'Auto Dealers See Upbeat Festive Sales Over GST Cut Boost But...': FADA Eyes Clarity On Inventory Build

The automotive industry is buzzing with anticipation following the potential reduction of GST rates, a move that is expected to boost sales and consumption in the economy. With Nifty Auto leading gains in the market on Monday, C.S. Vigneshwar, President of the Federation of Automobile Dealers Associations or FADA is looking forward to the tax rate cuts.

“We are very delighted and over the moon that there is some sort of a rate rationalisation coming in. We had written to the government, it will help with the mobility of customers. More customers are going to come and we are grateful to the government for this move," he said.

The GST cut is already accounted for as a key driver in the upcoming festive season sales especially for the auto sector. A major challenge remains for dealers, due to lack of clarity around the rate cut, which is the management of existing inventory.

Vigneshwar noted that dealers have already built up stock at the current, higher GST rates. "We will need to have a conversation with the government regarding inventory already built at the higher GST rates," he said. He noted that the government will address this issue, possibly through a GST credit or some form of reversal.

"There will be some sort of reversal like a credit of the GST that is already paid and I think the government will take care of it," he added. FADA believes that a GST rate cut on vehicles will make them more affordable, especially for entry-level models and two-wheelers.

The association has been advocating for a reduction in the GST rate on two-wheelers from 28% to 18% to the government to make them more accessible and to expand profit margins for players. The industry is hopeful that the festive season will bring a strong surge in sales boosted by the tax cut.