Getting
into a Groove
Jayendra Kachalia, President
Dear friends,
The year 2005-06 has started on a none-too-boisterous note.
While the 2-wheelers continue to have their dream run, the
performance of passenger car and commercial vehicle segments
is not something to go gung-ho about. It is a different
matter that a few individual car-manufacturing companies
have performed reasonably well for a variety of reasons.
One of the reasons for not-so-impressive performance during
April could be that the purchases were advanced to March
due to the fear of higher price tag of vehicles post April
1 on introduction of VAT and partly because of the price
increase announced by some of the manufacturers in order
to partially offset the rising input costs.
However, I continue to be sanguine that we shall post a
decent growth in this year as well. There are quite a few
positive indicators that support my optimism. Economy is
doing very well, as studies of various institutions and
organisations reveal. The Credit Policy 2005-06 of RBI announced
recently projects real GDP growth of around 7.00 per cent.
This forecast comes close on the heels of GDP growth of
7.2% projected by the NCAER for the year 2005-06 and 6.6%
estimated by CMIE. Even by conservative estimates, the GDP
growth is expected to go past 6.5% in the current year.
Macro-economic indicators for the month of April 2005 inspire
a lot of confidence. On the flipside is the uncertainty
over oil prices, which have been ruling at $50/barrel as
against an average price of $39/barrel during the year 2004-05
and $28/barrel in 2003-04. The Indian automobile market
is poised for a big leap forward. However, any significant
hike in petroleum product prices has the potential to playa
spoilsport. While the industry and trade has drawn up ambitious
plans, all such plans can go awry with the jacking up of
fuel prices, which the Government find it difficult to avoid
for long.
Another area of concern is the confusion over and the lack
of understanding of the VAT. Business community continues
to harbour apprehensions over the new tax regime. A number
of issues are coming to the fore with each passing day.
Industry, trade and also the tax administration are having
hard time coming to terms with VAT.
A case in point so far as retail automobile trade is concerned
is the VAT on sale of used cars. What is dismaying is that
VAT legislations of various States have varied provisions
and rates in relation to VAT on sale of used cars by registered
dealers. At various fora, FADA has been pleading that VAT
on used cars has to be treated on a different footing for
various reasons. One, used car on sale has already suffered
either VAT or sales tax prevailing earlier; two, higher
VAT on used cars will drive the customers away to brokers
in the unorganised sector, thereby depriving the Government
of revenue, which would otherwise accrue; three, customers
by purchasing used cars from the brokers will not feel assured
of the quality of product and after-sales warranty; and
four, sale through brokers will not afford any assurance
or guarantee of the genuineness of the transaction, and
compromise, at times, the national security through transactions
of dubious nature. FADA's submission is that there should
be a special dispensation for VAT on used cars, which should
be pegged at 1% of the gross value of dealer's invoice to
the customer or 4% on value addition, which is the essence
of VAT.
Meanwhile, the Finance Bill 2005 has been passed by the
Lok Sabha. While FADA had welcomed the Union Budget 2005
as growth oriented, the proposals relating to Cash Withdrawal
Tax and Fringe Benefit Tax, which the industry and trade
found to be irritants in an otherwise good budget, have
been retained, albeit in their toned down versions. We feel
that these new levies, which are likely to give rise to
complications and accounting problems, go against the avowed
objective of simplification and rationalisation of tax regime
and, therefore, should have been withdrawn altogether.
Adverting to the activities of FADA, as already informed
through the medium of this Journal, FADA has launched a
new look website on 26th January 2005, thanks to efforts
put in by Indiacar Pvt Ltd. FADA Members would soon be receiving
their login Id's and passwords for accessing the members'
section in website.
FADA is proposing to hold a Global Conference on Retail
Automobile Trade jointly with Society of Indian Automobile
Manufacturers (SIAM). The two-day event is proposed to be
held on 13-14 January 2006 at New Delhi. We shall keep you
posted on further developments in this regard, including
the programme of the proposed Global Conference, from time
to time.
I am happy to inform that FICCI has constituted a Task Force
on retail auto trade to identify and to take up with the
appropriate authorities the issues of concern to retail
automobile trade. This Task Force would focus on issues
specific to the retail automobile trade and allied businesses.
The Task Force is headed by Mr Vinay Nevatia, Past President,
FADA and comprises members drawn from retail automobile
trade, finance companies and banks, equipment manufacturers,
management consultancy firms, tyre and auto component industries.
Almost all the automobile dealers are feeling manpower crunch
with the growth of automobile industry and expansion of
network of dealerships and automobile workshops. Either
we are not able to find the manpower or, if we find, the
manpower is not up to the mark. FADA is alive to this problem.
We have initiated a dialogue with the national chambers
like ASSOCHAM and FlCCI for FADA associating with some of
the ITls in order to ensure that candidates qualifying from
these ITls fit in the requirements of automobile dealerships
and workshops. Simultaneously, we plan to partner with other
institutions to conduct courses for honing the skills of
graduates and diploma holders to suit the needs of automobile
dealers. Such institutions will impart coaching and training
strictly in accordance with the curricula laid down by FADA.
We hope to start pilot projects at Bombay and Pune soon.
There are a host of other issues, including sales tax on
warranty parts and service tax on the amount received by
automobile dealers from NBFCs and banks for arranging vehicle
finance on behalf of the customer, which are receiving the
attention of FADA Council.
I count on your suggestions and inputs for further strengthening
the activities of FADA.
With best wishes,
Yours sincerely,
Jayendra Kachalia |
