Shri Arun Jaitley, Finance Minister of India announced GST Bill in the Rajya Sabha and its effect will be felt by all sectors in the country and more predominantly on the auto sector.
GST will have two components with regard to federal structure and include Central GST and State GST. In simpler terms, GST stands for one single tax to be imposed on all goods and services taking the place of all sorts of indirect taxes in place as on date.
Where the auto industry is concerned, GST will only need to be paid by the automaker at the time of dispatch of goods as GST is destination based tax. It is yet to be ascertained whether GST will be payable on stock transfer or on sales value. Many automakers have also invested in states that offer them certain benefits in terms of taxes especially where SEZ and backward areas are concerned.
Society of Indian Automobile Manufacturers has also asked the finance ministry to consider various issues on passing of GST Bill. It has requested that vehicle sales be included under its gambit so that there are no additional taxes levied to increase burden of both manufactures and buyers.
Mr. A. K. Rastogi, GM Finance, Nippon Audiotronix has also addressed the issue of GST Bill stating that it will have a positive impact on the auto sector as it will take off all effects of taxes on cost of goods and services. As on date, automakers charge 2% CST which is included in the cost of the vehicle which is not creditable while where GST is concerned, credit will be available. While the general perception is that cost of vehicles will rise, the actual fact is that prices will be reduced which will ultimately be to the benefit of the customer.
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