GST implementation would enable ease of doing business

Dated 2nd October, 2015

India is at the cusp of implementing the Goods & Services Tax (GST). If implemented in its current form, it will subsume all the applicable taxes and allow manufacturers to avail input tax credit across the value chain. With this, the proportion of the overall tax in a vehicle price may reduce from the current high level of 20-25%, depending on the GST rates finalized. Further, since majority of the sales of any OEM generally happen outside the native state, OEMs are unable to claim input tax credit on state levies for a large majority of their sales. This increases the cost for the end customers.

Moreover, GST will also help build a common India-wide market across the country instead of the state-specific markets that exist now. Accordingly, auto ancillaries and auto OEMs will not have the need to set-up smaller warehouses across multiple states but rather benefit from economies of scale at a few locations.