[JoyPangli]

My understanding broadly of GST was that by widening the tax base, the tax on currently taxed items would reduce so as to stay revenue neutral overall.

Before reading this discussion I was quite certain that offsetting of taxes would reduce the prices, but I guess it looks like it is still up for debate.

These are two articles I had read earlier in the year because of which I thought that there could be some reduction in prices. May be some more qualified person can go through these articles and comment if these calculations make sense:

http://www.business-standard.com/bud...1800745_1.html

http://www.ey.com/IN/en/Newsroom/New...or-auto-sector

[MercFan]

Originally Posted by etrast75

Our indian government will never let go of tax money..

Why should the govt let go taxes? How many people out there pay taxes? How will the country run? You should come to US and see how the federal govt squeezes taxes from its citizens.

There is tax for everything, and anything. And you cannot escape paying taxes here. But one thing I should accept is, the govt provides you with the infrastructure and you feel happy that you are taxes are helping you enjoy better facilities. But back in India, one person pays his taxes and 1000 other try to live on his taxes.

Sorry

[kotirajendra]

Prices are a function of demand and supply and not that of taxes. Business has its tricks of maximizing profits at various price points. They always find ways - new products, new variants, cost cutting on quality etc etc. GST is not meant as a mechanism to lower consumer costs. Its meant to simplify tax structure and facilitate easy movement of goods across state borders.

[MSC]

To be very frank, I am not even distantly related to economics and these tax stuff is simply out of the world for me.
I am a big zero in this field so its just a layman's view on GST.
The overall price is going to remain the same. Our intelligent brains in finance ministry wont let common public live in peace. They might reduce the number of taxes and implement a single tax, but the Government will take away the savings in some other way.
The price of petrol and diesel is just an example. Despite the reduction of oil prices in international market to almost one-third levels, the price is just 10 odd rupee less. The government just increased excise to increase its own coffers and deny people the benefits of lower oil prices.
In similar manner, the purchasing price might get reduced but the government will again take away benefits in form of income tax or other sort of taxes.

[r_devakumar]

My understanding also that GST will simplify the tax related process which in turn will increase the faster / smooth good movements and will be good for business. But it will not reduce the tax and give any direct / immediate benefit to consumer. I don't believe our politicians have neither capable or has any good intention to reduce the tax burden to common citizens (rather they are so incompetent that they need means / reasons to introduce new taxes and surcharges ).

[sgiitk]

Originally Posted by etrast75

There is a misconception that GST will lower taxes.. Our indian government will never let go of tax money.. All it will do is rationalize the tax structure so that it is easy to be compliant of all the indirect taxes the govt imposes on businesses and consumers..
In fact, for some goods it may actually increase the taxes as states do not want to let go of revenue that they desperately need for the next set of scams.

They are banking on reduced revenue leakage to help them. Hopefuloly, tax evasion will reduce.

Originally Posted by MSC

To be very frank, I am not even distantly related to economics and these tax stuff is simply out of the world for me.
I am a big zero in this field so its just a layman's view on GST.
The overall price is going to remain the same.

Assuming the same GST rate, then vehicles may become costlier in lower tax states, and cheaper in the high tax states. Also, CENVAT will go in a year or two so that levy will go. Overheads (warehousing, transport, etc) will drop, but trust that competition may be more of a regulator. I will expect a marginal downward bias.

I hope that the RTO loot in moving states will go one day. With all databases linked, this can happen even now, but with (hopefully) the same rate across the land, there may be less incentive for the loot! At the time moving states is almost a no-no!

[alpha1]

Originally Posted by MercFan

Why should the govt let go taxes? How many people out there pay taxes? How will the country run? You should come to US and see how the federal govt squeezes taxes from its citizens.

There is tax for everything, and anything. And you cannot escape paying taxes here. But one thing I should accept is, the govt provides you with the infrastructure and you feel happy that you are taxes are helping you enjoy better facilities. But back in India, one person pays his taxes and 1000 other try to live on his taxes.

Aha, now we are talking.
So what are your views about the Swach Bharat cess? (http://www.dailyo.in/politics/swachh...ry/1/7425.html)

What if Govt comes out with another revenue stream under the garb of Infrastructure development surcharge??

The better question, then, just like it happens in all the companies, is to first ask how can we cut the unnecessary expenses and hare brained schemes. What about hordes of employees under govt bureaucracy and police and judiciary that are supported on tax money who will not think twice before fleecing you for doing their jobs as per the constitution (and other laws, regulations etc)? What about right-from-inception bad debt given to countless (especially agricultural) cooperatives? What about money wasted on repeated contracts awarded to politicians relatives and shills?

