GST an opportunity to rationalise auto tax

Automobile makers on Thursday welcomed the passage of GST Bill, which offers an “excellent opportunity” for rationalising the existing differential tax structure on vehicles based on physical dimensions.

A Maruti spokesperson said, “GST is about unifying the market, widening the tax net and generating efficiencies throughout the value chain. Faster implementation will be critical in determining its success.” Renault India Operations Country CEO and MD Sumit Sawhney said: “GST is expected to drive overall consumer demand since the cost for the logistics and supply chain inventory will be curtailed by almost 30-40%, the benefits of which are expected to be passed on to the consumers.”

The auto industry has four different slabs of excise duty based on dimensions and engine capacity. Small cars that are less than four metres in length attract excise duty of 12.5%, while cars longer than four meters but with engine of less than 1,500 cc capacity attract a duty of 24%. Further, vehicles with engine capacity of more than 1,500 cc are charged an excise duty of 27% and those with ground clearance of more than 170 mm attract an excise duty of 30%.

Honda Cars India President and CEO Yoichiro Ueno said, “From the automobile industry perspective, which contributes close to 45% in the manufacturing GDP, it is an excellent opportunity for the government to rationalise the current differential tax structure based on physical dimensions. With India benchmarking the car safety, emission and fuel efficiency standards with the developed automobile markets, the tax structure should also be aligned to meet these objectives. This would be a win-win situation for the environment, customer and the economy,” he added.