Bring some stability

Automobiles was one sector that cheered the announcement of the GST rate structure

Apropos the report, “Auto firms lash out at move to hike cess on large cars, SUVs” (August 9) by Ajay Modi and Indivjal Dhasmana, automobiles was one sector that cheered the announcement of the goods and services tax (GST) rate structure. The effective tax rate in this sector went down as GST absorbed several taxes such as VAT, sales tax, road tax, motor vehicles tax and registration duty on cars and bikes. Luxury cars and sports utility vehicles were among the biggest beneficiaries, with the effective tax rate plummeting to 28 per cent plus 15 per cent cess from 42 per cent and 45 per cent approximately. 

After the implementation of the GST, auto makers were passing the benefit on to buyers. But with the government increasing the cess to 25 per cent, there is not much left for luxury car makers to cheer about. If the cess is increased, prices are expected to shoot up by Rs 72,000-2.58 lakh. 

It is good to rectify a mistake, however, the authorities concerned should bear in mind that a taxation regime has wide-reaching effects on the economy. Frequent changes in the economy hamper a company’s ability to plan, draft policies and take strategic decisions.  

The GST is considered the country’s most ambitious tax reform and the expectation is that it will contribute an additional two per cent to gross domestic product. But, for its implementation, various stakeholders might have to pay a price. When the entire country is trying to cope with the present conditions, the government must take measures to bring some stability, which would not hurt business sentiment.

                Ankita Kalia   Chandigarh  Letters can be mailed, faxed or e-mailed to: 

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