Maruti, Hyundai, Bajaj to compensate dealers over GST losses incurred

Auto dealers expect to face losses to the tune of 2.5-5% on basic price of inventory post introduction of GST.

Even as introduction of Goods and Service Tax looms large with implementation set for 1st July 2017, automakers across the country have been sending out reassurances to their dealers, promising to absorb losses.

As on date, Maruti Suzuki India Limited, Bajaj Auto Limited and Hyundai Motors have sent out notices to their dealers promising absorption of losses with more automakers set to follow suit in the weeks ahead. However, the conditions of promising such financial support are on dealers achieving sales targets.

Automobile dealers have been predicting losses to the extent of 2.5-5% on basic price of inventory. This will work out to INR 1,000-3,000 per two wheeler going up to INR 8,000-40,000 where passenger cars are concerned. Levies have also been paid on stocks lying at dealerships which are non-refundable as they do not come under the GST gambit, but fresh sales will be taxed as per GST norms from July 2017.

Maruti Suzuki has issued a statement to dealers that include a target based compensation formula promising to compensate dealers on all vehicles dispatched after January 2017. However, these will not include the Vitara Brezza and Suzuki DZire which currently command a long waiting period due to excess demand and dealers will be able to liquidate stocks immediately.

Bajaj Auto also sent a circular to dealers on June 5th promising compensation for unsold inventory for 3 months prior to GST. No support will be offered by the company on sales of spares since it comes with a sufficient margin of profit. Similarly, Hyundai Motors India has also notified dealers on adequate compensation on losses incurred with a formula to arrive and calculate loss.