Goods and services tax in India will be very much positive for the automobiles sector as the tax regime holds the efficiency to remove the cascading effects of the current tax scheme. As Harishanker Subramaniam, national leader – indirect tax, EY mentioned that, “From a procurement point of view too, if there are interstate procurements, we suffer today at 2 percent CST which is a cost to the manufacturer, that also will not happen because those interstate procurements will have an IGST in it which is again available as a full credit to the manufacturer if the credit rules are simple and easy.”
Recently introduced GST tax regime has given a tedious and complex environment by the means of numerous tax implications and strict compliances. The automobile industry also carries a complex structure like extended investment tenure, development of the vendor and supply chain and categorized outsourcing processes. This has made some mainstream changes in the automobile industry after the introduction of the GST.
There are certain doubts and queries which must be cleared before the application of the GST in order to spread knowledge in a detailed manner:
Q: What will be the effects on automobile prices after the GST?
A: In the present scenario, Small cars are levied at 12.5 per cent central excise duty while a 14.5-15 per cent VAT is levied by states, making the total tax sum to 27-27.5 per cent. According to the senior officials in the authority, the final slab for a particular category of cars will be 28 per cent, making it a little increase in prices. While Mid-sized cars of up to 1500 cc are imposed with a 24 percent excise by the central government and then a 14.5 per cent VAT by state governments, taking the tax calculations up to 38.5 per cent.
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