Index

Chapter no. List of contents Page no.

Chapter no.1 introduction 1

1.1 introduction 2

1.2 tax laws before GST 5

1.3 History of GST in india 7

1.4 Benefits of GST 9

1.5 registration 11

1.6 procedure for registration 13

1.7 problems regarding GST 14

1.8 automobile sector an overview 18

1.9 automobile sector and india 22

1.10 impact of GST on automotive industry 23

2 Research methodology 39

3 Review of literature 42

4 Data analysis and interpretation 62

5 Findings suggestion and conclusion 94

BIBLIOGRAPHY AND WEBILOGRAPHY 96

Appendix 98

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Chapter 1

1.1 Introduction
GST is an Indirect Tax which has replaced many Indirect Taxes in India. The Goods and Service
Tax Act was passed in the Parliament on 29th March 2017. The Act came into effect on 1st July
2017; Goods & Services Tax Law in India is a comprehensive, multi-stage, destination-based tax
that is levied on every value addition.

The Goods and Services Tax or better known as GST is a Value added Tax and is a comprehensive
indirect tax which is levied on the manufacture, consumption, and sale of goods and services. The
Goods and Services Tax in India would replace all the indirect taxes which are levied today on
goods and services by the Central and the State governments. GST is intended to be comprehensive
for most of the goods and services. Goods and Services Tax is a single indirect tax for the entire
nation, which would make India a unified market. It is proposed to be a single tax on supply of
goods and services, from a manufacturer to the end consumer. The credit of all the input taxes
which are paid at each and every stage would be allowed in the following stages of value addition
that makes GST basically a tax on value addition only at every stage. The end consumer would
have to bear only the Goods and Service Tax which is charged by the final dealer within the supply
chain, together with all the set-off benefits availed at pNrevious stages.

In simple words, Goods and Service Tax (GST) is an indirect tax levied on the supply of goods and
services. This law has replaced many indirect tax laws that previously existed in India. GST is one
indirect tax for the entire country. Most countries with a GST have a single unified GST system,
which means that a single tax rate is applied throughout the country. A country with a unified GST
platform merges central taxes (e.g. sales tax, excise duty tax, and service tax) with state-level taxes
(e.g. entertainment tax, entry tax, transfer tax, sin tax, and luxury tax) and collects them as one
single tax. These countries tax virtually everything at a single rate.

India established a dual GST structure in 2017, which was the biggest reform in the country's tax
structure in decades. The main objective of incorporating the GST was to eliminate tax on tax or
double taxation, which cascades from the manufacturing level to the consumption level. Many
studies have proven that such a situation would create an instant growth in the economy. So it
would be huge potential for india to grab opportunity. Goods and Services Tax (GST) is an indirect
tax (or consumption tax) used in India on the supply of goods and services. It is a comprehensive,
multistage, destination-based tax: comprehensive because it has subsumed almost all the indirect
taxes except a few state taxes. Multi-staged as it is, the GST is imposed at every step in the
production process, but is meant to be refunded to all parties in the various stages of production
other than the final consumer and as a destination-based tax, it is collected from point of
consumption and not point of origin like previous taxes.

Some of the Salient Features of GST are as follows:

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1. Levy of Tax:

The State GST (SGST) and Central GST (CGST) shall be levied on all the transactions of goods
and services, concurrently.

2. Utilization of Levy:

Levies from State GST (SGST) & Central GST (CGST) shall form part of State and the Centre
respectively and no cross-utilization shall be allowed.

3. Availability of Tax Credit:

In respect of taxes paid on any supply of goods or services or both used or intended to be used in
the course business.

4. Destination based Tax:

The GST is a destination based tax on consumption of Goods and Services. Hence the credit of
SGST shall be transferred to the Destination State in the form of Integrated GST (IGST). IGST will
be imposed on all Inter-State Transactions.

5. Assessment :

Registered person will be allowed himself to assess the taxes payable under the GST Laws and
furnish a return for each Tax Period.

6. Threshold Limit:

There shall be a taxable limit (presently, 10 Lakhs in North Eastern States & `. 20 Lakhs in rest of
the county)

7. Composition Scheme

The GST Laws will provide a composition scheme for small dealers (presently, turnover of `. 75
Lakhs).

8. GSTIN or GST Identification Number

Every registrants or dealers ( including Exporters and Importers) shall be given a PAN based TIN
number which shall be a common to the both the State GST and Central GST.

9. Compensation to States

The GST Laws provides for payment of compensation to the States for loss of revenue, if any,
arising out of implementing of the Goods and Services Tax for a period of 5 years.

10. The GST Council

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The Council is a quasi – judicial body of States and the Centre, represented by the State Finance
Ministers or Taxation Ministers and the Finance Minister of India. The key role of this Council is
to make recommendations on various provisions of GST Laws to the State and the Centre.

11. Anti-Profiteering Measures –

It is expected the GST Laws will bring down the prices of goods and services once implemented.
To ensure the pass of such benefits to end users or the customers, the government has put anti-
profiteering measures.

12. Transition

Elaborate ‘Transitions Provisions” for smooth transition of existing tax payers to new Indirect Tax
Regime provided.

It is expected that the GST Laws or new indirect tax regime, brings benefits to all the stakeholders
viz. industry, government and the citizens. Further, lower the cost of goods and services, boost the
economy and make our products and services globally competitive.

Components of GST

There are 3 taxes applicable under this system:

 CGST: Collected by the Central Government on an intra-state sale (Eg: transaction

happening within Maharashtra)

 SGST: Collected by the State Government on an intra-state sale (Eg: transaction happening
within Maharashtra)

 IGST: Collected by the Central Government for inter-state sale (Eg: Maharashtra to Tamil
Nadu).

In most cases, the tax structure under the new regime will be as follows:

Types of New Old Regime

Transaction Regime

Sale within CGST + VAT + Revenue will be shared equally between

the State SGST Central the Centre and the State
Excise/Service
tax

Sale to IGST Central Sales There will only be one type of tax
another Tax + (central) in case of inter-state sales. The
State Excise/Service Centre will then share the IGST revenue
Tax based on the destination of goods.

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 Illustration:

 Let us assume that a dealer in Gujarat had sold the goods to a dealer in Punjab worth Rs.
50,000. The tax rate is 18% comprising of only IGST.
In such case, the dealer has to charge Rs. 9,000 as IGST. This revenue will go to the Central
Government.

 The same dealer sells goods to a consumer in Gujarat worth Rs. 50,000. The GST rate on
the good is 12%. This rate comprises of CGST at 6% and SGST at 6%.
The dealer has to collect Rs. 6,000 as Goods and Service Tax. Rs. 3,000 will go to the
Central Government and Rs. 3,000 will go to the Gujarat government as the sale is within
the state.

1.2 Tax Laws before GST

In the earlier indirect tax regime, there were many indirect taxes levied by both state and centre.
States mainly collected taxes in the form of Value Added Tax (VAT). Every state had a different
set of rules and regulations.

Interstate sale of goods was taxed by the Centre. CST (Central State Tax) was applicable in case of
interstate sale of goods. Other than above there were many indirect taxes like entertainment tax,
octroi and local tax that was levied by state and centre.

This led to a lot of overlapping of taxes levied by both state and centre.

For example, when goods were manufactured and sold, excise duty was charged by the centre.
Over and above Excise Duty, VAT was also charged by the State. This lead to a tax on tax also
known as the cascading effect of taxes.

The following is the list of indirect taxes in the pre-GST regime:

 Central Excise Duty

 Duties of Excise

 Additional Duties of Excise

 Additional Duties of Customs

 Special Additional Duty of Customs

 Cess
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  State VAT

 Central Sales Tax

 Purchase Tax

 Luxury Tax

 Entertainment Tax

 Entry Tax

 Taxes on advertisements

 Taxes on lotteries, betting, and gambling

CGST, SGST, and IGST has replaced all the above taxes. However, the chargeability of CST for
Inter-state purchase at a concessional rate of 2%, by issue and utilization of c-Form is still
prevalent for certain Non-GST goods such as:

i. Petroleum crude;

ii. High-speed diesel

iii. Motor spirit (commonly known as petrol);

iv. Natural gas;

v. Aviation turbine fuel; and

vi. Alcoholic liquor for human consumption.

In respect of following transactions only:

 Resale

 Use in manufacturing or processing

 Use in the telecommunication network or in mining or in the generation or distribution of

electricity or any other power.

GST regime also brought a centralized system of waybills by the introduction of “E-way bills”.
This system was launched on 1st April 2018 for Inter-state movement of goods and on 15th April
2018 for intra-state movement of goods in a staggered manner. Under the e-way bill system,
manufacturers, traders & transporters are now able to generate e-way bills for the goods
transported from the place of its origin to its destination on a common portal with ease. Tax
authorities are also benefitted as this system has reduced time at check -posts and help reduce tax
evasion.

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 1.3 History of GST in india
The GST is in nearly in 160+ countries and in 1958, France was the first country to introduce GST.
As the tax ensure various benefits, its introduction has been in the agenda of the country of every
ruling party. The journey to introduce GST in India has been long and its a result of larger section
in society, particularly, trade and industry and the foreign establishments who have business
interests in India.

when the government of India set up the empowered committee of state finance ministers with
Hon’ble state finance ministers of west Bengal, Karnataka , Madhya Pradesh, Maharashtra, Punjab,
Uttar Pradesh, Gujarat, Delhi, and Meghalaya, as members, it had the following objectives :

 To monitor the implementation of uniform floor rates of sales tax by states and union territories.

 To monitor the phasing out of the sales tax based incentive schemes; to decide milestone and methods
of states to switch over to VAT; and

 To monitor reforms in the central sales tax system existing in the country.

Subsequently honourable state finance ministers of Assam, Tamil Naidu, Jammu & Kashmir,
Jharkhand and Rajasthan were also notified as the members of the empowered committee.

On august 12, 2004, the government of India decided to reconstruct the Empowered committee
with all the honourable finance/taxation ministers of states as its members. Later on, it was decided
to register the body as a society under the society registration act, 1860. GST has been in the pipe
line for a long time, for its passage and implementation.

