms that cost below Rs. 1,000, any cost above this will be taxed progressively, however, all room charges above Rs. 5000 will be charged a whopping 28% tax rate. </td> </tr> <tr> <td> GST Tax Rate on Refined Cooking Oil: </td> <td> Edible oil will be taxed at 5%, a subsequent decrease from its current tax rate. </td> </tr> <tr> <td> GST Tax Rate on Air Travel </td> <td> An economy-class air ticket which is currently taxed at 5.6% will decrease to 5%. While business class travelers will have to shell out a lot more than which is currently charged since it will increase from 8.4% to 12%. </td> </tr> <tr> <td> GST Tax Rate on Telecom </td> <td> The existing tax rate of 15% on telecom services will increase to 18% as these services will not benefit much input tax credit. </td> </tr> <tr> <td> GST Tax Rate on Eating Out </td> <td> Non-AC eateries will charge 12% against GST on your total bill. But, you will have to pay the price of eating out at a 5-star restaurant as 28% in GST will be the tax rate (an increase from the existing 18%). </td> </tr> </tbody></table> A List of Items Exempted from GST Here are a few commonly utilized goods and services which have been exempted from the GST regime. Unprocessed cereals (rice, wheat etc.) Unprocessed proteins (milk, vegetables, meat, fish etc.) Train travel via local and sleeper class. Education. Healthcare (exclusive of medicines). Hotel stay or lodges with room rented at less than Rs. 1,000. Kid’s Stationery items (color pencils, crayons, drawing books etc.) Bindis, sindoor, bangles etc. All India ITR summarizes that the upcoming GST Law will have its own sets of pros and cons - many necessities will get cheaper but in the meanwhile, the rest of the necessities that falls under the higher GST tax rate bracket will ultimately cause a discomfort in the household budget. <keyword id="6360118" type="UNKNOWN" weightage="20" keywordseo="GST-Rates">GST rates</keyword> will also bring about a bigger tax burden on the use or purchase of goods and services which are deemed as luxurious. (This article has been written by Vikas Dahiya, founder, and CEO of <a href="https://www.allindiaitr.com/">All India ITR</a>)

Here's how GST rates will impact your monthly household budget

<ul><li>India's auto sector continues to reel under the economic impact of the Covid-19 outbreak, as only 3,500 <keyword id="81756" type="PERSON" weightage="20" keywordseo="dealerships">dealerships</keyword> are operational across the country now.</li><li>In fact, half of these dealerships are just utilising their workshops capacities.</li><li>According to the <keyword id="609771" type="COMPANY" weightage="20" keywordseo="Federation-of-Automobile-Dealers">Federation of Automobile Dealers</keyword> Associations (FADA), even under lockdown 3.0, as on date just 20% of the total network has opened up.</li></ul>India's auto sector continues to reel under the economic impact of the Covid-19 outbreak, as only 3,500 dealerships are operational across the country now. The low number of operational dealerships comes even after relaxed movement norms were implemented across the country in the third phase of the nationwide lockdown. In fact, half of these dealerships are just utilising their workshops capacities. According to the Federation of Automobile Dealers Associations (FADA), even under lockdown 3.0, as on date just 20 per cent of the total network has opened up, which is close to 3,500 outlets. Currently, FADA represents over 15,000 automobile dealers having 25,000 dealerships, including 30 Associations of Automobile Dealers at the regional, state and city levels, accounting for 90 per cent of the total market share in India. "This number is going up on a daily basis as many dealers are in the process of obtaining permission to open up their businesses" Ashish Harsharaj Kale, President, FADA, told IANS. At present, the country has entered into the third and a more relaxed phase of lockdown. Some industrial and retail activities are allowed under this phase, depending on the geographical area of the operations. The whole country is divided into zones which are designated as red, orange or green depending upon the number of Covid-19 cases detected in these areas. The lockdown has dealt a heavy blow to commercial activities, leading to temporary closure of shopping malls, dine-in restaurants, grounding of aircraft, shutting down of factories, leaving major market places deserted. Not just the automobile sector, even the government's own revenue collection has been impacted. In terms of <keyword id="6357824" type="UNKNOWN" weightage="20" keywordseo="sales">sales</keyword> during the current month, Kale said: "May is going to be a slow month in terms of sales, as the auto industry is currently focusing on getting operational. It is difficult to comment on how the recovery in business is going to be like." Business and demand revival will strongly depend on the withdrawal date of the nationwide lockdown. More importantly, the support package offered by the government to kick start the economy and the extent of it, along with new initiatives taken by the vehicle makers for boosting retail, will also have a bearing on demand revival. The country's auto sector is a key engine of economic activity. Presently, the automotive industry accounts for almost 50 per cent of manufacturing gross domestic product (GDP), 15 per cent of Goods and Services Tax (GST) and employs 37 million people directly and indirectly in India. See also: <a href="https://www.businessinsider.in/business/auto/news/maruti-suzuki-and-ford-will-home-deliver-cars-in-india-as-people-in-most-cities-are-still-under-strict-lockdown/articleshow/75571077.cms" data-type="tilCustomLink">Maruti Suzuki and Ford will home deliver cars in India as people in most cities are still under strict lockdown</a> <a href="https://www.businessinsider.in/business/news/audi-india-launches-online-sales-initiative-amid-coronavirus-pandemic/articleshow/75671863.cms" data-type="tilCustomLink">Audi India launches online sales initiative amid coronavirus pandemic</a>

Only one in five car dealerships have opened for business after India relaxed lockdown norms

The government wants to get everything under the tax ambit and now is planning to bring barters and exchanges under the <keyword id="6359833" type="ORGANIZATION" weightage="20" keywordseo="Goods-and-Services-Tax">Goods and Services Tax</keyword> (GST). 
 
So, if the bill gets passed in Rajya Sabha, exchanging smartphones and vehicles with new ones will no more be an advantage. 
 
If barters come under GST, consumers will have to pay tax on the full value. 
 
The government wants to put a clean chain without disruption in payments to ensure tax credit flows seamlessly. 
 
"It would have an impact on consumer electronics and automobile sectors, wherein old items or cars are exchanged with a new product at a reduced price. It would need to be seen how goods under barter or exchange would be valued," Pratik Jain, partner, KPMG India, told ET. 
 
But for this, government will have to mention clear guidelines. 
 
Reportedly, GST will be levied on supply of goods and services as against provision of service, sale or manufacture of goods presently. Supply will include barter, exchange and licences such as those for mining or spectrum.

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With 32 million jobs at stake in India’s auto sector, the Modi government may ease tax burden on cars

Katya Naidu

India unveils economic stimulus-- from homes to cars to banks to infrastructure to equity markets

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Here's how GST rates will impact your monthly household budget

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Only one in five car dealerships have opened for business after India relaxed lockdown norms

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GST will make sure everything is taxed, even exchange of smartphones, vehicles

BI India Bureau

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