GST effect on Indian Two Wheelers

GST effect on Indian Two Wheelers

The Goods and Service Tax (GST) or a unified proposed bill for deduction of tax has been in talks for a considerable time now. Four of these GST slabs which include the Integrated GST Bill 2017, The GST (Compensation to States) Bill 2017,  the Central GST Bill 2017 and the Union Territory GST Bill 2017 have been passed by the Rajya Sabha. None of the passed bills is directly impacting the Indian automotive industry. However, may have an indirect effect once introduced by July 2017.

The expectation from the Indian Automotive industry is positive as there would be better transparency and one single percentage of tax levied on the consumer instead of a number of location based taxes such as Octroi.

 

At present two wheelers are levied a combined tax rate of around 23 to 24 per cent. This number is expected to be brought down to 18 percent, after GST in place. Before you start jumping with joy expecting the price of your favourite two-wheeler to be reduced, do remember that changing safety and emission compliance requirements will raise the prices of products.

Bike factory

ACMA (Automotive Component Manufacturers Association of India) are happy with how things are moving. They believe removing the multiple taxes, which has a cascading effect on prices. Creating a one India market is actually the government’s way of plugging the gaps in their agenda of making business an easy and trouble free affair.

Here’s what some key manufacturers in the industry feel about the passage of GST bill:

Sunil Munjal, joint MD, Hero MotoCorp

 

The Goods and Service Tax (GST) bill will significantly help the industries. As most companies organise their warehousing and logistics based on the difference of taxation in various states. The implementation of the bill will allow warehouses to be made in accordance to the compatibility, with both the production and the market. As standard tax rates will be applied throughout the country.

The GST rate and other terms of the tax are yet to be finalised. 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.

Yadvinder Singh Guleria, Senior Vice President, Sales & Marketing, Honda Motorcycles & Scooter India

 

Roy Kurian, VP, Sales and Marketing, Yamaha Motor India

 

The introduction of GST is a significant step to promote trade and industries, especially for the manufacturing sector. The impact on the automotive sector can only be gauged after the RNR (revenue neutral rate) is announced. However, it is certain that the taxation system will get simplified and more transparent. The overall rate is expected to come down benefitting manufacturers which will eventually benefit the end consumers.

Tax reforms have been a topic of discussion and the passing of GST Constitution Amendment Bill in the parliament is the most significant reform since independence and we welcome such a historic move. We have a complex tax structure that includes indirect taxes, duties & surcharges, where GST will help in making this uniform throughout. We will wait and watch till we have clarity on the rate of tax applicable to our industry.

Vimal Sumbly, MD Triumph Motorcycle India

 

What should the Government ideally do?

Is reduce taxes for lower segments to a considerable extent as most of these categories are the prime contributors in the country.

Also Read: Boom in Indias Motorcycle Segment


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