Here is the brief flash back mirroring the key milestones of the journey in India:

 2003: The kelkar task force of indirect taxes had suggested a comprehensive goods and service tax
(GST) based on VAT principle.

 February 2007: an announcement was made by the union finance minister in the central budget
(2007-08) to the effect that GST would be introduced with the effect from April 07, 2010.

 September, 2009: the empowered committee (EC) decided to constitute a working group consisting
of principle secretaries/(finance/taxation) and commissioner of trade taxes of all states/UTs to give
their recommendation on :

 The commodities and services that should be kept in the exempted list.

 The rules and principles and taxing the transaction of services including the transaction of inter-state
services, and

 Finalization of the model suggested for inter-state transaction/movement of goods including stock
transfers in consultation with the state bank of India and some other nationalised banks.
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 November, 2009: based on the inputs of Government(s) of centre and states, Empowred committee
realised its First discussion paper on GST.

 March, 2011: The constitution(One hundred and fifteen amendment) bill, 2011to give concurrent
taxing powers to the union and states was introduced in lok Sabha. The bill suggested the creation of
goods and service tax councils and a Goods and Service tax dispute settlement authority. The bill
was lapsed in 2014 and was replaced in the the constitution (122nd amendment) Bill, 2014.

 November 2012: A “committee on GST design”, consisting of the official of the government of
India, State government and empowred committee was constituted.

 January 2013: The Empowered committee deliberated on the proposed design including the
constitution (115th) Amendment bill and submitted the report. Based on the report. the EC
recommended the certain changes in the amendment constitution bill and decided to constitute three
below mentioned committees of officer to discuss and report on various aspect of GST:

 Committee on place of supply Rules and Revenue Neutral Rates ;

 Committee on dual control, threshold and exemptions;

 Committee on IGST and GST on imports.

 March 2013: a not for profit, non government, private limited company was incorporated in the
name of Goods and service Tax Network (GSTN) and special purpose vehicle setup by the
Government primarily to provide IT infrastructure and serviced to the central and state governments,
Tax payers and other stakeholders for implementation of the Goods and Service Tax (GST).

 August, 2013: The parliamentary standing committee submitted its report to the Lok Sabha. The
recommendation of the Empowered committee and the recommendation of the parliamentary
standing committee were examined by the ministry in the consultation with the legislative
department. Most of the recommendation made by the Empowered committee and the parliamentary
standing committee were accepted and the draft Amendment bill was suitably revised.

 September, 2013: the final draft constitutional amendment bill incorporating the above stated
changes was sent to the Empowered committee (EC) for consideration.

 November, 2013: the EC once again made certain recommendation on the bill after its meeting in the
shilling. Certain recommendation on which were incorporated in the draft constitution (115th
amendment) bill and the revised draft was again sent to the empowered committee for its
consideration.

 June, 2014: the draft constitution amendment bill in March 2014 was sent to the Empowered
committee after approval of the new government.

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 December, 2014: the constitution (122nd amendment) bill 2014 seeking to amend the constitution
to introduce the Goods and Service Tax (GST) and subsume the state value added Tax, octroi and
entry tax , luxury tax etc, was introduced in the Lok Sabha on December 19, 2014by the honourable
finance minister of India Mr. Arun Jaitley.

• May, 2015: constitutional amendment bill (122nd) was passed by lok sabha on July 22, 2015.

• May, 2015: In rajya sabha the bill was referred to a 21-members select committee of rajya sabha on
June 22, 2015.

• July, 2015: select committee submitted its report to rajya sabha on 22nd July, 2015.

• June, 2016: on June 2016 the ministry of finance released draft model on GST in public domain
with certain amendments.

• August, 2016: on august, 03 2016 the constitution (122nd amendment) bill, 2014 was passed by
Rajya sabha with certain amendments.

• August 2016: The changes made by the Rajya sabha were unanimously passed by lok sabha , on
August, 08 2016.

• September, 2016: The bill was adopted by majority of state legislature where approval of at least
50% of the state assembly was required.

• September, 2016: Final assent of the Hon’ble president of India was given on 8th September 2016.

• April, 2017: Parliament passes the following four bills:

(i) Central goods and service tax (CGST) bill

(ii) Integrated goods and service tax(IGST) bill

(iii) Union territory goods and services(UTGST) bill

(iv) Goods and service tax (compensation to states) bill

• April, 2017: President assent was given to four key legislation on goods and service tax.

• July, 2017: on 1st July 2017 GST becomes a reality.

1.4 Benefits of GST

Benefits for centre

As per the existing taxation system the centre does not has power to tax on production of goods. The
power to levy tax on sales rests with state except in case of inter state sales. Therefore, introduction
of GST would empower centre to tax sales also.

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Benefits of GST for Centre:

Increase in GDP

Increase in exports

Power to tax after production down to distribution point

Ensures better compliance and prevent tax evasion

Benefits to state

There is no uniformity in rate of taxes among the states. Even after introduction of VAT there are
different rates of tax in different states. Therefore, there was rate war among states. GST will lead
to uniformity in tax rates. Other benefits for state are:-

Benefits for states

Will get power to tax services

Will reduce rate wars, therefore, outflow of investment to other states due to rate war will be prevented

Introduction of comprehensive system of reliefs including set off of CENVAT and service taxes

Increase in revenue due to broadening of tax base

Removal of burden of CST

Benefits to Industry

Benefits to Industry

Will provide comprehensive input tax credit, the service tax can be set off with sales tax

No need to pay CST

Many central and state indirect taxes will be subsumed in GST, therefore, a single tax is to be paid.

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Uniformity in tax procedure throughout the country

Reduced tax burden will increase competitiveness of Indian products in foreign markets

Benefits to Consumer

Benefits to Consumer

Reduced tax burden will be passed on to consumers in form of reduced prices.

Better compliance and increased tax revenue will enable the government to spend more on welfare

The GST at the Central and at the State level will thus give more relief to industry, trade,
agriculture and consumers through a more comprehensive and wider coverage of input tax set-off
and service tax set-off, subsuming of several taxes in the GST and phasing
out of CST. With the GST being properly formulated by appropriate calibration of rates and
adequate compensation where necessary, there may also be revenue/ resource gain for both the
Centre and the States, primarily through widening of tax base and possibility of a significant
improvement in tax compliance. In other words, the GST may usher in the possibility of a
collective gain for industry, trade, agriculture and common consumers as well as for the Central
Government and the State Governments. The GST may, indeed, lead to the possibility of
collectively positive-sum game.

1.5 REGISTRATION
Persons liable for registration

(1) Every supplier shall be liable to be registered under this Act in the State or Union territory,
other than special category States, from where he makes a taxable supply of goods or services or
both, if his aggregate turnover in a financial year exceeds twenty lakhs rupees: Provided that
where such person makes taxable supplies of goods or services or both from any of the special
category States, he shall be liable to be registered if his aggregate turnover in a financial year
exceeds ten lakh rupees.

(2) Every person who, on the day immediately preceding the appointed day, is registered or holds
a licence under an erstwhile law, shall be liable to be registered under this Act with effect from the
appointed day.

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(3) Where a business carried on by a taxable person registered under this Act is transferred,
whether on account of succession or otherwise, to another person as a going concern, the transferee
or the successor, as the case may be, shall be liable to be registered with effect from the date of
such transfer or succession.

(4) Notwithstanding anything contained in sub-sections (1) and (3), in a case of transfer pursuant
to sanction of a scheme or an arrangement for amalgamation or, as the case may be, demerger of
two or more companies pursuant to an order of a High Court, Tribunal or otherwise, the transferee
shall be liable to be registered, with effect from the date on which the Registrar of Companies
issues a certificate of incorporation giving effect to such order of the High Court or Tribunal.

Persons not liable for registration :

(1) The following persons shall not be liable to registration, namely: –

(a) any person engaged exclusively in the business of supplying goods or services or both that are
not liable to tax or wholly exempt from tax under this Act or under the Integrated Goods and
Services Tax Act;

(b) an agriculturist, to the extent of supply of produce out of cultivation of land.

(2) The Government may, on the recommendations of the Council, by notification, specify the
category of persons who may be exempted from obtaining registration under this Act. Central
Government vide Notification No. 05/2017-Central Tax, dt. 19-06-2017 has w.e.f 22nd June 2017
amended section 23 of CGST Act, 2017 to include the persons who are only engaged in making
supplies of taxable goods or services or both, the total tax on which is liable to be paid on reverse
charge basis by the recipient of such goods or services or both under section 9(3) of the CGST Act,
2017 in the category of persons exempted from obtaining registration under the aforesaid Act.

