From what it claims, the Goods and Service tax popularly known as the GST and officially known as the Constitutional Bill, will be the biggest reform in India’s tax structure since the economy opened up in 1991. This is the 122nd constitutional amendment which got the nod from the Rajya Sabha last month.
To put it in simple terms, GST is a single indirect tax that brings most of the taxes and duties imposed on goods, services, sales and consumption of goods and services into one single tax at the national level. It thus replaces taxes levied by the central and state governments. All current indirect and direct taxes will be consolidated into a single unit and there will be a single and uniform tax rate, however, the final draft is yet to be ratified.
The indirect tax structure will help set a uniform price and this will help the Auto Industry a lot. It’s been affected the most due to the indirect tax structure, as each state has its own.
With the implementation of GST, auto manufacturers will certainly feel the ease in doing business. It’s not just us saying it, but the industry. In fact, the biggest concern for most is the percentage of tax that will be levied. Dr.Pawan Goenka – Executive Director, Mahindra & Mahindra said, “The Industry is looking forward to that (GST) but more than what, it’s the rate which will be of utmost importance. I mean it could be 18 per cent, 20 per cent, 22 per cent but that’s just a number in some sense.”
A similar concern on the implementation of GST in the country was shared by YS Guleria – Senior VP (Sales & Marketing) – HMSI. He said, “A lot depends on the rate, so you know there is some debate going on, 18, 19% definitely there will be a good benefit will be passed on to the end consumer, but if it is about 20% around 21 -21% then by the time it comes it depends on the real calculation, what is going to be the real benefit or it is almost the same, so lot depends upon the rate, which will be finally decided for the GST”
So, yes, the customer is at the forefront of this debate and that’s the biggest concern for the folks of the automotive industry. Pravin Shah – President & Cheif Executive (Automotive business), Mahindra & Mahindra said, “It’s too premature without knowing the blueprint of the GST but surely the approach itself leads us into a situation where it will surely ease the doing of business because various complex state and central levies. A few major taxes including GST and I am sure the auto industry which has been the most impacted industry because of the cascading effect of the various taxes both at state and central level which finally the customer ends up paying it.”
While the rate is a concern, the fact that the implementation of the GST will ease the process of doing business has to be taken into consideration. The big wigs of the auto industry aren’t shying away from admitting it either. Dr. Goenka added, “GST will help in us doing business easily because the potential that it has of simplifying all the indirect taxation is huge I mean and also it help us to run the business more efficiently in terms of where we look at supplies, where we look at warehouses, where we look at plants, which is right now driven by tax consideration, under GST there is no tax consideration, it will drive by what is most efficient so that’s what we are looking at.”
Even Guilaume Sicard, President, Nissan India admits that “GST will ease and smooth the market in terms of organisation, in terms of simplification, in terms of quickness of execution, it will solve a lot of issues, So, I think definitely it’s a great step.
Vinod Dasari, MD, Ashok Leyland goes one step ahead to talk about how it’ll help the GDP. He says, “I think it’s a fabulous achievement by the government, Its been over 7 years we have been talking about GST and finally its coming so I’m very excited about it. It will give a boost to the over all GDP, People expect 1-2% increase in GDP.”
While ease in doing business is the idea all around, Ravindra Pisharody, Executive Director (Commercial Vehicles), Tata Motors puts things into perspective by saying that the industry that suffers the most is the transportation industry. Because of the multiple taxation the trucks are stopped as they cross state borders. “Today if you buy an expensive truck it will really pay back if you can complete the trip in 3-4 days but over 2 days are lost just because of this they keep waiting at the check points. So the ease of business the efficiency, productivity and also fuel consumption will improve. So the GST will be very good for the country particularly the logistics industry which is directly a customer to the commercial vehicle business.”
The positives of GST are aplenty but what most of the folks from the industry are waiting for, is the rate that will be set. There will be better organization and it’ll be more like ‘one tax to rule them all’. The auto industry, then is extremely positive about this move which will make things simpler and better for the industry and the consumer.