GST an opportunity to rationalise tax structure in auto sector

Hailing the passage of GST Bill in the Rajya Sabha, automobile makers today said it offers an "excellent opportunity" for rationalising the existing differential tax structure on vehicles based on physical dimensions and simplify taxation burden.
"From the automobile industry perspective, which contributes close to 45 per cent in the manufacturing GDP, it's an excellent opportunity for the government to rationalise the current differential tax structure based on physical dimensions," Honda Cars India Ltd (HCIL) President and CEO Yoichiro Ueno told PTI.
With India benchmarking car safety, emission and fuel efficiency standards with the developed automobile markets, the tax structure should also be aligned to meet these objectives, he added.

"This would be a win-win situation for the environment, customer and the economy," Ueno said.
Expressing similar sentiments, Renault India Operations Country CEO and Managing Director Sumit Sawhney said the GST Bill will positively impact several sectors "including the automobile industry, by minimising and simplifying the taxation burden".
He added: "GST is expected to drive overall consumer demand since the cost for the logistics and supply chain inventory will be curtailed by almost 30-40 per cent, the benefits of which are expected to be passed on to the consumers."

The auto industry has four different slabs of excise duty based on dimensions and engine capacity. Small cars that are less than four meters in length attract excise duty of 12.5 per cent, while cars longer than four meters but with engine of less than 1,500 cc capacity attract a duty of 24 per cent.

Further, vehicles with engine capacity of more than 1,500 cc are charged an excise duty of 27 per cent and while those with ground clearance of more than 170 mm attract an excise duty of 30 per cent.
Ford India Executive Sales and Director Anurag Mehrotra, said: "As details of this historic reform, including the final tax rate get finalised, we surely expect automotive industry, one of the biggest contributors to GDP, to benefit from the one-nation-one-tax regime in the time to come."
GST is one of the most significant tax reforms in India since independence and will further enhance the ease of doing business, he added.

Hero MotoCorp Chairman, Managing Director and CEO Pawan Munjal said bringing in GST has the potential to make country's economy more open and robust and country more competitive internationally.
Munjal added: "At a time of divisive politics all around
the world - particularly in the advanced democracies of the West - the passage of the Goods & Services Tax (GST) reflects the maturity and willingness of the Indian democratic system to work towards the greater benefit."
Maruti Suzuki India Managing Director and CEO Kenichi Ayukawa said GST is about unifying the market, widening the tax net and generating efficiencies throughout the value chain.

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Society of Manufacturers of Electric Vehicles Director, Corporate Affairs, Sohinder Gill said as the GST bill progresses, the government should keep taxation on green vehicles either at par or at a lower rate than the current tax structure, for a certain period.
"If the government manages to do it, it will definitely revive the electric vehicle (EV) industry in India, otherwise it will nullify the FAME incentive being passed on to the customers under NEMMP for inducting more and more EVs on Indian roads," he said.
Currently, the tax levied by state governments on green vehicles are varied between 0 to 5 per cent, except three states -- Uttar Pradesh, Punjab and Bihar which charges more than 14 per cent, Gill added.

"Road tax is almost nil in majority of the states. If we consider the average VAT levied on green vehicles across India it comes up to approximately 4 per cent," he said.
BMR & Associates LLP Partner Mahesh Jaising said the proposed GST rate likely to be applicable on goods and services still remains a big question mark with possibility of higher tax rate being levied on de-merit goods, including aerated beverages and luxury cars.
"Resolution around these key decision areas will be critical to this sector for framing their pricing and operational strategies before the GST finally sees the light of the day," he said.