The Goods and Services Tax (GST) bill inches closer to reality as the Rajya Sabha has given a green signal to the amendment. The GST will replace various taxes levied by the Central and State governments and will be a comprehensive indirect tax on manufacture, sale and consumption of goods and services throughout India. The bill will have a great impact on the automotive sector with small car prices likely to come down by good margin. So what do the industry experts have to say?
We round up the comments to give you the industry reaction.
Mr. Yadvinder Singh Guleria – Senior Vice president, Sales & Marketing, Honda Motorcycle & Scooter India Pvt. Ltd.
The Goods and Services Tax (GST) is definitely one of the most important tax reform in the history of India which was closely tracked by each and every one this monsoon session of Parliament.The GST rate and other terms of the tax are yet to be finalized. However once implemented, we expect the effective tax rate to come down (from the current 28% – 35% taxation rate as the two-wheeler sector faces as many as 13 different types of taxations). The new simplified and uniform tax structure will reduce the cascading effect of tax-over-tax, provide a 360 degree ease of doing business for the complete automobile ecosystem, be it suppliers, manufacturers, dealers and most importantly customers who will get the benefit.
Mr. Sumit Sawhney, Country CEO and Managing Director, Renault India Operations
GST is the greatest tax reform ever attempted in India. The passing of the much-awaited GST Bill signals a paradigm shift with a unified tax structure which will catalyse economic growth. GST will positively impact several sectors, including the automobile industry, by minimizing and simplifying the taxation burden. GST is expected to drive overall consumer demand since the cost for the logistics and supply chain inventory will be curtailed by almost 30-40 per cent, the benefits of which are expected to be passed on to the consumers. As next steps, the focus will be on establishing a robust infrastructure and harmonizing the licensing and environmental regulations across the states.
Surely a big step in the direction of ease of doing business, GST also reflects the spirit of positive governance to foster collaboration that best suits the economy, businesses and the consumers alike.
Mr. Sohinder Gill, Director- Corporate Affairs, Society of Manufacturers of Electric Vehicles
It’s a major step taken by the government as it intends to turn India into one common market which will lead to ease of doing business. Currently, the tax levied by state governments on green vehicles are varied between 0 to 5%, except three states i.e. Uttar Pradesh, Punjab and Bihar which charges more than 14%. Road tax is almost nil in majority of the states. If we consider the average VAT levied on green vehicles across India it comes up to approximately 4%. Hence, we hope as the bill progresses the government should keep it either at par or at a lower rate than the current tax structure, for a certain period. If the government manages to do it, it will definitely revive the electric vehicle industry in India, otherwise it will nullify the FAME incentive being passed on to the customers under NEMMP for inducting more and more EVS on Indian roads.
In addition to the tax rationalisation and work simplification, that everyone is talking about, we feel that GST will do its bit in impacting the environment in a positive way. The miles long queue of slow moving trucks at multiple toll barriers and checkpoints across Indian highways and consequent traffic jams lead to a significant rise in pollution. At many places trucks detour/divert to travel much longer to avoid the green tax/ entry taxes. This indirect benefit of GST of reducing crude oil consumption and cutting down emissions is in line with the NEMMP objective of inducting 6 million EVs on Indian roads in 6 years making India less reliant on crude imports and improving the air quality of our cities.
Mr. Vipin Sondhi, MD and CEO, JCB India Limited
The passage of GST in Rajya Sabha is a landmark reform. A critical milestone towards Free Trade within India. It will also give a massive push to Make in India especially MSMEs. The ease and cost of doing business will receive a fillip and the width of the tax base will be enhanced.
Mikael Benje, Managing Director, Scania India
We welcome the unanimous approval of the GST bill by the Indian government. This is a significant milestone in India’s economic growth. Scania is a pioneer of Sustainable transport solutions and the GST bill supports our efforts in developing public transport and logistics solutions that enable environmental and economic sustainability.
As a bus and truck manufacturing company we see the GST bill as a game changer for logistics solutions and the flow of goods and services as it will drive seamless inter-state business by ensuring smoother and more efficient mobility with a rationalized and simple tax structure. The GST bill enables fuel efficiency, supply chain efficiency, reduced logistic costs. The drive to Make in India will get more competitive as GST addresses inter-state tax, one market concept and enables localized production. Above all a simplified tax structure enables a positive business dynamic.
Mr. Amit Kavrie, Exceutive Director, Supreme Treon Pvt Ltd
We shall see a spike in automobile sales as the prices of automobiles are expected to reduce substantially with the introduction of GST. Today, there is Excise Duty, VAT/ CST and cascading effect of other local taxes and levies which add to the cost of finished product.
The increase in sale of automobiles shall help the auto ancillaries by increase in their sale and better utilization of production facilities.
GST impact on manufacturer of automobile parts will be higher for those manufacturer who have one or two manufacturing locations in India and CST impacts their cost to the OEMs. Also, the benefit will be much higher for those manufacturers who are dependent on traders/ importers for supply of material and excise duty becomes part of their cost of production.
In case of Supreme Treon, the impact of GST is going to be much lower as we have our manufacturing locations closer to all our valued customers (OEMs). There is almost nil to very small inter-state tax impact.
In addition, we are integrated backwards to a very large extent for manufacture of raw materials for automobile parts. We have tied up with large fiber/ other raw material manufacturers in India and overseas directly and we get full benefit of all the taxes for which we credit can be availed. These benefits are already getting passed onto the OEMs by the way of lower cost of products as compared to our competitors. Yes, we will get some benefit of GST in relation to inter-state sale and purchase but the impact of the same is still to be quantified. I expect the same to be partially offset by higher cost of services.
Its customers for passenger cars and commercial vehicles include Ashok Leyland, Daimler, Force Motors, Ford, General Motors, Honda, Mahindra, Maruti-Suzuki, Nissan, Renault, Scania, Tata Motors, Toyota and Volvo.
They are announcing taking 100% ownership of Supreme-Treves Private Limited. The Company was started in 1996 as a joint-venture between Supreme Nonwovens Private Ltd and Treves S.A.S, France. It is a Tier-1 system supplier of Automotive Interior Trims and NVH components. With Supreme Group taking full control, the Company is being renamed as ‘Supreme Treon Private Limited’.