Currently the tax scene is like giving hafta to local goon. You simply have to live with it without questioning.

Originally Posted by kotirajendra

Prices are a function of demand and supply and not that of taxes. Business has its tricks of maximizing profits at various price points. They always find ways - new products, new variants, cost cutting on quality etc etc. GST is not meant as a mechanism to lower consumer costs. Its meant to simplify tax structure and facilitate easy movement of goods across state borders.

Yes, but if the tax rate affects every seller uniformly, it will raise the general price levels. Or in other words - inflation.

The other thing is that GST plans to bring a lot of goods and services under its umbrella thereby increasing the potential revenue. It was hoped that in order to attain a revenue neutral state, Govt will lower the tax percent, which looks bleak today.

[vinit.merchant]

A little bit of googling got me this. Apparently, the biggest relief would be on the Mid size and Luxury vehicles, to the extent of 16% savings on taxes.
Since the Sub 4 meter and <1.2L segment is already enjoying exemptions, there would hardly be any relief there. Me feels that this segment will in fact have a increased levy of tax, unless the centre decides to extend those exemptions to GST as well.

While there is a lot of uncertainty on the implementation of the goods and services tax (GST) in April next year, this new tax structure is expected to bring in better pricing and margins for the automobile industry. The automobile industry is reap rich benefits from the GST, which include reduction in cost for the industry, which is currently marred by endless taxes charged at different state levels. If the opinions and views of the experts are to be believed, the cost savings will run into double-digits for the sector.

GST is expected to eradicate small tax windows and lead to seamless travel of products from one state to the other. It would remove multiple taxes and bring forth the right value of the products. The government is also expected to come up with a separate duty structure for small and electric vehicles citing the rising pressure to keep carbon dioxide emissions under check. Further, he said there is no clarity on what happens to the customs duty. The expected GST is around 18% (taking centre and states together).

Source: http://www.motorzest.com/2015/04/imp...utomobile.html


Some more searching found me this, straight from the SIAM website. Taxing the used car trade is quite a horrible suggestion made. Leads to double taxation, which is the basic purpose for implementation of GST i.e. avoiding double taxation.

The auto industry looks forward to introduction of GST. However, based on whatever inputs we got, there are several concerns of the industry which have been mentioned below:

Taxes to be covered/ subsumed

All kind of domestic indirect taxes should be subsumed in the proposed GST, as suggested by Kelkar Committee. This should include Road Tax/Motor Vehicle Tax also.

After introduction of GST, no additional tax should be introduced/ levied. A provision be made in the law that no new levy or tax be introduced.
Any change, if required, in future (for specific needs like calamity, education, infrastructure, etc.) should be done through modifying the rate of taxation under the GST regime and not through any additional levy/tax/cess, etc.

Bring in used vehicle trade under GST framework with a token levy to make used vehicle trade more organized.
1% GST rate will provide substantial annual revenue to the exchequer.

Source: http://www.siamindia.com/economic-af...8&pgidtrail=21


Also, bringing in the GST is one thing, proper implementation is totally a different ball game. It is like those auto manufacturers who's majority R&D happens on constomer complaints. They will bring in the GST, will take around a couple of years of feedback and loopholes and then try to fix them with updates. So it is anywhere between 2-4 years after passing the law, that the GST will actually be a streamlined.

So it is too early to start thinking about its effect on the car prices.

[wildsdi5530]

In the name of tax; direct, indirect, cess, excise, octroi, sales, VAT, etc. at every step of production from raw material to the consumer, more than 75% of the on road price goes to the govt. If all that is scrapped and a uniform 26% is applied, the prices will go down. There was an article in The Economic Times about how taxes on petrol and diesel have crossed the procurement cost, i.e. >50%. So again fuel prices will come down. But then again, our govt. will either have exemptions or introduce other indirect taxes like swaach Bharat cess, etc to raise it up again. Only the base tax will go up from 14.8% (VAT) to 25%.

[MercFan]

Originally Posted by alpha1

Aha, now we are talking.
So what are your views about the Swach Bharat cess? (http://www.dailyo.in/politics/swachh...ry/1/7425.html)

What if Govt comes out with another revenue stream under the garb of Infrastructure development surcharge??

The better question, then, just like it happens in all the companies, is to first ask how can we cut the unnecessary expenses and hare brained schemes. What about hordes of employees under govt bureaucracy and police and judiciary that are supported on tax money who will not think twice before fleecing you for doing their jobs as per the constitution (and other laws, regulations etc)? What about right-from-inception bad debt given to countless (especially agricultural) cooperatives? What about money wasted on repeated contracts awarded to politicians relatives and shills?

