[Muski]

Originally Posted by pgsagar

Do people believe in fairy tales? I see some speculating that car prices may come down? People are so naive as to believe this? The zeal on part of the ruling Govts. in itself is a proof that there is something in it for Govt. Not for us. Govt. would not fight so tooth and nail over it if it weren't beneficial to it. And only one party can benefit. Either the Govt. or the people. Not both unless they print paper currency and shower from a plane on the streets. The zeal with which central and state Govts. since independence fleeced people by way of exorbitant taxes over automotive fuels should be enough indicator of this fact.

GST is not a fairy tale my friend. I can assure you taxes on cars are coming down with GST.

Infact in our country taxes till now are biased on manufacturing. Excise duty is levied on manufacture and VAT is levied on sale seperately and input tax credit (ITC) between VAT and excise is not shared. Service tax is levied seperately on maintenance, insurance etc. Also CST is levied on inter state trade which gives no ITC benefit at all. Overall this comes out to be around 32% (small cars ) to 40% (sedans) to 45% (luxury cars).

Now under GST we will only have dual levy of CGST (centre) and SGST (states) with CST being abolished. Overall tax is expected to be around 18%-22% for combined dual levy (CGST + SGST).

You can do the math.

The only issue consumers may face is that auto industry might not pass the benefit to buyers immediately and may decide to simply increase profits in short term, but I am not two worried as Indian market is price conscious and competition will ensure we consumers get the benefit sooner or
later.

Why govt both center at state are pushing it?

Centre because this will be BJPs defining achievement. People say they promised big but didn't deliver. This will change that. GST will be for Modi govt what nuclear tests were for Vajpai govt. Not to mention service tax on services will increase from current 15% to GST rate (expected 18%~22%). I should remind you 66% of Indian GDP is Service sector today. Imagine the over all hain from this. This will go to both centre (CGST) and states (SGST)

States is more complicated. Majority of states want GST as it will benefit them. GST is destination based consumption tax, unlike current indirect tax regime which favors states which manufacture. So it will benefit states with large populations which can drive consumption like UP, Bihar while manufacturing states like TN, Gujarat, Maharashtra will lose revenue big time. This is the reason GST took so long to become a realization.

GST is truly a win - win - win situation for centre, states and consumers.And it will particularly benefit manufacturing industry. So interesting things ahead.


PS: printing paper money is a seriously bad idea is economics. But it's called deficit financing. Leads to uncontrolled inflation for common public and serious erosion of trust in national currency for the government. Just read up Zimbabwe inflation situation.

I hope my post may clarify the doubts on GST.

[arakhanna]

Originally Posted by pgsagar

Do people believe in fairy tales? I see some speculating that car prices may come down? People are so naive as to believe this? The zeal on part of the ruling Govts. in itself is a proof that there is something in it for Govt. Not for us. Govt. would not fight so tooth and nail over it if it weren't beneficial to it. And only one party can benefit. Either the Govt. or the people. Not both unless they print paper currency and shower from a plane on the streets. The zeal with which central and state Govts. since independence fleeced people by way of exorbitant taxes over automotive fuels should be enough indicator of this fact.

I concur with you on the fact that the government is looking at a revenue neutral rate. It means that overall tax collections need to be similar to previous years. Status quo would mean that that rates would be set at higher levels than those quoted at 18-20% standard rate and 40% demerit rate.

However the very essence of GST is to curb un-taxed parts of the economy.

The savings would result from taxing the unofficial parts, so that the highly burdened segments would be lessened from the load.

This would act as an incentive to boost consumption, thus increasing tax due to increasing volumes rather than just higher rates. Hence boosting the economy.

I am generally as skeptical as you on these matters however I would wait till the end of CY16 before taking a call on purchasing a vehicle.

Taxation at a point could move towards a win-win rate. I.E. it depends where is the taxation of the state currently on the Laffer Curve. I believe in this instance, that by reducing rates, consumption could be induced thus increasing tax revenue for the government.

Call me sanguine, but in this case, I believe that there is value in waiting for the GST rate before going ahead and purchasing a vehicle.

[himanshusharma]

Originally Posted by arakhanna

Just curious, how many people are waiting for GST to purchase a new car?

I have also deffered my plan of buying SCROSS 1.6 due to gst, but i am still in dilemma because of few factors.

A)Time of implementation of GST, will it be apr 2017 or post that.If it is after apr 2017 then atleast i, have no clue how much time will they take to put GST in full effect, also there may be several political/practical hurdels in full scale implementation.

B)Will the manufacturers pass the benifit to the consumer, if yes then upto what extent.Means they might offer a puny discount in the name of GST to enjoy higher.

C)Will maruti offer a discount on an already heavily discounted SCROSS 1.6.

D)Also haven't heard of any thing related to GST effect on a car which has imported engine\parts.

[pgsagar]

Originally Posted by Muski

GST is not a fairy tale my friend. I can assure you taxes on cars are coming down with GST.

GST is not a fantasy my friend. I know GST is a reality. It is people's belief that car prices may come down is what I call fantasy. Nothing comes down in this country. I may sound cynical but our past experience with fuel prices is a pointer in that direction. You have written a great deal about it but do you know how tax officials are literally hounded by their seniors to collect more and more revenues and how every year revenue targets are revised unrealistically to a point where if officials were to meet them, they would have to literally loot our houses. Ours is probably one of the most revenue hungry Govts. in the world. I have zero expectations from this Govt. whether BJP or Cong. They are same once in power. So you can write at any length the fancy ideals that the Govt. dishes out . But rest assured my friend, nothing will come down post-GST. It will be time for Govt. to rejoice. Not us. Still doubt? Let's wait. We will find out soon enough.