Compulsory registration in certain cases:

i. persons making any inter-State taxable supply;

ii. casual taxable persons making taxable supply;
iii. persons who are required to pay tax under reverse charge;
iv. person who are required to pay tax under sub-section (5) of sec 9
v. non-resident taxable persons making taxable supply;
vi. persons who are required to deduct tax under section 51, whether or not separately
registered under this Act;
vii. persons who make taxable supply of goods or services or both on behalf of other taxable
persons whether as an agent or otherwise;
viii. Input Service Distributor, whether or not separately registered under this Act;
ix. persons who supply goods or services or both, other than supplies specified under sub-
section (5) of section 9, through such electronic commerce operator who is required to
collect tax at source under section 52;

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 x. every electronic commerce operator;
xi. every person supplying online information and database access or retrieval services from a
place outside India to a person in India, other than a registered person; and
xii. such other person or class of persons as may be notified by the Government on the
recommendations of the Council

1.6 Procedure for registration

1) Every person who is liable to be registered under section 22 or section 24 shall apply for
registration in every such State or Union territory in which he is so liable within thirty days
from the date on which he becomes liable to registration, in such manner and subject to
such conditions as may be prescribed: Provided that a casual taxable person or a non-
resident taxable person shall apply for registration at least five days prior to the
commencement of business. Explanation. —Every person who makes a supply from the
territorial waters of India shall obtain registration in the coastal State or Union territory
where the nearest point of the appropriate baseline is located.
2) A person seeking registration under this Act shall be granted a single registration in a State
or Union territory: Provided that a person having multiple business verticals in a State or
Union territory may be granted a separate registration for each business vertical, subject to
such conditions as may be prescribed.
3) A person, though not liable to be registered under section 22 or section 24 may get himself
registered voluntarily, and all provisions of this Act, as are applicable to a registered person,
shall apply to such person.
4) A person who has obtained or is required to obtain more than one registration, whether in
one State or Union territory or more than one State or Union territory shall, in respect of
each such registration, be treated as distinct persons for the purposes of this Act.
5) Where a person who has obtained, or is required to obtain registration in a State or Union
territory in respect of an establishment, has an establishment in another State or Union
territory, then such establishments shall be treated as establishments of distinct persons for
the purposes of this Act.
6) Every person shall have a Permanent Account Number issued under the Income Tax Act,
1961 in order to be eligible for grant of registration: Provided that a person required to
deduct tax under section 51 may have, in lieu of a Permanent Account Number, a Tax
Deduction and Collection Account Number issued under the said Act in order to be eligible
for grant of registration.
7) Notwithstanding anything contained in sub-section (6), a non-resident taxable person may
be granted registration under sub-section (1) on the basis of such other documents as may
be prescribed.
8) Where a person who is liable to be registered under this Act fails to obtain registration, the
proper officer may, without prejudice to any action which may be taken under this Act or
under any other law for the time being in force, proceed to register such person in such
manner as may be prescribed.
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 9) Notwithstanding anything contained in sub-section (1), :–
a) any specialised agency of the United Nations Organisation or any Multilateral
Financial Institution and Organisation notified under the United Nations
(Privileges and Immunities) Act, 1947, Consulate or Embassy of foreign
countries; and
b) any other person or class of persons, as may be notified by the Commissioner,
shall be granted a Unique Identity Number in such manner and for such purposes,
including refund of taxes on the notified supplies of goods or services or both
received by them, as may be prescribed.
10) The registration or the Unique Identity Number shall be granted or rejected after due
verification in such manner and within such period as may be prescribed.
11) A certificate of registration shall be issued in such form and with effect from such date as
may be prescribed.
12) A registration or a Unique Identity Number shall be deemed to have been granted after the
expiry of the period prescribed under sub-section (10), if no deficiency has been
communicated to the applicant within that period.

1.7 PROBLEMS REGARDING GST

The post-GST era has so far witnessed exporter numerous strikes, error and mismatch in returns
filed as well as the World Bank calling GST a very complex Taxation system. But, several months
ago, on July 1st, 2017, India as a nation had taken a giant leap towards a new order in its Taxation
History. GST was touted as India’s second tryst with destiny.

However, more than 26 months down the line and after multiple policy updates, it seems that not
everything has unfolded as planned. This was, however, a possibility and the Government was
prepared to incur short-term losses in exchange for large future gains. GST in India not only boasts
of one of the highest tax rates but also consists of the largest number of tax slabs. Add to this the
growing compliance burdens, technical as well as compliance issues.

Among Asian countries, India has the highest standard GST rate. On the planet, it is second only to
Chile. The non-zero rated products ( 0, 0.1, 0.25, 1, 1.5, 3, 5, 7.5, 12, 18 and 28 percent) combined
with the remaining zero-rated products and the 3 percent GST rated Gold are a sharp deviation
from the one Nation one GST Tax dream. Petroleum products, power, and real estate are still
outside the GST ambit.

• GST is meant to simplify the Indian indirect tax regime by replacing a host of taxes by a single
unified tax, thereby subsuming central excise, service tax, VAT, entry tax, etc. However, there is a
plethora of challenges before the government for its successful implementation. Some of these are
highlighted below:

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– The GST Constitutional Amendment Bill was passed by the Lok Sabha in May 2015. However,
the government faced tremendous political set-backs and failed to get it passed in the Rajya Sabha
during the monsoon and the winter sessions last year.

– Once this is achieved, another Herculean task would be to get the GST Bill passed by the
respective state governments in state assemblies. The government would also be required to put the
GST bill in the public domain and give sufficient time to all stakeholders to comprehend and give
their views on the bill.

– A large part of the success of GST depends on two prominent factors – ‘RNR’ and ‘threshold
limit’ for GST. RNR, ie the Revenue Neutral Rate, is the rate at which there will be no revenue loss
to the government after implementation of GST. Needless to mention, RNR will impact India Inc
adversely, if it is unduly higher than the present tax structure. Based on the study conducted by
National Institute of Public Finance and Policy (NIPFP), RNR was decided at 27 percent.
However, recently the Economic Advisor Panel recommended an RNR of 15 percent to 15.5
percent, ie a lower tax rate of 12 percent and a standard tax rate of 17 percent to 19 percent.

– Further, the threshold limit of turnover for dealers under GST is another bone of contention
between the government and the Empowered Committee, aiming to broaden the tax base under
GST.

– Another factor that will impact the success of GST is the robust IT backbone connecting all state
governments, trade and industry, banks and other stakeholders on a real-time basis. The
government has already incorporated an SPV viz. – Goods and Services Tax Network (GSTN),
which has to develop a GST portal – front-end system for trade and industry and back-end system
for all government agencies. GSTN will ensure technology support for registration, return filing,
tax payment, IGST settlement, MIS and other dashboards on GST portal to all the stakeholders.

– GST is quite different from the existing indirect taxation system in the country. For effective
implementation of GST, tax administration staff – both at central and state levels – would require
to be trained properly in terms of concept, legislation and procedure. The tax administration staff
would also need to change their mindset, approach and attitude towards the tax payers. And for
this, they would have to ‘learn, unlearn, and relearn’ the GST not only in letter but in spirit too.

– As per the Constitutional Amendment Bill placed in the Lok Sabha, it was proposed that states
would be allowed to levy an additional 1 percent non-vatable tax on inter-state supply of goods for
the initial two years, in order to compensate the states for loss of revenue while moving to GST.
This was supported by a few states, while a few others criticized the same. However, recently the
Empowered Committee recommended abolition of the additional tax. There is no clarity on the
same yet.

– The taxing events of ‘manufacture under central excise’, ‘sale under VAT’ and ‘provision of
service under service tax’ will converge into one taxing event of ‘supply’ under GST, ie GST will

15
be levied on the event of supply of goods or services. The ‘Place of Supply Rules’ will thus form
an important factor to determine the place of provision of goods or services.

• These are some of the major challenges before the government and the industry, ahead of the
actual implementation of GST.

• GST will be a welcome change for the economy since it is expected to simplify the indirect tax
structure in India. However, it is expected to have far-reaching impact on businesses. While the
Constitution Amendment Bill has not yet been passed, at this stage, the businesses should prepare
for GST by undertaking GST impact assessment study and have a high-level plan for the GST
transition.

• A study by the National Council of Applied Economic Research (NCAER) had estimated that roll
out of GST would boost the India’s GDP growth by 1 percent to 2 percent. Crisil had also reported
that GST is the best way to mobilise revenue and reduce the fiscal deficit. GST has been commonly
accepted by more than 140 countries in the world. Looking at the magnitude, GST is going to
impact all sections of the society – from small time businessmen to huge conglomerates and from a
developing state to a developed state in this country. The implementation of GST will give a boost
to the growth engine pursued by the government

The Pre-GST regime

India had the worst indirect tax system anywhere in the world. Both the Centre and the State
Government were entitled to levy a set of taxes. There were seventeen taxes levied. An
entrepreneur, therefore, faced seventeen inspectors, seventeen returns and seventeen assessments.
The rate of taxation were exorbitantly high. The standard rate of VAT and excise was 14.5% and
12.5% respectively. To this could be added the CST and the cascading effect of tax on tax. The
standard rate thus became 31% on a large number of commodities. The assessees had only two
options – either to pay a high rate of tax or evade it. Tax evasion was prevalent to a large extent.
India comprised of multiple markets. Each State was a separate market because the rate of tax
could be different. Interstate sales became inherently inefficient because trucks had to wait for
hours and days at the State borders.

The GST impact on 1st July, 2017

From the date of its implementation, the GST changed the situation radically. All seventeen taxes
were combined into one. The whole of India became one market. The interstate barriers
disappeared. Entry into the cities became open with abolition of the entry tax. States were charging
an entertainment tax ranging from 35% to 110%. This came down radically. 235 items were being
charged at either 31% tax or even higher. All except 10 such items were brought down immediately
to 28%. The 10 such items were brought down to even a lower rate i.e.18%. Multiple slabs were
fixed transiently in order to ensure the tax of no commodity goes up radically. This contained the
inflation impact. Most aam aadmi items were placed in the zero or 5% tax bracket. Returns became

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online; assessments will be online; multiple inspectors had disappeared. The States were
guaranteed that for the first five years they will be ensured a 14% annual revenue increase.

The revenue trends

A frequently made comment has been that the revenue positon has been disappointing. The
comment is based on an inadequate understanding of both the targets and the revenue increase. The
targets set for the State in the GST regime is unprecedently high. Even though GST commenced on
1st July, 2017, the base year for revenue increase has been calculated is 2015- 16. For each year a
14% increase is guaranteed. Thus, even when 18 months have not been finished since the launch of
GST, on this day every State has a target of improving its revenue with three 14% increases
compounded annually over the base year of 2015-16. This is close to a 50% being reached in the
second year itself. It is almost an unachievable target. Yet six States have already achieved it,
another seven are within a striking distance of achieving it and only eighteen are still more than
10% away from achieving it. By the third, fourth and fifth year, as in the case of VAT, the ability
to increase revenues and closing the gap will substantially increase. Those States which do not
achieve the target of 14% are paid out of the compensation cess. The requirement of compensation
cess in the second year is expected to be much lower than the first year. This increase in the tax
collection has to be factored keeping in mind the significant rate reduction which has taken place in
the GST. The reduction in monetary terms amounts to about Rs.80000 crores per year.
Notwithstanding the substantial tax reduction, the GST collection in the first six months of this
year has shown a significant improvement as compared to the first year. The average monthly tax
collected in the first year was Rs.89700 crore as compared to Rs.97100 crore per month in the
second year.

