Rajasthan CM Assures Automobile Dealers of Addressing Disparity in Taxes on Motor Vehicles & Auto Fuels

Ashok Gehlot, Hon'ble Chief Minister of Rajasthan assured the automobile dealers of Rajasthan that the issue of higher level of taxes on motor vehicles and auto fuels, which puts the automobile dealers at distinct disadvantage vis-à-vis neighbouring States, leading to due diversion of trade from Rajasthan, will be given a serious consideration and addressed in the best possible manner that benefits both the State and the auto retail trade.

The Chief Minister made these observations while delivering his Inaugural Address at the first ever Regional Convention of Automobile Dealers at Jaipur, organized jointly by Federation of Automobile Dealers Associations (FADA) and Authorised Motor Vehicles Dealers Association (AMVDA) of Rajasthan, on 22nd November 2010.

Addressing over 200 automobile dealers from Rajasthan and other parts of India, the Chief Minister pointed out that the State government was concerned over worsening traffic congestion, road safety and environment due to the tremendous growth of motor vehicles in the State over time. Attributing the increasing number of road accidents due to lack of awareness of traffic rules, scientific drivers' training and proper roads, the Chief Minister exhorted automobile dealers, especially in Rajasthan to help and support the Government's efforts in promoting the road safety, fuel conservation & clean environment.

The CM noted that the resurgent Indian economy has come out of the slowdown mode quicker than expected and is again on a high growth trajectory, while other economies are still struggling to cope with the global recession. The rising incomes and the changing lifestyles of the people, while leading to the growth of automotive sector, have resulted in the challenges of infrastructure constraints and traffic management & regulation for the Government. He invited automobile dealers to join hands with the State Government to tide over these challenges in public-private partnership. Like implementation of the scheme of registration of new vehicles by automobile dealers, the State Government would welcome inputs and suggestions from automobile dealer community in improving traffic management & streamlining the procedures.

Painting a bright future for the State, the CM pointed out that 39% of the proposed freight corridor passes through Rajasthan, which would provide fillip to the industrialization of the State. He announced the single-window clearance for setting up industries in the State from January 2011. The CM also advised the automobile dealer fraternity to undertake CSR activities, which, he said, go a long way in generating goodwill for the business among the Government and the public.

Brij Kishore Sharma, Hon'ble Transport Minister, Government of Rajasthan, in his address, said that Rajasthan adds over 7 lakh vehicles annually to the vehicle population in the State. The high number of road accidents in the State, resulting in 9,000 fatalities in road accidents every year, is a major concern for the State Government. While the number of road accidents and fatalities has shown a downward trend over the past few years, as a result of cogent measures taken by the State Government, the enforcement against traffic violations including drunken driving, driving without helmets & seatbelts, over-speeding and overloading has been stepped up. Other steps taken by the State Government in the area of road safety include constitution of Road Safety Council represented by all stakeholders, acquisition of 5 interceptors for traffic violations, addition of low-floor buses under JNNURM, rectification of road flaws and putting up speed-breakers particularly on the roads connected to State highways and National highways. The State Government is also proposing to set up state-of-the-art 60 drivers' training schools at places having divisional headquarters for which the allotment of land has already begun. He welcomed automobile dealers to set up vehicle fitness centres, drivers' training schools and to strengthen infrastructure under PPP model.

Earlier in his welcome address, Nikunj Sanghi, President, FADA pointed out that the alarmingly high level of VAT at 14%, coupled with the additional burden of entry tax @ 1 % charged on motor vehicle trade has placed retail automobile trade in Rajasthan at an unfair disadvantage and is driving the vehicle sales out to the neighbouring States. While automobile dealers do appreciate the constraints of the State Government, such a remedy is worse than the disease. The high level of taxes in the State of Rajasthan is depriving the State Government of a significant part of the revenues, which it would have otherwise earned had the taxes been at par with the neighbouring States, Sanghi noted.

Highlighting the importance of auto retail sector in the State economy, Sanghi said that there are around 375 automobile dealers in Rajasthan, who have invested close to Rs. 1,500 crores and provide direct employment to over 50,000 people, selling more than 7 lakh vehicles annually.

VAT collections in Rajasthan on vehicle sales have gone up from Rs. 600 crores in 2006-07 to over Rs. 810 crores in 2009-10 and is expected to be Rs. 1,200 crores in the current financial year. Auto retail contributes around Rs. 2,500 crores by way of VAT and Transport Department's revenue alone in Rajasthan. Besides, there is VAT on sales of parts, lubricants and fuel and service tax on repair & servicing of vehicles, he added.

He hoped that multiplicity of and variation in taxes on motor vehicles, including VAT, road tax, registration fee and permit fees will be removed with the introduction of GST, to pave the way for faster growth of automobile industry and the economy as a whole.

FADA President assured the Hon'ble Chief Minister and other distinguished guests present at the Convention that automobile dealer fraternity remains committed to play its part as responsible corporate citizens. FADA, AMVDA of Rajasthan and their constituent automobile dealer members are willing to work with the State Government and other stakeholders to improve environment, road safety and training as well as manpower training in the interest of sustained growth of the State economy and auto market.