[Muski]

Originally Posted by pgsagar

GST is not a fantasy my friend. I know GST is a reality.

I wholeheartedly understand the skepticism. I totally agree that tax officials are hard pressed to meet annual revenue targets. I also quite agree that fuel price is another pointer as you have rightly mentioned.

However, its a little different this time.

This time, government has no discretion. If the rate is set at say 20% (UPA wanted it to be capped at 18%), it has to be the same across the spectrum.

But as you mentioned, lets wait and watch. My reading of the GST draft model law says automobiles (manufacturing) will become cheaper and eating out (services) will become expansive.

Lets wait and watch.

[rselva]

Originally Posted by Muski

I wholeheartedly understand the skepticism. I totally agree that tax officials are hard pressed to meet annual revenue targets. I also quite agree that fuel price is another pointer as you have rightly mentioned.

However, its a little different this time.

This time, government has no discretion. If the rate is set at say 20% (UPA wanted it to be capped at 18%), it has to be the same across the spectrum.

But as you mentioned, lets wait and watch. My reading of the GST draft model law says automobiles (manufacturing) will become cheaper and eating out (services) will become expansive.

Lets wait and watch.

By the time GST is put into effect, the manufacturers will raise the price to offset any gains from GST. This has already started.

[JKBKS]

My understanding is that the ex-showroom price is basically a combo of manufacturer's price and taxes/duties which is generally believed to be in the ratio of 65:35. From this we can assume that the current 35% taxes will come down to GST rate of 18-20%. So this means a price reduction of 15-17%.

Even if Manufacturers increase their price by 10% i.e from 65% to 71% (10% of 65%) at GST launch then their will still be a total reduction of 8-10 % in ex-showroom price.

Is this understanding correct?

[Wheeliej]

I sincerely doubt that the govt will fix tax rate for cars at par with rest of the goods.

What will happen is that there will be greater transparency on the actual rate of tax. Currently, i believe, that taxes constitute around 50%+ of the total cost of the car. Maybe more.

The government wont like to lose even a paise of this revenue and hence cars like certain other luxury products will be charged at a higher rate.

Even assuming that government doesnt recover 100% of the current tax our manufacturers will rush to close the gap and increase the cost of cars to the level before change of tax.

So anyone hoping that purchasing car next year will get them a better deal may not want to hold their breath.

[johannskaria]

Ernst & Young's take on the GST impact of Indian Auto Industry.
(Full report attached below)













Attachment 1546669

[anurag.somani]

Do we know the impact of GST on company-leased-vehicles (CLV).
Currently CLV have to pay a service-tax + cess. which add up to 15% on the EMI.
If you fall in the 30% tax-bracket, then it implies a saving of 15%.

Do we foresee:
1. the service-tax on CLV to increase to proposed GST rate. If yes, this will in-effect nullify the benefits of lower car prices.
2. For vehicles which are already under CLV, will the tax liability be calculated as per GST rates from next year.

[RavenAvi]

Indications are rife that the government is set to finalise a standard 18-19% Goods and Service Tax (GST) rate, when the newly-formed GST council comprising of state Finance Ministers and headed by the Union Finance Minister will sit down to deliberate on the rates & roll-out exercises over the next 2 months.

The rates will be top of the agenda when the GST council holds its first meeting on September 22 and 23 although revenue secretary Hasmukh Adhia said the agenda is being finalised.

The GST council will decide the standard rate along with the levy on essential goods, which will be lower, and a higher rate for demerit goods such as soft drinks and luxury items. For instance, the government wants to make a distinction in the levy on small cars, SUVs and luxury vehicles.

A panel headed by chief economic adviser Arvind Subramanian had estimated the revenue-neutral rate at 15-15.5% and suggested that the standard rate should be in the range of 16.9% to 18.9% with a lower band of 16.9-17.7% being the preferred option.

ET

[JKBKS]

Originally Posted by RavenAvi

Indications are rife that the government is set to finalise a standard 18-19% Goods and Service Tax (GST) rate

I believe their are going to be 3 rate categories: Standard, Merit and Demerit (Luxury). SUVs/Expensive cars wont get standard rate but will get a luxury rate which may equal to the current taxes. Small cars may get standard rate.

The states wont let go of the extra revenues I am told. Also this will make them pro common man and anti rich, which is politically correct and the flavor of the season these days !!!

[arakhanna]

As per the latest proposals with the GST Council, government is looking at a new slab of 26% below the demerit rate. If this materializes then most of the gain gets traded away as autos may come at this slab.

http://indianexpress.com/article/bus...s-tax-3031787/

[JoyPangli]

Originally Posted by JKBKS

I believe their are going to be 3 rate categories: Standard, Merit and Demerit (Luxury). SUVs/Expensive cars wont get standard rate but will get a luxury rate which may equal to the current taxes. Small cars may get standard rate.

This does seem like the most likely scenario. However, what I don't understand and strongly oppose is calling a strong and safe SUV like Fortuner/Endeavour - a demerit good or a sin good, hence proposing a Demerit/Sin Tax on it.

May be I can only afford a Creta or an Innova but thinking about how dangerous Indian roads have become, I may want to stretch my budget to buy a strong and safe SUV for my family. Instead of encouraging people to upgrade and buy safer vehicles, government wants to tax it heavily and discourage people from buying such goods. Their tax policies want us to stick to cheap, unsafe and sub 4 meter vehicles which compress to 2 meters in case of any mis-hap.

[sgiitk]

One thing seems to be coming in for sure - the 4m/1500D/1200P category may be history. Does no seem to fit into any standard model. But then strange are the ways ...