The rate rationalisation

We were faced with a situation with a large number of commodities being taxed heavily in the pre-
GST regime. The Congress legacy of indirect tax was a 31% tax. We transiently put them in the
28% slab. As the revenues kept increasing, we started bringing down the rates. Most of the
commodities have seen tax reduced. Today, barring tobacco products, luxury vehicles, molasses,
air-conditioners, aerated water, large TVs, and dish washers, all 28 items have been transferred
from 28% slab to 18% and 12% slab. Only cement and auto parts are items of common use which
remain in 28% slab. Our next priority will be to transfer cement into a lower slab. All other
building materials have already been transferred from 28% to 18% and 12%. The sun is setting on
the 28% slab. Of the 1216 commodities which are used, broadly 183 are taxed at zero rate, 308 at
5%, 178 at 12% and 517 at 18%. The 28% slab is now a dying slab. Restaurants are being levied a
tax compounded under the composition of turnover at 5%. Assessees with turnover upto Rs.20
lakhs are exempted from tax payment. Assessees upto Rs.1 crore turnover can get a composition by
paying 1% tax. The composition scheme for small service tax assessees is under consideration.
Cinema tickets tax between 35% to 110% has been brought down to 12% and 18%. The GST has
helped in controlling inflation. Evasion has also come down.

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The net effect

Lower rate of taxes, increased tax base, higher collections, easy for trade and least interface in
assessments with a significant part of the tax rationalisation over, the growth percentage in the
years to come will increase. The transformation has been done over a period of 18 months. Any
abrupt transformation could have been either detrimental to revenue or to trade.

The GST Council

The GST Council has had 31 meetings. It is India’s first experiment with the federal institution. It
is a body that has behaved with utmost responsibility. Several thousand decisions, including
legislative drafting, rules drafting, notifications, fixing initial rates and rationalising rates have all
been taken unanimously with consensus. The political noise outside is inconsistent with the
harmony inside the Council.

A personal thought with regard to the future road map

With the GST transformation completed, we are close to completing the first set of rate of
rationalisation i.e. phasing out the 28% slab except in luxury and sin goods. A future road map
could well be to work towards a single standard rate instead of two standard rates of 12% and 18%.
It could be a rate at some mid-point between the two. Obviously, this will take some reasonable
time when the tax will rise significantly. The country should eventually have a GST which will
have only slabs of zero, 5% and standard rate with luxury and sin goods as an exception.

1.8 Automobile sector An Overview

Automobile industry, the business of producing and selling self-powered vehicles, including
passenger cars, trucks, farm equipment, and other commercial vehicles. By allowing consumers to
commute long distances for work, shopping, and entertainment, the auto industry has encouraged
the development of an extensive road system, made possible the growth of suburbs and shopping
centers around major cities, and played a key role in the growth of ancillary industries, such as the
oil and travel businesses. The auto industry has become one of the largest purchasers of many key
industrial products, such as steel. The large number of people the industry employs has made it a
key determinant of economic growth.

What are commercial vehicles

The term commercial vehicle is used to identify a vehicle which main purpose is to transport goods
or materials rather than passengers.

A commercial vehicle will usually be able to carry two, three or more passengers, but behind the
seating will be something designed to carry materials or tow something large, and this feature will
make up the majority of the commercial vehicle.

What is a non-commercial vehicle

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A non-commercial vehicle describes any kind of vehicle which is designed primarily to transport
people.

Therefore, pretty much any type of car (hatchback, SUV, MPV, estate etc.) or specific model you
can think of in today’s car market qualifies as a non-commercial vehicle.

Automobile sector in India is growing fast and the growth pattern seems to have a clear correlation
with the reforms related policies those influenced both domestic demand pattern as well as trade.
India is global major in the two wheeler industry producing motor cycles, scooters and mopeds
principally of engine capacities below 200cc. The two wheeler industry in India has grown at a
compounded annual growth rate of more than 15% during the last five years and Indian two
wheelers comply with some of the most stringent emission and fuel efficiency standards
maintained world wide. In India two wheelers is the second largest producer in the world and the
world‟s number one producer is located in India. India is the largest tractor manufacturer, the fifth
largest commercial vehicle manufacturer and the thirteenth largest producer of passenger cars in
the world.

The Auto industry currently employs more than 30 million people both directly and indirectly. The
auto industry is a key employment generator in the OEM factory that manufacturers the vehicles, in
the inbound auto component and logistics industry that makes and delivers components & systems
and the out bound logistics and dealer network that sells, maintains and distributes the cars. Every
vehicle produced, generates secondary and tertiary employment. The industry generates
employment of 13 persons for each truck, 6 persons for each car and four persons for each three
wheeler and one person for two wheelers. It is important to appreciate the sector‟s multiplier effect
on economic activity. If the industry produces as per its potential, it could generate employment of
over 35 million people by 2020. The GST as the biggest taxation reform and is basically a
proposed tax reform at the moment. This is indirect tax much like the VAT, Service tax,
entertainment tax, etc. and this would be levied by the state and center in the form of State GST
and Centre GST on the manufacture, sale and consumption of almost all goods and services all
across India. The auto industry is likely to gain from the implementation of the GST since it is
expected to reduce logistics costs by removing trade hurdles, paving way for more competitive
manufacturing. The execution of GST will remove the effect of multiplicity of taxes on the cost of
goods and services. Currently, most of car manufacturers are located in few of the states in India
and by some estimates, 80% of these cars are sold to dealers in states outside the state in which
they are manufactured. Moreover, with the effective tax rate dropping to around 18% from up 27%
fro some segments currently, it will result in lower prices and consecutively, boost the demand for
automobiles with respect of taxation and duties, cars have been classified into four categories (i)
Small cars with petrol engine capacity below 1200cc and under four meters in length, (ii) Mid size
cars with petrol engine below 1200cc , (iii) Diesel engine below 1500cc , (iv) Luxury cars with
engine capacity of 1500cc and above, (v) SUVs with engine capacity above 1500cc, 170 mm of
ground clearance and longer than four meters. On small cars, a total tax of around 28% is levied
currently which includes VAT and excise duty while for Mid size cars, it‟s around 39% once GST

19
gets implemented, the total taxes levied on cars is likely to be reduced. The Automotive Industry is
comprised primarily of the world’s largest passenger automobile and light truck manufacturers.
Through broad dealership networks, most members of the industry sell vehicles in the global
market, covering developed and emerging countries. Automotive manufacturers offer a variety of
makes and models, though there tends to be limited brand integration at the marketing, advertising,
and dealership levels. The bulk of these companies operate production facilities in multiple
geographic regions.

Automobile manufacturers are subject to the demands of a vast international pool of customers.
Economic conditions affect overall industry sales. Car lot traffic perks up during a boom period,
and empty showrooms are commonplace during a downturn. Driving habits can change according
to the economic cycle, and therefore, product lineups are always shifting, with new models,
innovations, and technologies being developed to meet these demands. As a result, dealerships try
to showcase a wide range of offerings, from small compact cars to sedans to light trucks and sport-
utility vehicles (SUVs). Drivers’ tastes and finances are varied and often change. Thus, showrooms
will often have sports, economy, family, and luxury cars on hand to meet customers’ desires.
Luxury brands, with their high quality standards and advanced features, sell at premium prices and
carry rich margins.

The price of gasoline (and diesel fuel) is an important factor influencing customer demand. Indeed,
the rise and fall of gas prices since the 1970s has caused buyers to place varying degrees of
emphasis on vehicle fuel efficiency, durability, engine power, and quality. Accordingly, market
categories and product lineups evolve to meet customer preferences. Examples are crossovers,
which combine the features of an SUV and the traditional car, and hybrids, utilizing the benefits of
gasoline and alternative power (electric) sources. In order to stay profitable, manufacturers and
dealers must properly gauge demand and carry the optimal mix of autos for each period in the
business cycle.

To assist customers with purchases, and support sales, many companies offer low-rate financing
programs and attractive incentives, such as discounts and cash back. Warranties, covering defects
and repairs, are another means to lure drivers into showrooms. Another way to generate revenue is
to provide vehicle leasing. A company can benefit from leasing via recurring payments over the
life of one or more contracts and the eventual sale of the vehicle. Another good source of revenue
is the sale of new or used cars to the government and to private fleet owners (e.g., rental
companies)

Costs & Expenses

The auto industry is both capital and labor-intensive. These companies have to manage numerous
costs and expenses associated with facilities, materials, parts, equipment, product development, and
employment. At times, the prices of key raw materials, such as steel, can surge to record levels,
requiring a nimble hedging strategy. Research & development and marketing and advertising
expenses will have a discernable impact on the cost budget, as well. Too, given the seasonal nature
20
of demand and new product launches, effective working capital management is crucial in
supporting sales and controlling costs and expenses.

The cost of labor has a big impact on competitiveness and profitability. North American and
European manufacturers are heavily unionized. Though their power and influence has been waning
for a number of years, members of the United Auto Workers, for instance, still make up a good
portion of the U.S. and Canadian work forces and have an effect on the industry’s health. Medical
and pension benefits are substantial and can be a competitive disadvantage, especially compared to
car makers based in Asia, where wage costs are lower. Domestic union salary and benefit
concessions, and import tariffs, help to narrow the price advantage of foreign competitors.

Over its history, the American automotive industry has built up considerable scale and, at the same
time, weighty pension and healthcare obligations. U.S. manufacturers have had to rely on debt to
maintain operations and pay out benefits. Interest expense is significant. Production plant and
dealer network consolidations have become common in an effort to protect net profits. Domestic
companies have suffered market share losses over the longer term.

