Impact of GST on Automobile sector
The implementation of the GST regime is expected to bring in the most challenging times for Automobile sector initially but at a later stage, the manufacturers are expected to pay lower taxes and the benefits would also reach to the customers as well.
The best part of GST taxation system in this sector, is that it would be applied only on the goods consumed and not where they are produced. Earlier there were multiple indirect taxes levied on the movement of goods like VAT, surcharges, and cesses but now the movement of goods like trucks and bikes, from the factory to the dealership passing through multiple checkpoints are not bound to pay taxes anymore to all the passing by state governments. It will majorly benefit the Indian manufacturers as they would get the cost advantage. This regime has also combined the registration tax, the sales tax and the road tax into one category making it easier to understand and the process less complicated.
Tax Rates – Automobile sector
No doubt, it would be a boon to the Automobile sector as the prices of vehicles will go down and the demand will increase specially for the small cars. Earlier the tax was 29% on small cars (VAT plus excise plus cess) however with GST in place now; the rate is 28% plus 1% cess for petrol cars and 3% for diesel cars. There is a prediction of the 8% fall in the on-road price of cars and the increase in demand for vehicles across all categories. We can expect a slight increase in vehicle prices initially but eventually there will be high growth expected in this sector after full implementation of GST guidelines resulting in better GDP growth rate.