Dear Chief,

A lot has been written about the new policy on car sales through the CSD. The initial reaction to any such decision is of anger, helplessness and even abusive at times. But now that the dust has settled I wish to bring out the negatives of this decision.

1. There’s this very old saying of how you see a half glass of water. While some see it as half empty, some as half full. The govt is getting 50% GST on sales of cars. Where is the loss. Loss is when the govt doesn’t get anything. So the glass is half full.

2. On sales of cars costing Rs 12 Lakh, the govt gets Rs 108000 GST at 9%. On a car costing Rs 20 Lakh the govt will get Rs 180000 as GST at the same rate. This is simple economics. What is better?

3.  The govt policies on taxing  differentially based on length and engine capacity is something to be considered also. Cars under 4 metres length and upto 1300 CC are taxed lower so that majority buyers in this category are benefitted. Does the govt calculate the loss in tax revenue on this count? Why is it done? Answer. It is done to stimulate demand and have reduced emissions. Same with the tax on diesel vs petrol cars. In the developed world the price of petrol and diesel is nearly the same as also the prices of petrol and diesel variants of the same car. Why is the govt losing revenues in far greater proportion as a result of these policies.

4. The govt thinks  Increasing the periodicity at which cars can be purchased will reduce tax losses.  It is other way round.  Now you will get 9 % less tax for that many years as the increase in periodicity.

5. One of the best decisions taken by the govt nearly three decades back was to allow foreign car manufacturers to set up base in India.  Are  not the sights on our roads better than Ambassadors and Fiats of the bygone era. Newer cars mean less pollution, more revenue, better safety features and so on. From add on seat belts on Maruti 800 we have come a long way. And despite the opening up of the auto sector some of the renowned manufacturers have closed down.

6.  More sales mean more for everyone. More taxes to the govt. More profits to car manufacturers who after paying taxes on various manufacturing inputs will also pay more corporate tax on higher profits. Better business for the auto ancillary industry and replacement manufacturers like tyres, batteries and so on. More employment generation, a subject on which the govt is facing serious problrms. More factory hands,  more business for transporters of cars, more people in the sales showrooms, more business for insurance companies, more business for service and repair of cars, increased revenues to state govt on registration costs, increased used car business. The benefits are so many. These have been lost sight of against just one parameter  the govt gets 9 % GST in place of 18 %.

I am sure more such benefits will also be seen by the 40 lakh serving and retired military personnel.

The slowdown in auto industry is the worse in a decade. We have possibly added a fraction of a percentage more.

Every sector of the govt is in a slowdown mode. The budget less than a month away will address these issues. Like the lakhs of crores spent on stimulating the economy post the global crash of the world economies in 2008 by the Indian govt and across the globe, you can stimulate s small demand.

I hope this message reaches you somehow.

Regards,