Car sales in India suddenly hit a speed breaker; Know why!
The festival season is almost here, but it looks like the car mart are not seeing the fireworks it expected in terms of sales. There indeed are a lot of enquiries on what new car to buy, but these enquiries are not translating themselves into sales.
The reason attributed to this phenomenon is the uncertainty in Goods and Services Tax (GST) rates after the overhaul of the tax framework, which is being watched closely. Many potential customers have suddenly gone reluctant as to pump in the money immediately.
This is because they would prefer to wait to know whether the GST rate cuts would actually help them save more. They are not keen on spending more when a rate cut is imminent. However, they are a confused lot as of now, simply because there has been no final clarity on how much the rates would reduce when the tax framework overhaul comes into real play.
GST cut could benefit small car buyers
It is a known fact that a cut in GST on small cars from 28 percent to 18 percent has been mulled over by the government. Meanwhile bigger cars could come under a new 40 percent slab. In the current day scenario, small cars, those with length under 4 metres and engine capacity ranging up to 1.2-litre for petrol and up to 1.5-litre for diesel have a 28 percent GST plus cess slapped on them. The new framework would pull that rate down to 18 percent. This in turn would make these small cars cheaper by 5 to 8 percent.
Meanwhile, bigger cars would see a new 40 percent special bracket, doing away with the existing GST plus cess. This move may not be effective enough in cutting down in prices of these mid-size and large vehicles.
Sales see a halt for now
The anticipated savings amount that the potential customers are looking forward to pocketing when they look to buy small cars. But then, an official clarity on the same is yet to come about. This pushes the consumers on to a tricky terrain, not knowing to go ahead and buy their dream cars now, or wait for some clarity on the GST rates to come about.
In such a scenario, sales have taken the back seat at dealerships across the country. People are said have been looking to know details and zeroing in on their festival purchases, but can’t shell out the money now as they would want to take home the savings that the new GST regime would hand them.
