Mon, 18 Nov, 2019

Reverse gear: Auto industry wants govt to reduce road tax by 50%

Several factors have compounded woes for automobile sector, like slowing Indian economy and mining ban in Goa. Sources claimed that car sales are down by 35 to 40 per cent in Goa compared to last year. Fearing that slowdown can get worse in the coming months, auto dealers want the State Government to reduce road tax by 50% for three months

19th August 2019, 02:19 Hrs

Karan Sehgal  

It has been more than two years that the sales of automobiles have remained sluggish in Goa. However, now, the slowdown is so severe that it has reached a state wherein auto dealers are finding it near impossible to continue their business.  

At pan-India level as well, sales of car and bikes have shown signs of slowing down this year. But the situation in Goa is far more complex because mining, which was the driver of the economy, is shut down for the last few years.  

The other important sector for State’s economy – tourism – also fared poorly last season when the number of foreign tourists came down considerably. As a result, sales of cars and bikes in Goa have fallen sharply this year.  

If the situation does not improve, auto dealers fear that sales may further come down in the upcoming festive season. Therefore, they want the government to reduce road tax on automobiles by 50% just for the three months of August, SeptemberandOctoberso that the sector can get a boost.  

Evencio Quadros, chairman and managing director, Quadros Motors, said, “Fear has gripped the auto industry. There is such a dearth of jobs that people are willing to join a dealership at half of their normal salary. I think car sales are down by 35-40 per cent compared to last year and the slowdown is equally compelling for even two-wheeler sales.”  

Several sources said that auto sales in Goa never recovered from the demonetisation (announced in November 2016) and roll-out of Goods-and-Services-Tax (GST) in July 2017. This means that auto sales have remained low for more than two years now.  

Prashant Joshi, president, Goa Automobile Dealers Association (GADA), said, “We urge the State Government to reduce road tax by 50 per cent on automobiles for three months of the festive season, which begins from August.”  

Joshi continued, “In good times, the auto sector used to contribute Rs 600 crore to the State’s exchequer by way of road tax and sales tax. If the government reduces road tax, auto sales may get a boost. If sales grow at a high rate, then even the tax revenue of the government will grow as well.”  

The auto sector is very crucial for Goa’s economy, as it employs 8,000 people directly and indirectly. If the slowdown continues, some of the people employed by auto dealers may end up losing their jobs. If someone is told to leave a job, he or she will find it tough to find employment in such a weak economic scenario.  

Vinay Kunkolienkar from Goa Rajee (dealers of Honda two-wheelers) said, “The sales have been slow this time. Business does not pick up in the rainy season. The month of Shravan has begun in August. Then, we will have Ganesh Chaturthi as well. We hope that the business recovers in the festive season.”  

Battered by a slowdown to such an extent, the auto dealers are hoping that festive season will bring some respite for them. Meanwhile, the scene with auto sales has remained grim at pan-India level throughout the year. Close to 200 dealer showrooms of passenger vehicles have shut down in India in the last one year.  

A source, on the condition of anonymity, said, “Auto dealers can never send back unsold inventory to the manufacturers. Once dispatch of a car or a bike is done from the manufacturer’s end, it is entirely a dealer’s responsibility to sell it. If he is unable to sell it, he will have to bear the loss.”  

Moreover, auto manufacturers do not provide any funding to dealers to make purchases. The dealers have to depend upon loans from banks and non-banking-finance-companies (NBFCs) to make purchases from manufacturers.  

In good times, dealers can repay loans. But, in bad times, they find it tough to repay loans and even banks start refusing credit to them making matters worse. These are the reasons auto dealers expect the State Government to reduce road tax by 50% for three months.  

The rate of GST, being under the purview of the Central Government, is not within the State Government’s control to change. But road tax on automobiles is within the State Government’s purview to change.  

The dealers hope that the State Government will reduce the road tax and that will give a boost to auto sales. From August onwards festive season starts in Goa, as major festivals like Ganesh Chaturthi, Dussehra and Diwali fall in this season. And, this is when people buy cars and bikes.  

Joshi continued, “Last year, all the auto dealers had sold 1,800 to 2,000 four-wheelers in Goa around the festival of Ganesh Chaturthi. If the government does not reduce road tax, four-wheeler sales are likely to fall to 800 to 1,000 this time.”  

The situation is really serious for the auto sector. The dealers want the government to step in by reducing road tax for three months. After three months, the government can take stock of the situation and act accordingly. But, for the next three months, the only way the State Government can help is by reducing road tax.  

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