Automobile manufacturers are subject to the demands of a vast international pool of customers.
Economic conditions affect overall industry sales. Car lot traffic perks up during a boom period,
and empty showrooms are commonplace during a downturn. Driving habits can change according
to the economic cycle, and therefore, product lineups are always shifting, with new models,
innovations, and technologies being developed to meet these demands. As a result, dealerships try
to showcase a wide range of offerings, from small compact cars to sedans to light trucks and sport-
utility vehicles (SUVs). Drivers’ tastes and finances are varied and often change. Thus, showrooms
will often have sports, economy, family, and luxury cars on hand to meet customers’ desires.
Luxury brands, with their high quality standards and advanced features, sell at premium prices and
carry rich margins.

The price of gasoline (and diesel fuel) is an important factor influencing customer demand. Indeed,
the rise and fall of gas prices since the 1970s has caused buyers to place varying degrees of
emphasis on vehicle fuel efficiency, durability, engine power, and quality. Accordingly, market
categories and product lineups evolve to meet customer preferences. Examples are crossovers,
which combine the features of an SUV and the traditional car, and hybrids, utilizing the benefits of
gasoline and alternative power (electric) sources. In order to stay profitable, manufacturers and
dealers must properly gauge demand and carry the optimal mix of autos for each period in the
business cycle.

To assist customers with purchases, and support sales, many companies offer low-rate financing
programs and attractive incentives, such as discounts and cash back. Warranties, covering defects
and repairs, are another means to lure drivers into showrooms. Another way to generate revenue is
to provide vehicle leasing. A company can benefit from leasing via recurring payments over the
life of one or more contracts and the eventual sale of the vehicle. Another good source of revenue

21
is the sale of new or used cars to the government and to private fleet owners (e.g., rental
companies).

1.9 Automobile sector and India

The automobile industry in India is world’s fourth largest, with the country currently being the
world's fourth largest manufacturer of cars and seventh largest manufacturer of commercial
vehicles in 2018. Indian automotive industry (including component manufacturing) is expected to
reach Rs 16.16-18.18 trillion (US$ 251.4-282.8 billion) by 2026. Two-wheelers dominate the
industry and made up 81 per cent share in the domestic automobile sales in FY19. Overall,
Domestic automobiles sales increased at 6.71 per cent CAGR between FY13-18 with 26.27 million
vehicles being sold in FY19. Indian automobile industry has received Foreign Direct Investment
(FDI) worth US$ 23.51 billion between April 2000 and September 2019. Five per cent of total FDI
inflows to India went into the automobiles sector. Domestic automobile production increased at
6.96 per cent CAGR between FY13-19 with 30.92 million vehicles manufactured in the country in
FY19. In FY19, commercial vehicles recorded the fastest pace of growth in domestic sales at 17.55
per cent year-on-year, followed by three-wheelers at 10.27 per cent year-on-year. The passenger
vehicle sales in India crossed the 3.37 million units in FY19 and is further expected to increase to
10 million units by FY20. Passenger vehicle exports is estimated to touch about 6,90,000 units in
2019-20.

The government aims to develop India as a global manufacturing as well as a research and
development (R&D) hub. It has set up National Automotive Testing and R&D Infrastructure
Project (NATRiP) centres as well as a National Automotive Board to act as facilitator between the
government and the industry. Under (NATRIP), five testing and research centres have been
established in the country since 2015. NATRIP’s proposal for “Grant-In-Aid for test facility
infrastructure for Electric Vehicle (EV) performance Certification from NATRIP Implementation
Society” under FAME Scheme which had been approved by Project Implementation and
Sanctioning Committee (PISC) on 3rd January 2019.

The Indian government has also set up an ambitious target of having only electric vehicles being
sold in the country. Indian auto industry is expected to see 8-12 per cent increase in its hiring
during FY19. The Ministry of Heavy Industries, Government of India has shortlisted 11 cities in
the country for introduction of electric vehicles (EVs) in their public transport systems under the
FAME (Faster Adoption and Manufacturing of (Hybrid) and Electric Vehicles in India) scheme.
The first phase of the scheme has been extended to March 2019 while in February 2019, the
Government of India approved the FAME-II scheme with a fund requirement of Rs 10,000 crore
(US$ 1.39 billion) for FY20-22. Under Union Budget 2019-20, government announced to provide
additional income tax deduction of Rs 1.5 lakh (US$ 2146) on the interest paid on the loans taken
to purchase EVs. Investment flows into electric vehicles start-ups in 2019 (until the end of
November) increased nearly 170 per cent to reach US$ 397 million. Under FAME II, Government
has sanctioned 5,595 e-buses in 64 cities in 26 states for inter-city and intra-city operations. Under
the scheme 2,636 charging stations in 62 cities across 24 States/UTs were sanctioned.
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Overall automobile exports increased by 14.50 per cent year-on-year in FY19 and during April-
December 2019, overall export increased by 3.9 per cent. It is expected to grow at a CAGR of 3.05
per cent during 2016-2026.

Domestic two-wheeler industry is expected to grow at 8-10 per cent during FY19. Also, luxury car
market in India is expected to grow at a 25 per cent CAGR till 2020. The Government of India
expects automobile sector to attract US$ 8-10 billion in local and foreign investments by 2023.
India will be part of Global Automotive Triumvirate - the global Big 3 in coming 20 years and will
also exceed the Indian automotive sales from US market by mid 2030s

The irony here is hard to ignore: GST was introduced two years back to make it easier for
businesses to pay their taxes, but today they are as befuddled as ever by the GSTN portal which
forces them to upload form after form, besides micro-level transactional detail. The recently
released CAG report on GST implementation spells out some of the trouble spots. It says: “On the
whole, the envisaged GST compliance system is non-functional. The deficiencies in the GST
system also point to a serious lack of coordination between the Executive and the developers.” The
number of GSTN 1 return filers (the form that requires invoice level details) is far less than those
filing GSTN 3B (the form that calls for gross details). This can be attributed to hassles in uploading
the details for GSTN 1, and not — as the bureaucrats running the show seem to believe — to any
general tendency to evade taxes. If “all returns being filed showed a declining trend of filing from
April 2018 to December 2018” the blame lies clearly with the GST Network that continues to
flounder without being held accountable. The so-called simplified format of uploading returns,
supposed to be introduced in a couple of months, is full of rows and columns, with needless details
being sought. In fact, online invoice matching, and the assumption of suspicion underlying it,
should be reviewed. Rather than merely create a quarterly filing option for small businesses
(below ₹5 crore turnover) and offer them a flat rate of tax under the ‘composition scheme’, GST
filing rules should be streamlined for all. Small businesses still suffer overheads on account of GST
compliance (which includes filling forms in English without any other language option), despite
efforts to simplify processes for them.

1.10 IMPACT OF GST ON AUTOMOTIVE INDUSTRY

The Goods and Service Tax is a single rate tax levied on the manufacture, sale and consumption of
goods as well as services at a national level. In this system the GST is implemented only on the
value added at every stage of production. This will ensure there is no cascading effect of taxes (tax
on tax paid) on inputs that are used in manufacturing goods. With the GST in place, the prices of
goods are expected to fall, and in the long term we can expect the dealers to pass on these benefits
to the end consumer as well. The Automobile industry has seen significant disputes under central
excise valuation like, sale below the cost for market penetration, inclusion of State Industrial
Promotion subsidies retained by the manufacture, deductibility of past sale discounts from value
under excise, valuation of demo cars treatment of PDI charges and other dealer reimbursement
advertisement charges recovered from dealers etc., and sales though marketing companies and
mutuality of interest. The model GST law continues with the concept of transaction value which is
23
a welcome measure, however the powers for rejection of the transaction value are very wide, and
could lead to significant valuation disputes.

The GST is working towards a more viable approach when it comes to tax, which is applicable in
the manufacturing process. The tax under the new regime which the manufacturer has already
levied in the manufacturing process in deducted when the final product created by the manufacturer
is produced in the market. Hence, the tax on products in overall reduced as the tax otherwise
charges on the final product does not include the pre charged one. The same process is followed on
the level of the wholesaler who sets off the tax when he purchases the good from the manufacturer
and releases them in the market. The product passes from the wholesaler to the retailer the retailer
after adding value to the product again sets off the tax when releasing the goods finally in the
market. In this chain of passing the goods from one to another, the tax sets off at every level,
releasing a bit of pressure on all the people on the respective stages. Hence, when the final product
is released the overall value of the good when taxed has a marginal variation in favor of the
consumer as to re-existing rate of taxes. The double tax burden is being eliminated from this region
as taxes that may have been charged and again charged on the tax that was already paid has been
done away with the section, though has variations as per type of vehicle depending on the size and
emissions by the same. Moreover the overall compliance burden is expected to decrease and bring
lots more efficiency in operations of the indirect tax prospective the whole country will be treated
as one market and will add to operational efficiencies.

The GST will be positive for the automotive sector, primarily because of the efficiency and the
removal of cascading that is expected with GST, example a car is manufactured in a particular state
and generally 80 percent of these cars are sold to states outside the state of manufactures to dealers
outside the state. So today, to straight away give you an example, the two percent central sales tax
(CST) that they pay will not be there tomorrow because hopefully origin tax is not there. Even the
two percent CST will be an integrated GST (IGST) which will be fully creditable by the dealer
when he sells the car in the other state, and even from a procurement point of the view, if there is
interstate procurement we suffer today at two percent CST which is a cost to the manufacturer, that
also will not happen because those interstate procurements will have an IGST in it which is again
available as a full credit to the manufacturer if the credit rules are simple and easy. The second
efficiency could be also on the input side, a bigger, more easy credit mechanism so that all the
taxes on the input side, whether it is input services, whether it is capital goods, whether it is
manufactured products are set off against the output liability of GST.