In his Vote of Thanks at the Inaugural Session, C H Shah, Chairman, Rajasthan Automobile Dealers Summit and Council Member, FADA, while thanking the dignitaries, media and participants, emphasized the need to provide for Auto Clusters/Zones in the land planning of cities. It was also essential to develop "Vehicle Maintenance & Repair" facilities on the highways, along with amenities such as - fuel dispensing station, medical facility, eating & refreshment facility and public conveniences, Shah stressed. He pointed out that the state-of-the-art workshops of automobile dealers, equipped with modern tools, machines & diagnostic equipment could play a meaningful role in the vehicle fitness regime under PPP, thereby promoting road safety.

Shah assured the CM, the Transport Minister and other State Government officials that automobile dealers stood committed to Corporate Social Responsibility.

Speaking at the subsequent session, Sunil Arora, Principal Secretary- Industries, Government of Rajasthan welcomed the suggestion for development of auto clusters and public amenities, like service stations, fuel dispensing stations, medical aid, hotels and restaurants on the highways for the convenience of drivers and travelling people. He assured that RIICO would constitute a sub-committee to consider the suggestion and come up with a report within 3 months. He requested AMVDA to nominate 3-4 representatives to be a part of the sub-committee that would also comprise officials of the Transport Department as well.

Referring to simplification & streamlining of registration procedures and free movement of road transport across States including e-tolling, Arora noted that a group of Transport Ministers of various States, headed by the Rajasthan Transport Minister had already gone into the matter and submitted a Report to the Union Minister. FADA and AMVDA could give their inputs, which could form part of the Group's supplementary report.

Pramod Bhasin of Muskaan, an NGO, in his presentation highlighted the initiatives taken by Muskaan to promote road safety in the State. He said that enforcement, education & awareness among the people and timely medical aid during accidents can help save thousands of people from losing their lives and becoming disabled. He urged the automobile dealers to adopt roundabouts in the State to spread the message of road safety.

Deepak Upreti, Transport Commissioner, Government of Rajasthan, reiterating the State Government's resolve to promote road safety, said that he would welcome automobile dealers to form public-private partnership for setting up drivers' training schools, vehicle fitness centres and drivers' facilitation centres on highways.

Regarding the disparity in taxes on motor vehicles vis-à-vis the neighbouring States, he assured that Transport Department would hold periodic meetings with automobile dealers, preferably every quarter, to discuss and address issues of mutual interest from time to time. The issue of non-uniformity in taxes and other issues such as, plying of unauthorized vehicles including Juggads could be discussed in those meetings, he added.

Speaking at a session on Using Strategic HR for Enhancing Dealership Profitability, Ms Saujanya Shetty of Transforma Management Partners Pvt Ltd, brought forth from the case studies that human resource is the single most important factor in enhancing dealership profitability on a sustained basis. The HR plays a more important role than other factors such as brand, demographics and size of the dealership. The objective of strategic HR is to identify the right talent and develop it within the organization, and avoid vacuum in case of someone leaving suddenly. She pointed out that while hardware is important, the soft infrastructure comprising the manpower and workplace environment is more important in ensuring sustained growth. Saujanya stressed on the right recruitment process, as the manpower is the ONLY factor input for achieving extraordinary performance in a sustainable manner i.e. it is the only aspect that cannot be copied by others. The organization should employ people with right attitude and train them for aptitude enabling them to grow.

Ms Puloma Dalai, Tax Consultant, dwelt on various issues of service tax, which automobile dealers confront day in and day out.

She clarified the provisions and legal position on the applicability of service tax on (i) Free service & PDI; (ii) Finance incentives; (iii) Target-based incentives; (iv) Sale of spare parts during the course of service & repair; (v) Extended warranty; (vi) Comprehensive maintenance contract including replacement of parts; (vii) Input credit; and (viii) Works contract.

S B Gupta, Consultant, speaking at the penultimate session, made a presentation on Dealer Profitability, wherein he emphasized putting in place 'Enablers' and 'Sound Business Plan', for arriving at good decisions in a scientific manner.

M V S Prasad, Consultant, speaking at another session on Effective Management of Auto Dealership, laid emphasis on processes incorporating benchmarks set by the top performing dealerships, in order to manage dealership effectively without depending much on brand value and market conditions.

FADA's 254th Council Meeting

Dovetailing with the Regional Convention, FADA held its 254th Council meeting the next day, i.e. 23rd November 2010 at the same venue. The meeting reviewed the progress of ongoing activities and upcoming events, namely -Automotive Dealership Excellence Awards 2010 (ADEA 2010); J D Power India Automotive Dealer Satisfaction with the Automotive Manufacturer Study 2010; Vehicle Safety Inspection Programme; Seminar on the topic: "Generation Next" for the owners of family-owned dealerships and their spouses, sons & daughters who are going to take over the mantle of managing dealership in near future; and arrangement with Travo.com for travel needs of FADA members.

Council also co-opted additional members to fill up vacancies in the Council.

Council placed on record its appreciation and thanks to Mr C H Shah, Chairman, Rajasthan Automobile Dealers Summit, for excellently organizing the Convention that was a tremendous success in all respects. Council expressed its sincere thanks to Mr K S Gehlot for getting the Rajasthan CM to inaugurate the Regional Convention. Council also acknowledged the untiring efforts of Mr Nikunj Sanghi, President, FADA and other members of Organising Committee.