New GST rules may increase prices of old vehicles, durables, smartphones
By Team Legistify / 2017-04-05

Have a Legal Issue?

Get connected to the Best Lawyers and Chartered Accountants Near You!


After getting hit by the transition of new fuel technology — from Bharat Stage-III (BS-III) to BS-IV — the automobile sector in the country may be awaiting yet another shocker. The proposed taxation format under the upcoming goods and services tax (GST) is likely to fuel inflation, and increase the tax burden of secondhand car buyers and those opting for exchange offers. It may also increase the working capital of dealers of used vehicles.

Earlier the tax used to be calculated on the discounted value of a product in the case of exchange schemes after the market value of the old vehicle was deducted. The proposed GST rules, issued by the government on Sunday, will consider the market value of the new vehicle while calculating the tax burden. Thus, consumers may end up paying more as the discounted amount would be taxed.

Under the new GST rules, retailers and traders dealing in used vehicles will come under taxation. While under the existing rules, secondhand products are outside the purview of tax, sellers will have to pay taxes at the same rate as the new products.

According to Priyajit Ghosh, partner, indirect tax, KPMG in India, consumers may have to shell out more while buying used vehicles. “Under the GST, dealers are likely to pass on the additional tax burden to the consumers. However, bulk buyers may get some tax credit as invoices will include the taxed amount.”

“The new structure may increase the working capital of companies dealing in exchange schemes. While dealers who sell used vehicles within a month of buying them may not see the impact, delaying the process will increase working capital,” said Biren Vyas, partner, Grant Thornton India. Taking credit of the purchase tax in the same month will help them keep a check. The resellers market in India is currently pegged at 3.3 million units a year.

None

Have a Legal Issue?

Get connected to the Best Lawyers and Chartered Accountants Near You!


Related Posts

Read More News on Similar Topics