The GST law treats job work as a service and seeks to maintain existing excise procedures for the
job work transactions, i.e. non taxability of job work transaction and providing credits to the
principal for supplies to job worker 180 days condition for bringing back goods after job work. The
automobile industry for vendors to develop tools for the manufacture of parts of automobiles. The
ownership of such tools is transferred to the OEMs, and the cost is also recovered from OEMs.
However, the tools are physically located in the vendor's factory for manufacture of parts. As
specified in model GST law the definition of capital goods covers only those goods which are used

24
at the place of business of supply of goods. Thus, only goods which are used in the place of
business of OEM seem to be eligible for GST credit in the OEM‟s hands. This could possibly
result in increase in the cost of totaling and cost for manufacture. The automotive industry has
witnessed several cesses including automobile cess, NCCD, tractor cess and infrastructure cess. In
the discussions on GST, the Government has indicated its intention to subsume all Central and
State cesses into GST.

The existing CENVAT credit rules the input tax credit will be allowed only of those goods falling
within specified chapters to the model GST law. Further the definition of inputs and input services
also provides for exclusions. Therefore, it appears that even under GST, restrictions on input tax
credit will continue. Generally, states provide for various incentives including investment
promotion subsidies (IPS). A majority of the automobile manufacturers enjoy special benefits from
the State government in the form of State investment promotion subsidies (IPS). This is given in
the form of refund of VAT/CST paid. The implementation of GST, taxes move from the origin
state to the consumption state. This could result in significant reduction of flow back of IPS, since
GST on inter state sales is not credited to the origin state unless on inter state sales is not credited
to the origin state unless there is a compensation mechanism to the states or to the OEMs with
regard to the impact on the IPS due to GST.

The automobile sector is mainly comprised of commercial and non-commercial vehicles, with the
former consisting of vehicles like three-wheelers, minibuses, etc. and the latter comprising of
personal vehicles (including SUVs, budgeted cars, luxury cars, etc).

Firstly, we’ll look at the impact of GST on the commercial vehicles category and following that,
we’ll focus on the non-commercial category. Here goes:

Impact of GST on Commercial Vehicles

The commercial vehicle segment, comprising of vehicles used for transportation of goods and
people, vehicles used for execution of business services and three-wheelers has been heavily
affected by GST. Earlier, the segment was paying 12.5% Excise Duty + 12.5% VAT and 2 % CST
as well as other taxes which totalled to overall around 30-33% of tax. After the implementation of
GST, the overall impact on the segment is a slight dip as the tax levied is now reduced to 28%. So,
the impact in valuation is relatively negligible.

However, there would be no change in the prices of tractors. As agriculture is considered the
backbone of the Indian economy, the GSTN Council (Goods and Services Tax Network) has aimed
to provide major relief to the farming sector. GST tax rate on tractors and its parts has seen no
change in the pre and post-GST scenario, as it continues to remain at a rate of 18%.

The maximum effect would be visible on the new category introduced, of mini-buses (buses with a
capacity of carrying up to 13 seated passengers). Besides the base rate, this passenger vehicle
segment would invite a 15% cess on them, which shoots up the total GST rate to 43%. This is a
major cause of concern to the economy as it will not only impact businesses using such transport
25
vehicles but also the end-consumer as their cost-of-consumption, i.e. ticket prices wherever
applicable, will increase.

For example, consider a goods transport agency carrying goods from one location to another. The
increased costs associated with the purchase of transport vehicles and their maintenance will
inevitably inflate the selling price of goods, ultimately affecting the end-consumer. This is a major
concern which the GSTN Council needs to resolve.

Impact on Non-Commercial Vehicles

As compared to commercial vehicles, GST has had relatively low impact on non-commercial
vehicles. We’ll be elucidating its effect on small-budget cars (passenger cars costing under Rs 10
lakh), luxury cars, SUVs and further detailing how engine capacity relates to the tax rate levied on
the vehicles.

Small-Budget Cars (Both petrol and diesel variants, costing under 10 lakh INR):

 This section of cars would attract the base rate of 28% GST along with a cess of 1% and 3%
which is smaller than the taxes that were applicable in the pre-GST scenario which were
around 30-33%. This reduction of levied taxes is very beneficial to middle class families
who wish to buy small-budget cars.

Effect of Engine Capacity on the Tax Levied:

Further, the automobile sector has tax implications based on the engine capacity of the vehicles.
For example, for cars having an engine capacity < 1200cc, the GST levied will be 28% with 1%
cess whereas for motorcycles/small cars/single aircraft engines or chartered planes < 1500cc, GST
levied will be 28% along with 3% cess. For larger vehicles such as Sport Utility Vehicles (SUVs),
etc. > 1500cc, GST levied will be 28% along with 15% cess.

Effect of GST on Hybrid Cars:

 A drawback is seen in the case of hybrid cars. With global concerns such as the rise of
pollution, damage to the environment, and climate change, the GSTN council has not given
importance to the sheer need for hybrid cars by levying GST tax rate of 43% (28%, with
15% cess), which is higher than the tax on smaller cars. In comparison, pure electric
vehicles attract a relatively low GST rate of only 12%.

Effect on Luxury Vehicles/SUVs:

 In the recent amendment by the GSTN council, luxury cars have seen significant changes in
terms of taxation. The council has increased the cess rate from 15% to 25%, escalating the
total GST tax rate to 53%, which has lead to decrease of in sales in the luxury segment of
the automobile sector.

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The levy of GST in this segment is similar to the pre-GST scenario. Though Lok Sabha has passed
this amendment, it is yet to be implemented.

Transactions Involving Transfer of Vehicle’s Ownership:

Transfer of vehicles to other people will be liable for GST, irrespective of whether the transaction
is intra-state or inter-state.

In the case of businesses trading in second-hand goods, valuation rules under the GST regime state
that the value of supply will be the difference between selling and purchase prices. Additionally,
for cases involving negative value of supply, there will be no taxable component. These aspects of
GST will surely have a positive impact in this industry, because GST needs to be paid only on the
difference value of the transaction.

It has been specifically provided in the valuation rules that where a taxable supply is provided by a
person dealing in buying and selling of second hand goods, then the value of supply shall be the
difference between the selling price and purchase price and where the value of such supply is
negative it shall be ignored. This shall very positively impact this industry as GST needs to be paid
only on the difference value.

Impact on Valuation

In the pre-GST scenario, the various commissions received from manufacturers such as ‘Extended
Warranty’ or ‘Roadside Assistance’, Service Tax was paid only on the commission component.
However, in the GST regime such tax treatment is not acceptable, and dealers will have to pay GST
initially on the entire value of the warranty receipts. The amounts charged by the manufacturer can
later be taken as a credit.

EXISTING EXISE DUTY RATES

Vehicle Category Excise Duty

Small cars 12.5%

Length >4m but engine capacity less than 1500cc 24%

Length >4m and engine capacity more than 1500cc 27%

SUVs/MUVs (length >4m, engine capacity >1500cc and Ground
clearance >170mm) 30%
Hybrid cars 12.5%
Specified components of Hybrid vehicles 6%

27
 Electric cars, Buses, 2W & 3W 6%
Specified components of Electric vehicles 6%
Buses 12.5%
Trucks 12.5%
Three wheelers 12.5%
Two wheelers
12.5%

EXISTING IMPORT DUTY RATES

Criteria / Applicability Import Duty in

%

Used car import 125

Cars CBUs whose CIF value is more than $ 40,000 100

or Petrol Engine > 3000 CC 100

or Diesel engine > 2500 CC 100

Cars CBUs whose CIF value is less than $ 40,000 60

and Petrol Engine < 3000 CC 60

and Diesel engine < 2500 CC 60

Two-wheeler CBUs with engine capacity <800 cc 60

Two-wheeler CBUs with engine capacity >=800 cc 75

Commercial Vehicle CBUs (Trucks & Buses) 20

CKD containing engine or gearbox or transmission mechanism in pre- 30

assembled form, but not mounted on a chassis or a body assembly

28
CKD containing engine, gearbox and transmission mechanism not in a 10
pre-assembled condition

TAX RATE FOR THE INDUSTRY

The tax rate on inputs and output should be fixed considering the pattern of input purchase and
output sales which varies considerably. This has implications for the input tax credit. While vehicle
manufacturing takes place in a few states with supply to other states (local sales account for less
than 10% of total domestic sales), the majority of components (around 70% - 80%) are procured
from vendors within the state. If tax rate of components/inputs is more than the tax rate at the time
of supply of complete vehicles (Completely Built Units), then refund would arise.

GST IMPACT ON AUTOMOBILE AND SPARE PARTS INDUSTRY IN INDIA

The automobile Industry is coping up with the GST regime as the government is very cautious
particularly for this sector. The industry of automobiles is tremendously big which tackles the
manufacturing of a very large chunk of cars and bikes every year. The population across the nation
is also the major factor of this turbulence as it constantly seeks for dynamic technology and newer
models. The GST subsumes almost all the taxes under its ambit like excise, VAT, sales tax, road
tax, motor vehicle tax, registration duty which will further benefit the procedural ways of the
automobile industry.

GST IMPACT ON AUTOMOBILE INDUSTRY THROUGH E-COMMERCE PLATFORM

The Co-founder of Boodmo, Oleksandr Danylenko, said in a statement that, E-commerce

businesses especially auto components and logistics of spare parts have been adversely influenced
by complex GST process. With the several factors like uplifting of composition scheme on e-
commerce business along with higher 28 percent tax on both auto- components and spare parts
logistics involving complex GST process has lead to negative impact on e-commerce start-ups
concerning automobiles industry. Automobile manufacturers were not able to file claims since July
and nearly Rs 1,000 crores have been stuck in GST refund.

Automobile exporters are in worrisome as the current GST scheme of making payments upfront
and claiming of input tax credit refund is not working properly. The working capital requirement
29
for automobiles industry has enhanced and they could consider on exports till their issues are not
resolved. David Schock, CFO of Ford India said that the compensation cess has enhanced to 1-22
percent under GST, earlier it was 1-4 percent. Discussing on issues faced by automobile exporters,
Society of Indian Automobile Manufacturers (SIAM) Deputy Director General Sugato Sen said
that, the automobile companies which are especially dealing in export are facing problems, as the
current GST system of making payments upfront and claiming of refund tax system indirect tax
regime is not working properly under GST.

