Impact of GST on the Automobile Industry
By Team Legistify / 2017-07-01
GST will impact various sectors and industries of the country, some in a positive way and some others in a negative way. One sector which has the possibility of a having a very positive impact is the automobile sector primarily because of the efficiency and the removal of cascading associated with GST.

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The vehicle business in India is a huge business delivering an extensive number of automobiles every year, fuelled mostly by the huge population of the country. Under the present tax system, there are various taxes applicable to this sector like excise, VAT, sales tax, road tax, motor vehicle tax, registration duty which will be subsumed by GST. Though it is too early to provide an in-depth analysis of cost per product post-GST implementation, as some ambiguity still remains due to incentives/exemptions provided by different states to the manufacturers/dealers for manufacturing car/bus/bike we have taken the data accessible and anticipated the fate of this industry.

The Breakdown

Taxes charged currently on the end consumer are excise and VAT, amounting to an average combined rate of 26.50 to 44% which is greater than the anticipated rates of 18 and 28% under GST. So, there will be a lesser pressure of tax on the end consumer under GST.

Importers and dealers would be able to claim the GST paid on goods imported/sold, currently, they are not eligible to claim the excise duty and VAT paid. Excise that is paid on stock transfer is to be secured by IGST under the GST law. The Advance that is taken for supply of goods will also be taxed under GST. GST would help the manufacturers in obtaining auto parts at a relatively cheaper cost due to a better supply chain mechanism under GST.

The final GST rates have been announced for the various types of automobiles. As we thought the automobiles are kept under the 28% bracket and a list of cess to be imposed on a different kind of automobile has also been declared by the Indian government. Cess has been imposed on different kind of automobiles ranging from 1 to 15%.

GST will impact various sectors and industries of the country, some in a positive way and some others in a negative way. One sector which has the possibility of a having a very positive impact is the automobile sector primarily because of the efficiency and the removal of cascading associated with GST.

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