Tuesday, June 27, 2017
By Manoj Kumawat
Will Implementation of GST Contour The Indian Automobile Industry?
Goods and Service Tax (GST) has been one of the hottest topics in Indian economy since last couple of months and all segments of society are concerned about its affects on their income. Where some sectors are ready to welcome it with open heart, some of the sectors are opposing it. Simply it can be said that although the results of GST are hidden in future, but at present it is receiving mixed reactions from different segments.
Going through the speculated impacts of GST on Indian automobile industry Mr. R.C. Bhargava, Chairman, of country’s leading car manufacturing company Maruti Suzuki India Limited said, the small car market in India will continue to retain its strong position and cars falling in the range of Rs.5-8 lakh will dominate three-fourth of Indian car industry. According to him, by making the transition revenue neutral, the council for determining GST has taken an intelligent step and the prospective buyers of small cars will not notice much difference in car prices effective from July 1, 2017. Mr. Bhargava also added that 1% cess of petrol and 3% cess of diesel cars plus 28% of GST will not make much difference in ongoing tax of 29% over the small cars (including VAT+ excise plus cess).
Commenting on the impacts of GST on automobile industry Mr. V.G. Ramakrishnan, managing partner of an auto consultancy firm Avanteum Advisors said, “SUVs will provide a real alternative and a further fillip to the car industry,” It is believed that GST will encourage the manufacturers of mid-sized sedan and SUVS, which together hold 25%-30% share of the Indian car market.
The surprising factor of GST is that it is believed to even affect the sales of Hybrid vehicles which till now was considered as the segment that falls in the bracket of low taxes. But surprisingly the removal of hybrid vehicles from the lower bracket has developed the lines of tensions on the heads of car makers who are working on developing vehicles that will run on alternate sources of fossil fuels.
Luxury Cars: It is speculated that luxury car segment will witness will huge growth with benefits falling between Rs.60,000 and Rs.6 lakh, depending upon the state in which the vehicle will be sold. In the words of Mr. Roland Folger, CEO of Mercedes-Benz India, “The GST regime promises growth potential to the luxury car industry, which long remained prohibitively taxed, making them unaffordable for inspirational buyers,”
Compact Cars: It is believed that there will be not impact on the prices of compacts cars, however still it is believed to get affected by the GST as according to Mr. Rakesh Srivastava, Director, Sales and Marketing, HMIL, “With prices of mid-size sedans and SUVs likely to go down, offers are higher on them currently. But once GST is implemented, we expect schemes and offers will move to smaller cars to ensure demand is sustained.”
BIG CARS, SUVS AND HYBRIDS: As far as this segment is concerned it is believed that there will be slight difference in the sales of these vehicles which is mainly because of narrow gap between their prices. As in the words of Mr. Pawan Goenka, M.D. Mahindra & Mahindra, “A 0-5% relative price change between small and large cars will not change buying patterns or significantly impact the sales growth pattern towards SUVs”.
Going through the statements given by the industry mavens it is believed mid-sized cars and SUVs will definitely benefit by the implementation of GST and alteration will be witnessed in the Indian car market with decline in the sales of small cars.