However, going in deep and bifurcating per product impact will be senseless as the GST rules and
rates may get a shuffle due to individual exemptions and incentives provided according to the
model and its growth.

GOVERNMENT NOTIFIED GST TAX ON AUTOMOBILES

Category Engine Pre-GST Post-GST + Cess Final

Under 4- Under 1.2-litre Petrol 31.5% 28% + 1% 29%

metres

Under 4- Under 1.5-litre Diesel 33.25% 28% + 3% 31%

metres

Under 4- Above 1.2-litre Petrol or 1.5-litre 44.7% 28% + 19% 47%

metres Diesel

Above 4- Above 1.2-litre Petrol or 1.5-litre 51.6% 28% + 25% 53%

metres Diesel

SUVs – 55% 28% + 29% 57%

Hybrids – 30.3% 28% + 25% 43%

Electric – 20.5% 12% + 0% 12%

Vehicles
(EVs)

In the previous form of taxation, advance received on goods supply is not attracting Excise/VAT
and composite rate while in some of the states there is VAT applicable on used cars sales. While
30
many of the states do make available OEM Original Equipment Manufacturers (OEMs)/component
manufacturer linked with a various investment linked incentive scheme. The significant
components can be considered as interest-free loans and subsidies being attached with CST/VAT
paid on the sales.

Read Also: GST vs VAT: Simple Way to Describe the Differences It is also learned that the selling
of goods and services unattached to a form of consideration is exempted from taxes under the
service tax and VAT. While the dealers and importers are not eligible for the excise duty and CVD
which is paid by the OEMs (Original Equipment Manufacturer). The current tax rules mentioned
that VAT/CST is not applicable but excise duty is certainly on the tax part while transferring any
goods from the manufacturers place and factories. As these vehicles have exemptions from auto
cess/Nccd: electrically operated vehicles, three-wheeled vehicles, hydrogen vehicles based on fuel
cell technology, vehicles used solely as taxis, the ones used by physically handicapped persons,
hospital ambulances.

IRONY OF GST ON SPARE PARTS: TAX ON HIGHEST LEVEL

According to the recently surfaced, spare parts bill of an automobile, it seems that the GST rates
are a big issue within the industry. On a bill of 35,000, it was seen that a tax of 10000 was levied. It
was a hefty charge upon the billing as tax amount is taking a toll on the pockets of the consumers.

A tax rate of 28 percent on the spare parts is a heavy tax rate as most of the consumer base pay the
charges on a natural act of wear and tear or upon accidental damages. Bringing such a heavy tax
rate upon such incidents have made the market much more sensitive regarding the price issues.

As the spare parts of vehicles both commercial and private had fallen into the bracket of highest
slab rate i.e. 28 percent, it made a misery moments for the spare parts trading community. Also, the
complex compliance makes it more vicious for the traders to indulge in any kind of taxing activity.
The trading of spare parts is completely disrupted after the implementation of GST including the
much-hyped Delhi’s Hamilton road.

Many of the traders complained that the GST made their business to the lowest rank and are
expecting only 10 percent of the business of what they were earlier doing. The tax rates of 28
percent are much higher than previously applicable 12 percent and now the customers are not
willing to pay this much of taxes.
31
The scenario of taxes can be understood, like a wholesaler in Gurgaon paying 28% tax in Delhi to
acquire goods worth Rs 1,000. The GST comes out to be Rs 280, including Rs 140 as Central GST
and Rs 140 as State GST. Since the supply has been made over the counter in Delhi, the buyer can
claim ITC on the SGST of Rs 140 and only if he is registered under Goods and Services Tax as a
trader in Delhi. The auto parts industry states this equation to be the main factor of decreased sales
after the implementation of GST.

GST BECOMES POSITIVE FOR COMMERCIAL VEHICLES SALES

As soon the GST got to see the day of light in India, there were some foremost benefits emerged in
the economy as well as in many of the sectors. One of them is automobiles sectors, including all
the segments, passengers as well as commercial vehicle segments. Also, the GST e-way bill made
some possibilities for the vehicles to roam free without any border checking.

In the same manner, the commercial vehicles are now way much ahead in productivity than earlier
situations. The logistics companies are considering to increase the inventory of the commercial
vehicle as the vehicles are now capable to take the much higher load and can transport eh cargo in
much less time than previously taken.

Binaifer Jehani, director, CRISIL Research stated that “As hubs get bigger, and more concentrated
for a few industries, preference will shift to much higher-tonnage HCVs (towards 37T multi-axle
vehicles and higher-tonnage tractor-trailers). Also, new product offerings by OEMs in the higher
tonnage intermediate commercial vehicles (ICVs) segment will continue to gain traction along the
spoke routes.”

The automobile manufacturer is also in discussion to make higher capacity vehicles to serve the
industry which is ready to offer an order of commercial vehicles in anytime soon. The sales trend
in the 35T, 40T, 49T tractor-trailer segment has been providing much evident proof that the
logistics industry will be improving soon.

With GST in the picture, good roads with better compliance procedure in the middle of the journey
as well as better technology has given a positive hint to the automobile manufacturers to make
more and more commercial vehicle. Tata Motors, Ashok Leyland, BharatBenz, Mahindra &
Mahindra and VE Commercial vehicles are some of the vehicle providers who are standing in the
first row to cater the evergrowing logistics industry.
32
Overall it is defined that the GST impact on the automobile industry is less than the previous tax
scheme due to the lowered tax scenario. As the automobile industry has already gone through some
tough situations like demonetization and after which emissions norms rule hit the grounds of
automobiles sector. It is now done that the industry will get benefits out of GST with
minimum hassle-free procedures and rate fixation across the nation.

As there will be more or less similar case for the smaller cars due to the analytics of rates
comparing from both the pre-GST and post-GST effects. The tax scenario has been adjusted in
between 1 to 15 percent in which the small cars are being charged with 1% Cess rate with 28%
GST while talking about the middle sized cars it is being levied with the 3% Cess and for the
luxury cars segment, it is fixed at 25% Cess. The first major impact of the new tax reform has been
in facilitating smoother and speedier trucking across the country as inter-state border check posts,
long known to be speed breakers of transport, were dismantled across 20 states. This has helped in
reducing the travelling time for the transport community by around 20-25 percent, thus bringing in
much-desired efficiency in the sector.

According to the Ministry of Road Transport and Highway, after GST implementation, long-haul
trucks are now able to travel cover higher distances. The average distance covered has increased to
over 300km from the earlier level of 230-250km per day, thereby enabling improved transport of
goods and commodities. Previously, long-haul trucks typically spent nearly 20 percent of their
transit time waiting at the state check posts for a government official to check their documentation.

LOGISTICS COMPANIES TO BENEFIT

Commenting on the trends, the report states that a reduction in transit times because of GST, which
is led by removal of bottlenecks at checkpoints, will further improve the efficiency of logistics
players and reduce the fleet size requirement. Nevertheless, improving industrial activity, and
focus on infrastructure and rural economy will partly offset these downside pressures on CV sales.

According to Manish Gupta, director, CRISIL Ratings, “Players with stronger product profiles in
ICVs and HCVs stand to benefit – and this will support their credit profiles – while those unable to
adapt to the shift towards higher tonnages will come under stress.”

There is already a visible shift in the truck sales trend over the last few years as enforcement of
rated payload, superior operating economics and improving infrastructure has shifted buying
33
preference towards higher tonnage rigid trucks. As a result, 31T and 37T rigid truck sales have shot
up rapidly. After GST kicking in and the shift towards rated load application, 37T rigid truck
volumes have increased from 20 percent to 60 percent signalling a clear shift of the domestic
market. Since July 2017, demand for the 37T rigid truck has quadrupled.

In April-November 2017, 37T multi-axle rigid trucks saw sales of 12,353 units compared to 6,264
units for the same period last year. Ashok Leyland, being the first manufacturer to enter this
segment, has virtually dominated the segment. The fast-growing category also has prompted Tata
Motors, VE Commercial Vehicle and Daimler India CV to launch their offerings in the fast-
growing segment.

Another changing trend visible is in the 35T, 40T, 49T tractor-trailer segment, where sales have
been growing reasonably. Owing to GST the average daily distance, speed along with improving
road network has translated to increase in demand by customers for tractor-trailer.

In the critical long-haul tractor-trailer segment, Tata Motors and Ashok Leyland make up the lion'
share. BharatBenz, Mahindra & Mahindra and VE Commercial Vehicles though are eyeing gains
with new product offerings.

Positive

1. Vehicle prices - At present, the excise duty for vehicles is divided into four slabs, in which the
smallest tax rate is applicable to small cars. With GST implementation, taxes levied by the centre
like excise duty and state levels taxes like sales tax, road and registration tax would all be
subsumed into one.

Assuming that the proposed tax rate of 18-20 percent is accepted, the vehicle prices are expected to
decrease. The vehicle prices are expected to be more affordable and thus will create demand.
Although it still remains to be seen if there would be a dual tax structure for small and big cars.

2. 'One Market' - The overall compliance burden is expected to decrease and bring lot more
efficiency in operations. From the Indirect tax prospective the whole country will be treated as
'One Market' and will add to operational efficiencies. One could expect the logjam at checkpost,
etc. will get eliminated.

34
Overall economic activity is expected to increase and we could expect a better GDP growth that
should push demand for vehicle across categories.

Impact of Tax cascading will go away that will reduce overall cost of vehicle manufacturing. All
taxes on input paid will be offset with the output liability of GST.

Challenges and Clarity needed

1. Valuation Disputes - The Automobile industry has seen significant disputes under central excise
valuation like: sale below the cost for market penetration, inclusion of State Industrial Promotion
Subsidies retained by the manufacturer, deductibility of post-sale discounts from value under
excise, valuation of demo cars, treatment of PDI charges and other dealer reimbursements,
advertisement charges recovered from dealers etc., and sales through marketing companies and
mutuality of interest. The Model GST law continues with the concept of 'transaction value' which
is a welcome measure however the powers for rejection of the transaction value are very wide, and
could lead to significant valuation disputes.

