GST: Auto, tyre makers calm dealers with assurances

Dealers have been told that loss due to transition to GST would be protected by manufacturers

Leading automobile and tyre makers are reaching out to dealers with an assurance in the run-up to the implementation of the goods and services tax (GST). Dealers, who are the front-end of these businesses, have been told that any loss arising out of the transition to the GST would be taken care of by the manufacturers. 

The country’s largest tyre maker, MRF, recently informed dealers that if a dealer has stocks (in July) against invoices made on April 17 or later, the stocks would be “completely protected” against any loss. The Chennai headquartered company, however, advised dealers to sell the stock of tyres and tubes billed before April 17 by June 30, the last day of the current tax system. MRF said the goods received by a dealer against invoices of April 17 or later can be sold at any point of time and dealer would make the same profit. The cut off date of April 17 was decided keeping in mind the maximum inventory a dealer might have. 

The key concern of any industry as the nation moves to GST is the resultant loss in business arising out of apprehension of loss among the dealer community, especially in cases where rates are lower than existing taxes. “We are working out a transition plan. Our priority is to ensure that dealers do not suffer and it is business as usual for them. We will support them if there is a need,” said an official at Hyundai. 

Companies believe that educating the dealers will be the key to a successful transition. “We are working out the impact. In some cases, prices are going up and in some they are going down. Inventory is a tricky situation currently. If price is going up, there is no issue. If it is going down, we will have to work out a mechanism…if they are compensating each other, it does not matter. At this moment, we are asking dealers to focus on sales,” said Jnaneswar Sen, senior vice-president (sales & marketing), Honda Cars India.