Recently, the impact of demonetization on Automobile Industry resulted in a great tumult in the sales and overall market share of various manufacturers. The next move is Goods and Service Tax (GST) that is likely to be announced soon. As we all know, our govt. aims to create a cashless economy in India so as to benefit all with the reduced taxation and cheaper costs of the products. At present, paytm is an online money transfer platform, but soon enough govt. is also going to launch aadharpay, which will enable the ones without a phone number or credit/debit card to make their respective payments.
With the coming of GST, there will be the flat tax for all the states in our country, and for all the amenities that are sold in the country exclusive of Value Added Tax or Central State Tax which would all be included in the GST itself. Currently, an indirect tax is in play which is which implies number od taxes and long compliance obligations, thus imposing numerous trade barriers, especially for the manufacturing companies planning to enter India. This Single tax system will enable fair taxation and marketing of goods with reduced cost as their will be no indirect taxes to be paid.
At present, there are four taxes that are paid on automobiles, but with the introduction of GST, taxes levied by the centre like excise duty and state levels taxes like sales tax, road and registration tax would all be covered up by GST, hence reducing the cost of the automobiles drastically. The cars, be it small or big, will be covered under the same tax, tohugh it might be divided on the basis of segments they belong to. There will be no difference in the market for native and foriegn companies, thus giving a fair competition amongst the manufacturers.
It is likely to create more job employments as well because it will require a team to keep a record of the cess implied on various products and their excise procedures for the job work transactions, i.e. non-taxability of job work transaction and providing credits to the principal for supplies to job worker, 180 days condition for bringing back goods after job work, etc. But it might cause a reduction in the incentives that the employers generate out of the prevailing tax system. Many incentives like investment promotion subsidy are given to the workers by either not applying VAT and CST paid by the ones availing various services or loaning the amount to them. But with a single tax operation between the states, there will be a significant fall in the number.
GST does talk about the business of the goods but fails to cover the other goods trading cess like the parts of the vehicles which are taken from original equipment manufacturers and given the money to them via loaning. Hence, it is still unclear as to what taxation shall be applied in a situation of credit.
The automobile industry is keenly looking forward to the introduction of GST and how it is implemented, smoothly or roughly. We hope that the loopholes sighted in the GST are taken care of before its implementation, unlike the mismanaged implementation of demonetization which left lakhs of people in an unnecessary tumult. At present, there are 160 countries around the globe that follow GST/VAT system of taxation, out of which Europe have 53 countries and Africa have 44 countries. They mark a better form of trading across states and countries as compared to the other countries that follow the indirect taxation system. It is a good news that India is also going to enter the league pretty soon!
