GST

Siddharth points out the implications on the impeding GST regime on the Indian automobile industry.

- Siddharth Vinayak Patankar

The entire country is now anticipating the long-pending move to transition our indirect tax system to the pan-India GST or Goods and Services Tax. While the move is no doubt positive, and long overdue, it also spells confusion for a number of sectors – and indeed products. What level of GST automobiles will attract remains a little ambiguous too, even though the Finance Minister has spelled out that while automobiles will attract one tax rate, premium products will have a luxury cess imposed on them. In the present scenario, a premium, or larger car or SUV, attracts a duty pay out of up to 55%. This includes excise duty of 27%, VAT of 12.5-15%, a 1% national calamity contingency duty, a 1.8% auto cess, and the 1-4% infrastructure cess. Then there’s 4% octroy in some states.

If the maximum cess on larger cars gets capped at 15%, and the GST rate is set at the higher slab of 28%, the maximum duty one is likely to pay is 43% – which effectively means that prices may come down marginally. Road tax, though, has not been subsumed into the GST – and so will always remain an additional burden on buyers, which is a tad unfortunate considering that GST was meant to rationalise all taxes into one.