Benefits and Demerits of GST in Automobile Sector

The automobile industry accounts for 7.10  per cent of the country’s GDP. With automobiles being the mode of transportation for personal purpose & commercial purpose this industry in India is growing rapidly. What GST would bring to automobile sector is enumerated below:-

Benefits

• The present levies such as NCCD and automobile cess which are out of credit mechanism would be abolished with introduction of GST. Thus, reducing the additional cost burden.
• The practice of rate-buying which means buying of a product from the state where less tax is levied as compared to other state would be stopped with introduction of uniform taxes across the country.
• The interstate tax which is currently levied with no credit mechanism adds to the additional cost would now benefit from the introduction of Integrated Goods & Service Tax (I-GST) where credit would be available.
• It is expected that eco-friendly/Hybrid cars would either be subject to lower rate of tax or exempted from environmental point of view.

Demerits

• The difference in rate of luxury cars such as suv’s and small cars such as sedans is expected to continue in GST.
• The levy of road tax which is imposed on usage of vehicle by the consumer is not expected to be subsumed into the GST and would continue to be charged in the same old fashion.

Overall the GST would be beneficial for the automobile industry with the government promoting domestic manufacture and taxing the high end cars with higher rate. As high-end automobiles imported would be charged by import duty which would not be subsumed in the GST.