{"id":19391,"date":"2020-11-11T11:48:48","date_gmt":"2020-11-11T06:18:48","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=19391"},"modified":"2021-04-30T15:42:34","modified_gmt":"2021-04-30T10:12:34","slug":"impact-of-gst-on-the-automobile-sector","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/impact-of-gst-on-the-automobile-sector\/","title":{"rendered":"An Outlook On Impact of GST On The Automobile Sector"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Before GST implementation, taxpayers have\nto confront strings of indirect taxes in India. Every state in the Indian\nprovince has its specific indirect tax structure. After the arrival of GST, all\nthe indirect taxes have been integrated into one tax. <\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/impact-of-gst-on-the-automobile-sector\/#Positive_Impact_of_GST_on_the_automobile_sector\" >Positive Impact of GST on the automobile sector<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/impact-of-gst-on-the-automobile-sector\/#What_are_the_GST_Rate_on_Automobiles\" >What are the GST Rate on Automobiles?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/impact-of-gst-on-the-automobile-sector\/#Tabular_representation_of_GST_rate_on_different_class_of_automobile\" >Tabular representation of GST rate on different class of automobile<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/impact-of-gst-on-the-automobile-sector\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Positive_Impact_of_GST_on_the_automobile_sector\"><\/span>Positive Impact of GST on the automobile sector<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>As expected, the Impact of GST on the automobile sector is considered positive as the automobile makers were bound to address fewer tax liabilities which ultimately benefits the end-users. Before GST was implemented in India, various taxes like road tax, sales tax, <em><strong>VAT<\/strong><\/em><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Vat\"><em><strong>[1]<\/strong><\/em><\/a><\/sup>, sector tax, registration duty, motor vehicle tax were imposed. Fortunately, all these taxes are now integrated under the GST regime.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/11\/Impact-of-GST-on-the-Automobile-Sector-.png\" alt=\"Impact of GST on the automobile sector\" class=\"wp-image-19392\" width=\"534\" height=\"560\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/11\/Impact-of-GST-on-the-Automobile-Sector-.png 953w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/11\/Impact-of-GST-on-the-Automobile-Sector--286x300.png 286w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/11\/Impact-of-GST-on-the-Automobile-Sector--768x806.png 768w\" sizes=\"(max-width: 534px) 100vw, 534px\" \/><\/figure><\/div>\n\n\n\n<p>GST on vehicles has drastically reduced the transportation cost of goods. This is done by eliminating all irrelevant taxes accountable for raising the transportation cost.<\/p>\n\n\n\n<p>Eventually, the subsumed tax leads to the\nprice reduction of the automobile in India when contrasted with former prices\nbefore GST.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Decreased Operational Cost<\/h3>\n\n\n\n<p>The most complex central state tax has been\neliminated after the implementation of GST. Now automobile makers can stock up\ntheir produce in fewer warehouses and can rejoice in low operating costs.\nMoreover, taxes paid on promotion or advertising cover under the ITC i.e. input\ntax credit, which will eventually lead to low operating costs.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Effect on Working Capital<\/h3>\n\n\n\n<p> Every entities including automobile manufactures and dealer under <a href=\"https:\/\/corpbiz.io\/gst-registration\"><strong>GST Registration<\/strong><\/a> needs to address the certain tax liabilities depending the slab tax. Even after the reduction in operating costs, the surge in the GST tax rate on the automobile has been witnessed. This of course has become a serious matter of concern for dealers. Here are the reasons behind this setback.&nbsp;<\/p>\n\n\n\n<ul><li>Whenever any vehicle is\ndispatched from one place to another, GST is paid and capital is locked since\nsuch supply attracts GST. Now, the dealer is liable to pay GST on the same day<em>.<\/em>&nbsp;However,\nthis will also enforce the dealer to adopt a deliberate approach to avert\ndisrupting their outflow.&nbsp;<\/li><\/ul>\n\n\n\n<ul><li>Cash lock on free services is another loophole that might affect dealers under the GST regime. The majorities of automobile makers render free services or warranty cards while selling vehicles to benefit the customers. GST will apply to such services at the time of their issuance. However, customers are free to redeem these services whenever they want or as per their convenience.&nbsp;<\/li><\/ul>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/gst-on-motor-vehicle-renting-services\/\">GST on Motor Vehicle Renting Services<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_GST_Rate_on_Automobiles\"><\/span>What are the GST Rate on Automobiles?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The calculation of GST on the automobile is essentially done by taking a fixed base rate and additional cess into account. Currently, the fixed base rate is capped at 28%. The cess slab rate ranges from 1% to 22% depending on the type of vehicles.