‘Only an all-round recovery of the economy can revive demand’
Even as the auto industry clamours for fiscal relief in the form of a GST rate cut, truck operators say there is no real benefit from such a move. GST reduction, according them, is akin to giving vitamins to a sector that is desperately in need of a lifeline.
There has been a call to cut the GST rate from 28 per cent to 18 per cent for trucks to jump-start demand.
“There are already huge discounts offered for new trucks,” says SP Singh, Convenor of Indian Foundation of Transport Research and Training (IFTRT). The discounts, it is learnt, are in excess of ₹4 lakh in some regions, and still, there are no takers.
“A GST cut now will be a wasteful exercise. Only an all-round recovery in the economy can bring sustainable CV demand,” he added.
Hetal Gandhi, Director of Crisil Research, agrees. “Unless fleet utilisation picks up, it is unlikely that a GST rate cut would bring a substantial uptick in demand,” she says.
The sector is looking at much wider support. “If the current situation continues, the trucking industry will collapse. The government doesn’t have any roadmap to revive the industry. First, the industry needs some lifeline and then vitamins could be given. Since more than 80 per cent of the truckers are small operators having 1-5 trucks, the GST rate cut alone won’t save the industry,” SK Mittal, President, All India Motor Congress (AIMC), told BusinessLine.
The AIMC had sought some measures to resolve the issues affecting the transport sector. Three meetings have been held with the Finance Ministry and Road Transport and Highways Ministry. Some of the measures sought include reduction in third party premium, solving the ambiguity in calculating tax on empty vehicles, removal of TDS deduction and waiver of TDS on cash withdrawals.
The CV industry has been facing a severe slowdown with the sale of trucks falling in double digits over the past three quarters. During the first half of the current fiscal, the medium and heavy truck market declined by as much as 40 per cent.
Multiple factors have contributed to this situation. Implementation of GST has enhanced efficiencies in the transport system with the turnaround time declining by about 20 per cent.
This, coupled with higher axle load norms for trucks last year, meant that 75 trucks could deliver the freight instead of 100 trucks that were required earlier. Even as the sector was undergoing this transformation, the economy began to slowdown and the availability of freight dropped. Truck operators were left with increased idling of their trucks.
The industry had to deal with another variable — BS-VI norms that are to come into force in April next year. With no sign of economic revival and liquidity issues that the truckers faced in the past months, their hopes of pre-buying of BS-IV vehicles before the new norms come into force also evaporated.
With sales dwindling every month, truck makers have also resorted to production cuts. Despite offering an unprecedented level of discounts, sales continue to be depressing.