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Automobile sales down by 90% in J&K, FADA appeals Governor for relaxation

Ailing J&K auto sector hopes for relaxation in one time road tax imposed by Govt. since Aug 1

The automobile sector in pan-India is facing a slowdown owing to the higher GST rates, farm distress, stagnant wages and liquidity constraints. India's automotive industry is the fourth largest in the world which provides employment to more than 35 million people, directly and indirectly. Thus, the plunging car sales will ultimately affect the workforce.

The J&K Automobile Industry is also facing a steep slump in sales and this trouble stems from the order issued by the State administration notifying the increase in one time road tax on vehicles from 1.7% to 9% since August 1. Prior to this order, around 22000 rupees were charged for vehicles above 1400 cc irrespective of make and model and around 7500 rupees for vehicles below 1400 cc. Already, the auto industry is in stress and desperate for a cut in the goods and services tax (GST) on cars from 28 to 18 per cent and this 9% one-time road tax imposed by State government is now acting as a catalyst in the slowdown.

The auto industry is currently facing the biggest crisis in two decades and thus declining auto sales have led to massive job cuts. As per auto industry body SAIM (Society of Indian Automobile Manufacturers), the entire auto sector is reeling under a prolonged slump and around two lakh temporary and casual workers have lost jobs over the last few months.

The GST council meet is scheduled for September 20 in Goa so the automobile industry is expecting rate cut from highest GST slab of 28 per cent to 18 per cent but it seems unlikely as by doing so, the government's GST revenue could take a hit of at least Rs 30,000 crore. Besides, there is no surety that GST rate cut will ensure boost in sales.

What we need to understand here is that the auto-industry is the major contributor in the Jammu and Kashmir State economy followed by hospitality sector. The automobile sector provides employment to a major chunk of the state youth but with the downfall in sales, the dealers will attempt to cut corners and ultimately lay off people.

Jammu Links News talked to various automobile dealerships and they admitted that the sales have slowed down by 90% in the month of August which can be attributed to 9 percent Road Tax announced by the State Government.

The taxes have brought a great change in the customer sentiment as well because once they come to enquire about cars, features and prices, the RTO fees and 9% Road Tax acts as a big turn off and they finally leave or defer their plans to buy the vehicle.

Besides, the order issued by government on charging 9% Road tax does not provide any clarity to the dealers like if they have to charge it on base price or ex-show room price. For example, If a Fortuner costs around Rs 33 lakh( Ex-Showroom price) out of which Rs 14 lakh is for GST and Auto cess whereas Rs 19 lakh is the base price. So, if the dealer charges 9% Road tax on base price, it comes out to be Rs 1, 71,000 whereas if it is charged on Ex-Showroom price i.e, Rs 33 lakh, it will be around Rs. 2, 97,000. There is a difference of around Rs 1,26,000 so if the dealer charges a wrong amount owing to lack of clarity, who will be held accountable for that.

Considering the road taxes charged by neighboring states like Punjab, Haryana and Himachal Pradesh which range from 4-7%, the way out for J&K State would have been a slight increase in road tax instead of a steep rise from 1.7% to 9% directly which ultimately affects the customer.

The Federation of Automobile Dealers Associations (FADA) has written to Governor Malik for providing relaxation in the road tax imposed stating the 90% slump in sales.

Recently, the Finance Ministry announced a series of measures to tackle the slump in vehicles sales after which, a draft notification was issued by The Ministry of Road Transport and Highways announcing that the States must withhold any proposed increase in the registration fees of new vehicles across the country.

Quoting this, FADA has requested the State government to withdraw the order or to revise it after having a discussion with the stakeholders.

Details were shared by Manik Batra, Director Batra Group

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Hardeep Bali