GST DECIPHERED

GST

A puzzle for you:

 

A chicken farmer has figured out that a hen and a half can lay an egg and a half in a day and a half. How many hens does the farmer need to produce one dozen eggs in six days?

 

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Hard to crack? Well. That was how the GST felt to me when it was announced!

 

Under the previous tax structure, different states had different taxes like Excise Duty, VAT, CST, etc, few were direct & many were indirect. So, price for the same product in different states was different and if I were to calculate the price, I’d rather solve the puzzle.

 

Goods & Services Tax (GST) aims to do away with this discrepancy in prices under a uniform, countrywide tax, so prices will be uniform across the country. Thousands of goods and services were listed under various GST slabs, viz., 0%, 5%, 8%, 12%, 18%, 28%, 28%+cess.

 

We, as car nuts, aren’t worried about idly / dosa, but the impact GST in India on automobiles!

 

Simply put, the impact is ‘positive’. Contrary to our expectations, the taxes have gone down in most segments and all passenger vehicles including Two Wheelers, Cars & SUVs are now uniform at 28%. There is always a debate that larger vehicles take more resources to be produced, take up more space, and pollute more; same case with Diesels also.

 

The Solution? CESS!

 

For those of you exclaiming “Another Tax?”, we have made a chart of the revised tax structure for Two Wheelers and Cars.

 

 

 

While two wheelers with engine capacities more than 350cc are seeing a marginal hike of taxes of 1%, Hybrid cars see a tax hike of 12.7% which contradicts the government’s objective to achieve 100% electric mobility by 2030. We think this contradiction should be reconsidered.

 

Before you jump with happiness that the prices will go down on your purchase, we would like to remind you that the Road Tax is not covered under GST and there is a hike in tax slab of insurance to 18%.

 

So, will there be any other impact to the automotive sector? One of the biggest factors influencing the automotive sector is logistics. It is estimated that almost 40% of transit time of the trucks are spent at inter-state check posts. With GST, this process will be eliminated which will result in lesser turn-around-times. This may not have a direct impact on the price of the vehicle immediately but the impact would be positive on the ease of operations front.

 

So, we assume, on-road prices will more or less remain the same. Expect revised price announcements from all manufacturers shortly. Also keep in mind that there will be an increase in maintenance owing to the hike in the cost of spares and services.

 

It isn’t about buying an elephant, it’s about feeding it daily! Happy GST!

 

Oh! And the answer for the Puzzle: The farmer will need 3 hens to produce 12 eggs in 6 days.

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