Currently the tax scene is like giving hafta to local goon. You simply have to live with it without questioning.

Fully agree on the Swachch cess, Alpha. Just an add-on, before anything, the mindset of people has to change. How many times you saw people throwing bottles, plastic wrappers out of their cars? Infinite times, from Audi to Alto, this dirty habit repeats in India. Without this changing, nothing will actually change. Imagine People reaction, if Govt asks them to clean-up after their Dog!

For 6 decades India is used to corruption at all levels, "thuu kha, mujko khane de", was the attitude of the grand old party of India. Entire system is neck deep in corruption.

But this guy said, "na mein khaoonga, na kisi ko khaane doonga", let us see how far he keeps his words. His term ends in 2019. If his govt didn't have one single corruption charges, this is the CHANGE that he promised India.

Be it Swachh, corruption, development, tax, nothing can be changed overnight, but there has to be a start somewhere.

BTW, go through this link and you will see that something is "Actually" changing in India, finally!

http://www.dailyo.in/politics/lutyen...ry/1/7472.html

[kotirajendra]

Originally Posted by alpha1

Aha, now we are talking.
So what are your views about the Swach Bharat cess? (http://www.dailyo.in/politics/swachh...ry/1/7425.html)

Yes, but if the tax rate affects every seller uniformly, it will raise the general price levels. Or in other words - inflation.
.

Taxes have little effect on inflation. Inflation is due to easy money in the system that devalues currency. The list prices keep increasing while taxes remain constant.

[alpha1]

Originally Posted by kotirajendra

Taxes have little effect on inflation. Inflation is due to easy money in the system that devalues currency. The list prices keep increasing while taxes remain constant.

Actually you right but my point was that uniform application of taxes lead to increase in prices and reduction in consumption/production (I used the wrong term inflation). Will the increase in price be equal to the tax amount? We cannot be sure since it depends on the demand curve intersection point with the new supply curve.

[Asifgrkhan]

Originally Posted by MercFan

Why should the govt let go taxes? How many people out there pay taxes? How will the country run? You should come to US and see how the federal govt squeezes taxes from its citizens.

There is tax for everything, and anything. And you cannot escape paying taxes here. But one thing I should accept is, the govt provides you with the infrastructure and you feel happy that you are taxes are helping you enjoy better facilities. But back in India, one person pays his taxes and 1000 other try to live on his taxes.

Sorry

Please enlighten this forum on how the taxes on everything in the US does not correspond to taxation regime in India. I am sure you would know how difficult it is for any government in the US - municipal, county, state or federal to arbitrarily impose a tax on the public without there being an immediate recall or a devastating loss in the next elections. In most states sales tax increases are usually done after being put to vote by the entire state - effectively a referendum.

We in this country of ours (India) are absolutely loath to doing things the correct way or the hard way. Only thing that government (actually bureaucracy, since the elected officials are literally rubber stampers) knows is to do things the easy way. And this behaviour is given legitimacy by people like us who don't challenge such usurpations of power but cloaked in pseudo-nationalism, we accept it and move on.

Do you know how incredibly regressive is indirect tax. It affects people in lower strata of society the most since as a percentage of their income, they spend the highest on goods and services. And it is extremely beneficial to the well off in society who spend the least as a percentage of their income and hence pay the least amount in taxes again as a percentage of their income.

Instead of thinking and working hard on expanding the direct tax net (income tax), something which might require hardwork but also will necessitate bringing people like the very same politicos, contractors, doctors and other self employed into the tax net, what we get is expansion of indirect tax.

This is an ongoing and direct assault on all of our collective wallets and we are complicit in this by not speaking out.

See how the goalposts of GST have moved from arounf 10-12% during Chidambaram, to 16% during first Jaitley budget in 2014 to the trial balloon of 23-27% raised a couple of months back.

And any of us who are thinking that tax rates once implemented will be reduced, we then please pass on what you are smoking must be good stuff. Seen how the service tax net has grown from 4-5 services to now a negative list of a handful of services.

[sgiitk]

Originally Posted by wildsdi5530

In the name of tax; direct, indirect, cess, excise, octroi, sales, VAT, etc. at every step of production from raw material to the consumer, more than 75% of the on road price goes to the govt. If all that is scrapped and a uniform 26% is applied, the prices will go down.

in the UK in addition to VAT we also had a special car tax, so I am not too sure. Talk is for a GST in the 16-18% (20max) range!!

[wildsdi5530]

GST is uniform at 25% for central govt. with 1% extra initially for the state govt.