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GST could reduce automobile costs by 8-10 per cent

GST could reduce automobile costs by 8-10 per cent
Firoze Irani Firoze Irani Thursday 04 August 2016, 12:46 PM

If the Goods and Services Tax (GST) Bill does pass, it is set to make India one unified common market. What that means, is GST will replace the list of indirect taxes being charged by states and reduce the tax burden on consumers. This in turn could reduce prices of automobiles significantly, by around 8-10 per cent.

This Bill proposes to benefit almost every party involved, businesses will gain with easy compliance and uniformity of tax rates and structures. Central and State governments can benefit by having simple and easy to administer taxes in place of the multiple indirect taxes. This move will also provide a higher revenue efficiency which means it will decrease the cost of collection of tax revenues, and will therefore, lead to higher efficiency.

Lastly, the consumers. There will be a single and transparent tax which will be proportionate to the value of the goods and services and also provide a relief in overall tax burden. Coming to the automotive sector, at the moment, the effective tax rate in the sector currently ranges between 30 per cent and 47 per cent. On implementation of GST, the tax rate is expected to waver between 19-22 per cent. According to financial experts, it is expected to drive overall demand and reduce cost for the customer by about 8-10 per cent.


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