Only two GST rates for auto sector, SIAM suggests

The Society of Indian Automobile Manufacturers (SIAM) while extending its support for the faster implementation of the Goods and Service Tax (GST), also gave suggestions as to what GST rates the government should charge on automobile companies. One of its suggestions include that cars other than small cars should attract a GST rate which is 8% more than the standard rate.

SIAM also suggested that a lower GST rate for electric vehicles, hybrid electric vehicles and other alternative fuel vehicles, which should be at least 8% less than the standard rate.

It said that there should be only two rates for conventional vehicles. Standard GST rate should be applicable on small cars, multi-utility vehicles (MUVs), two wheelers, three wheelers and commercial vehicles.

“Many of SIAM members have made huge investments in locations falling under Area Based Exemption scheme in places like Uttarakhand, Himachal, etc. The period of the scheme is still not over and as such there is a need to protect the benefits to those units under GST regime till the end of the scheme,” SIAM said in a release.

It added, “In addition the road tax and registration tax still remain outside the GST framework. This will further burden the consumer and road taxes needs to be subsumed in GST.”

SIAM said that the automobile industry has been looking forward to the GST, since in its manufacturing process this industry accumulates a lot of embedded taxes and duties which make manufacturing in the country less competitive.

“GST regime will bring in a clean, transparent and predictable mechanism and also help streamline sourcing and logistics operations,” it said.

The automobile industry has joined hands with the government and by 2020 will leapfrog from BS IV to BS VI emission standards and several new safety features would be added which will have huge cost implications for the OEMs.

“While for a long time there were only two rates of Excise Duties on passenger cars, in recent years, the bigger car rates have fragmented and today we have four rates for passenger cars excluding Electric Vehicles and hybrid electric for which lower rates are applicable. In view of the current scenario, there is a need to look at GST rate for automobiles sensitively,” it added.