Tax Relief

Auto shares decline as tax break debate picks up; M&M Bucks development

Auto stocks remained the focus of attention on Thursday for the second straight day as investors assessed the growth prospects of the sector struggling with high taxes and commodity prices. The sector’s major stocks were mixed for the first half of the session.

While Maruti Suzuki lost 1.44 percent, TVS Motor 1.29 percent, Ashok Leyland 0.76 percent and Hero MotoCorp 0.44 percent. Mahindra & Mahindra gained 1 percent, while Tata Motors and Bajaj Auto were unchanged.

The Nifty Auto index – which measures the performance of 15 major stocks in the sector – fell as much as half a percent. The sector index has risen less than 7 percent so far this year, lagging behind Nifty50’s return of 19 percent.

On Wednesday, the government ruled out the ability to intervene in the auto sector after manufacturers sought tax breaks citing recent price hikes.

Finance Minister Tarun Bajaj said he wanted to understand from automakers why vehicle sales have been tepid in recent years, and whether it was just because of high taxes or other reasons.

Auto companies have been campaigning for lower GST tax rates for years, which they think could help boost sales.

“How can we tinker to make sure certain (vehicle) segments get the encouragement they deserve,” said Bajaj. The Treasury Secretary spoke at a conference organized by the Society of Indian Automobile Manufacturers (SIAM).

Also at SIAM’s annual meeting, Union Minister Nitin Gadkari said the center wanted to increase the contribution of the automotive sector to the country’s GDP from the current 7.1 percent to 12 percent and increase job creation from 37 million to 50 million. Gadkari also named the country’s auto industry a major player in the government’s vision of turning India into a $ 5 trillion economy.

The GST tax rate for cars in the country is up to 28 percent, plus other taxes are levied by the states. According to the company’s management, this makes the vehicles expensive for many buyers, especially since the high raw material prices and the upgrade to stricter rules have already pushed prices up.

Related Articles