While the GST regime in India is about to complete one year of implementation, many sectors still struggle with post-GST issues. One of them is the automotive industry of India.
Despite being one of the highest taxed industries, the Indian automobile sector is still waiting to get a relief from the increased tax burden. As per reports, the demand for vehicles in the domestic market is increasing every year, however, the high tax rate on automobiles is making it difficult for the industry to earn their dues.
A compensation cess in addition to GST is being levied on automobile supplies in the country, keeping the overall tax rate unchanged from the old tax regime. But this is not the worst thing. The rate of compensation cess has been changed multiple times during the last few months, which is leading to confusion among end consumers and disruption in business for auto manufacturers. OEMs are forced to revise the prices of their vehicles owing to frequent changes in compensation cess rates.
When the GST was initially implemented last year, the rate of GST for sedans and SUVs was 28%, in addition to a 15% cess. As of now, the cess rates are not uniform for all the vehicles and range between 15% and 22%, creating a confusion among buyers. The consumers are further struggling to know the current price of particular vehicles which is reportedly not being displayed correctly by some dealers.
The problems for the auto sector do not just end here. The government still holds the right to increase (or decrease) the compensation cess rate to up to 25 percent. That means the price of automobiles could further see an increase in the coming days. One of the worst things is that even hybrid and electric vehicles are not getting any special treatment in the form of a reduction in GST and/or compensation cess, despite the government’s claims to promote the use of electric vehicles in India. The cost of keeping and maintaining vehicles has further increased with an increase in GST rate for repair services to 18% and auto parts to 28%.
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