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Two-Wheelers<\/h3>\n\n\n\n<p>Two-wheelers equipped with 350cc engine\nwould attract 28% GST, whereas the vehicle with the engine above 350CC has to\nconfront GST @ 31%.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Commercial Vehicles<\/h3>\n\n\n\n<p>The majority of the commercial vehicles\nshall be charged with a 28% tax, which was previously capped at 30.2%. But,\nminibuses, in particular, have been largely affected as these lures cess charge\nof 15%, which makes the total to 43%. While the majority of commercial\nautomobiles have witnessed a negligible effect post-GST implementation, GST on\nthirteen passenger minibuses has raised concerns.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Luxury Car<\/h3>\n\n\n\n<p>Luxury car taxed at 42-45% under the GST\nregime. Under the erstwhile tax regime, these cars are taxable at 50% or more\nwhich seems quite steep considering the base price of the car.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Small Cars<\/h3>\n\n\n\n<p>Well, the tax structure for the small car\nunder the GST regime is more or less the same. Currently, small cars are taxed\nat 28%+1% cess under GST. The previous rate at which these cars are taxed was\ncapped at 29%. This is a marginal hike in the tax rate.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Hybrid Cars<\/h3>\n\n\n\n<p>Hybrid cars are taxed heavily under GST. As\nper the existing slab rate, the hybrid cars are supposed to be taxed at 28% +\n15% cess. Under the former tax regime, these cars attract 30% of the tax rate\nonly.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Spare Parts<\/h3>\n\n\n\n<p>The spare parts market could be disrupted\nafter the introduction of the new tax rate under GST. Previously, spare parts\nare taxed at 12% only but after the implementation of GST, spare parts are\ntaxable @ 28%. But this rate does not apply to all categories of spare parts.\nAs per the tax authority, spare parts under the code 8708 will attract the tax\nrate of 28%, which will be divided equally between the center and the state.\nThe parts like rubber hoses with code 4008\/4009 would be taxed at 18%\nGST.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Tabular_representation_of_GST_rate_on_different_class_of_automobile\"><\/span>Tabular representation of GST rate on different class of automobile<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<table class=\"table table-bordered\"><tbody><tr><td>\n  <strong><em>Category<\/em><\/strong>\n  <\/td><td>\n  <strong><em>Before GST<\/em><\/strong>\n  <\/td><td>\n  <strong><em>After GST<\/em><\/strong>\n  <\/td><\/tr><tr><td>\n  Two\n  wheelers\n  <\/td><td>\n  30.2%\n  <\/td><td>\n  28-31%\n  <\/td><\/tr><tr><td>\n  Small\n  cars\n  <\/td><td>\n  24-25%\n  <\/td><td>\n  29-31%\n  <\/td><\/tr><tr><td>\n  Luxury\n  cars\n  <\/td><td>\n  50%\n  <\/td><td>\n  42-45%\n  <\/td><\/tr><tr><td>\n  Spare\n  parts\n  <\/td><td>\n  12%\n  <\/td><td>\n  28%\n  <\/td><\/tr><tr><td>\n  Hybrid\n  cars\n  <\/td><td>\n  30%\n  <\/td><td>\n  43%\n  <\/td><\/tr><tr><td>\n  Commercial\n  vehicles\n  <\/td><td>\n  30.2%\n  <\/td><td>\n  28%\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>To be specific, the existing slab tax under\nGST for the automobile industry might look steep on the surface, but in\nreality, it will reduce the tax liabilities on the supplier to a considerable\nextend. However, Spare part manufacture could face tough times in confronting\nthe existing tax obligation because of the higher rate. <\/p>\n\n\n\n<p>So we can conclude by saying that the impact of GST on the automobile sector, on a whole, is the positive one.&nbsp;Consider connecting with <a href=\"https:\/\/corpbiz.io\/\"><strong>CorpBiz\u2019s<\/strong><\/a> experts to avail in-depth insight into this matter. We also assist our clients to obtain GST registration in a seamless way.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/impact-of-gst-on-loans-in-india\/\">What is the Impact of GST on Loans?<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Before GST implementation, taxpayers have to confront strings of indirect taxes in India. Every state in the Indian province has its specific indirect tax structure. After the arrival of GST, all the indirect taxes have been integrated into one tax. Positive Impact of GST on the automobile sector As expected, the Impact of GST on [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":19393,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[16],"tags":[1202],"acf":{"service_id":"96"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":7214,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/19391"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=19391"}],"version-history":[{"count":5,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/19391\/revisions"}],"predecessor-version":[{"id":29566,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/19391\/revisions\/29566"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/19393"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=19391"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=19391"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=19391"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}