Auto Sector Welcomes GST

India's growing auto sector has one more reason to rejoice.

The Goods and Services Tax (GST) Bill has finally received the green light from the Upper House and automakers have welcomed the development.

RC Bhargava, Chairman of Maruti Suzuki, in an interview said that the GST is a good move, but the focus should be on implementing it once the legislation is passed.

"Legislation on paper won’t be good unless there is implementation. The GST system should lead to a minimal avoidance of tax and the ability to control evasion will depend on the IT system," he said.

GST is expected to bring down cost for end consumers and thus boost demand for vehicles. Consumers can save up to Rs 35,000 while buying a hatchback which is priced around Rs 5 Lakh as taxes will come down from 31 per cent to 18 per cent.

Similarly, SUV prices will also come down by 12 per cent to 13 per cent. Carmakers like Maruti Suzuki India Ltd and Mahindra and Mahindra Ltd will benefit in a big way.

Two-wheeler makers, including Bajaj Auto, Hero MotoCorp and TVS Motor, will also see taxes coming down by 12 per cent from the minimum 18 per cent currently.

GST will also have a positive impact on the commercial vehicle segment and in improving the efficiency of transport sector. The transportation time and the overall cost will be reduced as the goods will be transferred from one state to another by surpassing various octroi and check points. Hence, cutting down the time which is lost at the inter-state checkposts. The cost for the logistics and supply chain is likely to come down by almost 30-40 per cent.

Rajeev Dimri, Leader, Indirect Tax, BMR & Associates LLP said, "GST is likely to subsume some major Central and State levies such as duties of excise, additional duties of customs (applied in lieu of excise and local taxes), service tax, value added tax, central sales tax, entry tax, octroi and luxury tax."

He adds, "These taxes in aggregate constitute typically 25 percent to 40 percent of the price of products with certain categories being taxed at lower rates. There could be a reduction of tax incidence for several product categories if the standard GST rate is notified in the range of 18 per cent to 20 per cent."