Finance Minister Nirmala Sitharaman on Friday announced a slew of measures to boost demand in the auto sector as well as reduce any uncertainty that was dampening sentiments, including saying that the government will now replace old vehicles with new ones.
“The government will lift the ban on the purchase of new vehicles to replace old vehicles by all the departments,” Ms Sitharaman said at a press conference. “The government will now buy new vehicles, and this will serve to increase demand for the auto sector.”
The Finance Minister, however, said that the Central Government cannot take a decision regarding the reduction of the Goods and Services Tax rate on automobiles because that is a decision for the GST Council to take. The next GST Council meeting is tentatively slotted for September 20.
The government has also clarified that BS-IV compliant vehicles purchased till March 31, 2020 will be allowed to remain operational for the full period of their registration.
“She has shown remarkable willingness to listen to industries and to respond quickly and respond in a practical manner,” RC Bhargava, Chairman of Maruti Suzuki told The Hindu. “Besides what she has done specifically for the automobile industry, which I believe is the best that could have been done, she has announced some changes which will have long term and hugely beneficial effects for the economy, which will in turn benefit the auto sector also.”
“The sentiment will change, I believe, particularly due to things like the government decision to buy cars,” Mr Bhargava added. “That conveys the message that internal combustion (IC) cars will be bought by the government and not just electric cars. She has clarified that IC cars and electric are the same for the government, there is no discrimination.”
Ms Sitharaman also announced a rollback of the date from which the higher one-time registration fees mooted by the Ministry of Road Transport and Highways (MoRTH) to June 2020. In July 2019, MoRTH had issued a draft notification that proposed to increase the registration charges for new IC engine powered vehicles to Rs 5,000 from the current Rs 600. This was met with intense resistance from the auto industry.
The Finance Minister also announced a higher depreciation of 30%, up from 15%, for all vehicles purchased from now till March 31, 2020. Finally, Ms Sitharaman also announced that the government will look into other measures to boost demand in the sector, including a scrappage policy.