Currently, dealer incentive schemes are not subject to VAT, but there are issues on applicability of
service tax on dealers, depending on the terms of each scheme.

2. Job work - The job work process is the backbone for automobile industry operations. The Model
GST law treats 'job work' as a service and seeks to maintain existing excise procedures for the job
work transactions, i.e. non-taxability of job work transaction and providing credits to the principal
for supplies to job worker, 180 days condition for bringing back goods after job work, etc.
However, some more clarity is needed in the conceptual framework for job work else will pose a
challenge.

3. Credits on vendor tooling - It is a common practice in the automobile industry for vendors to
develop tools/ moulds for manufacture of parts of automobiles. Typically, the ownership of such
tools is transferred to the OEMs, and the cost is also recovered from OEMs. However, the tools are
physically located in the vendor's factory for manufacture of parts. Under the Model GST law, the
definition of 'capital goods' covers only those goods which are used at the place of business of
supply of goods.

35
Thus, only goods which are used in the place of business of OEM seem to be eligible for GST
credit in the OEM's hands. This definition would pose a challenge to the OEMs in availing credits
relating to tools located in the premises, on which cost is recovered by the vendors. This could
possibly result in increase in the cost of tooling and the cost for manufacture.

4. Time of supply for payment - Currently, under the excise law, duty is paid at the time of removal
of the vehicles manufactured. VAT is paid at the time of sale of vehicles. The Model GST law
specifies that the time of supply of goods shall be at the earliest of: Date of removal of goods, Date
of which goods are made available to recipient, Date of invoice, Date of receipt of payment with
respect to the supply, Date of receipt of goods as shown in the books of accounts by recipient.
Under the existing law, receipt of advance towards supply of goods is not a taxable event, both
under Central Excise and VAT law.

However, under the Model GST Law, receipt of advance is sought to be treated as a taxable event.
Considering the practice of 'cash & carry' followed by vehicle manufacturers and also the dealer
network following advance for supply with its customers, the change in the timing of supply would
result in significant changes in the cash flow, and also procedural changes for manufacturers and
dealers. The industry would also need to consider that there could be more than one GST invoice
for the supply of vehicles. This has to be factored along with the procedure followed by various
State Regional Transport Office (RTO), to avoid any hassles in relation to registration of vehicles.

5. Dealer Incentive Schemes - Currently, dealer incentive schemes are not subject to VAT, but
there are issues on applicability of service tax on dealers, depending on the terms of each scheme.
The industry is of the view that these schemes are not an independent service by dealers to the
manufacturers, but are in the nature of post-sale discounts. The Model GST law does not provide
as to whether these incentives or discounts are subject to GST.

Further, since the original supply would have already suffered GST and the buyer would have
taken the input tax credit, the issue of whether these incentives/ discounts would impact the price
and credits, or will these be kept out of GST (in the VAT chain), needs to be addressed. Further, in
case such schemes are subject to GST, whether the same would be treated as a service or goods is
also another aspect that needs to be clarified.

36
6. Lack of clarity on subsuming of cess - The automotive industry has witnessed several cesses,
including automobile cess, NCCD, tractor cess and infrastructure cess. In the discussions on GST,
the Government has indicated its intention to subsume all Central and State cesses into GST.
However, on a reading of the Model GST law and the constitutional amendment bill, it is not clear
as to whether the cesses levied under different legislations (for specified purposes) will be
subsumed into GST or would continue under the GST scenario.

7. Input Tax Credit - The definition of capital goods has been drafted on the same lines as the
existing CENVAT Credit Rules. Accordingly, input tax credit will be allowed only of those goods
falling within specified Chapters to the Model GST Law. Further, the definition of inputs and input
services also provides for exclusions. Therefore, it appears that even under GST, restrictions on
input tax credit will continue. Further, a nexus of goods and services received is also required to be
established with outward supplies. Accordingly, nexus-related litigation could continue under
GST.

8. Stock in the hands of dealer on the transition date possible double taxation - The transition
provisions provide that credit balances admissible under the present regime can be carried forward
under GST. In case of stocks lying with dealer which are procured on payment of excise duty and
CST, such excise duty and CST is not admissible as credit under the present regime. Accordingly,
the transition of such taxes/ duties included in the stocks lying with the dealer have to be allowed.
Otherwise, under the GST regime, such stocks would suffer tax again, i.e. excise duty and CST
paid, and CGST and SGST on supply after the appointed date.

9. Lack of clarity on MOU incentives - The investments by automobile companies are significant
and have multiplier effect on the State's economy. Generally, States provide for various incentives
including Investment Promotion Subsidies (IPS). A majority of the automobile manufacturers
enjoy special benefits from the State Government in the form of State Investment Promotion
Subsidies (IPS). This is given in the form of refund of VAT/ CST paid, or as a loan.

With the introduction of GST, taxes move from the Origin State to the Consumption State. This
would result in significant reduction of flow-back of IPS, since GST on inter-state sales is not
credited to the Origin State. While this issue does not strictly arise under the GST law, the shift in
the place of supply significantly impacts the IPS. Unless there is a compensation mechanism to the

37
States or to the OEMs with regard to the impact on the IPS due to GST, the effect on project
viability for some of the mega automobile projects would be severe.

Proper GST administration and dispute resolution (more importantly on inter-state transactions) is
very critical apart from the competitive GST rate.

CHAPTER 2

RESEARCH METHODOLOGY
Research Methodology

2.1 Introduction of Research Methodology:

esearch is a logical and systematic search for new and useful information on a particular topic.
Research methodology is a systematic way to solve a problem. It is a science of studying how
research is to be carried out. Essentially, the procedures by which researchers go about their work
of describing, explaining and predicting phenomenon are called research methodology.
38
2.2.About my Research Problem :

The present research is exploratory in nature. Since GST is a new phenomenon in India, there are
hardly any studies in this area Specially there is a huge gap of empirical and behaviour studies on
GST in India. The study tries to find the significance of popular perception regarding GST in
Indian automobile sector, It attempts to find out the impact of GST on automobile sector. what kind
of problems are faced by the various suppliers of vehicles, customers how did they affected
whether positive or negative.

Project Title : The Impact of GST on Automobile Sector

2.3 OBJECTIVE OF THE STUDY

 To understand the working of GST and its mechanism.

 To understand the Impact of GST On the Automobile sector.
 To know the working of the GST council.
 To understand various kinds of tax slabs that are available to impose on various kind of
goods and services.
 To study the perception of traders dealing in the Automobile industry.
 To get the insight of the buyers of various kind of vehicles.

2.4 Scope of the study

The scope of the study is limited to the Impact of GST on Automobile Sector.

The present study is restricted to the area of the dombivli city, which belongs to the thane district
of the Maharashtra state in the India .

The research was carried in the dombivli city. I surveyed on my project topic that is the impact of
the GST on the automobile sectors I surveyed both the dealers of the various kind of vehicles and
the buyers of the vehicles. In this survey the researcher uses the questionnaire as an instrument for
as sample population; therefore, this study may not gather all the information from the whole
dombivli city. This analysis is carried on certain assumptions hence the assumptions would be
biased.

2.5 Significance of the study

It holds exceptional importance when it comes to the impact of gst on the automobile sector with
special reference to the Indian automobile industry. GST plays a vital role in the automobile
industry.

The recently finalized goods and services taxes that is GST for automobile are largely in line with
expectations and conform the overall indirect tax rates currently in vogue. While the base GST rate
for the automobile segment have been set at 28%, in addition to the base rate the Government of
india have also imposed to levy cess on vehicles of different categories. A comprehensive indirect
39
tax levy on manufacture, sale and consumption of goods as well as services at the national level
and this GST will replace all indirect taxes levied on goods and services by the Indian Central and
State governments. An uniform threshold across all States and Union territories is being considered
with adequate compensation for the States (particularly, the States in North-Eastern Region and
Special Category States) where lower threshold had prevailed in the VAT regime. The impact of
which on the end prices of vehicles will vary accordingly. The said project is to identify the how
the prices of various vehicles have been changed since the implementation of the gst.

2.6 Sample Design

Sampling is a fundamental part of statistics. Samples are collected to achieve an understanding of a

population because it is typically not feasible to observe all members of the population. The goal is
to collect samples that provide an accurate representation of the population. Constraints on time
and money dictate that the sampling effort must be efficient. More samples are needed to
characterize the nature of highly variable populations than less variable populations.

2.7 Sample size

The sample size for the said project is 25 as they include both dealers of the various vehicles and
buyers of the vehicles. Vehicles includes both the commercial vehicles and non commercial
vehicles.

2.8 Data collection

Data collection is the process to gather information about the relevant topic research , which is be
Data Collection usually takes place early in an improvement project , and is often formalized
through data collection plan which often contains the following activity :

➢ Pre collection activity on goals , target data , definitions and methods.

➢ Collection of Data

.➢ Presenting findings involving some form of sorting analysis. For accomplishing the objective
of study, both Primary and Secondary data have been used Data Collection through the Primary
Data as well as Secondary Data Sources.

PRIMARY SOURCE :

it can be collected by methods like Questionnaire, personal interview , and discussion with people.
Before finalizing the structured questionnaire , the draft questionnaire were prepared which can
facilitate in achieving required data from studying . the questionnaire is limited and the responses
are also limited as we have only 25 respondents.

Secondary sources :

40
Secondary Data : This type of data has already been collected by someone else and has already
passed through statistical process. This type of data has been collected from the following
resources :

Sources of Collection of Secondary Data

 Internet
 Books
 Journal
 Government gazettes
 Magazines, etc.

2.9 PRESENTATION OF DATA :

In this research study the techniques which are used for data interpretation are average methods.
By using this method all the data are computed and on that basis it is analysed. The data which is
been collected it is been represented in the form of various diagrams, graphs, etc. and the findings
of the particular question is been briefed before the particular diagram.

CHAPTER 3 REVIEW OF LITERATURE

To prepare this chapter the researcher has taken the review of various books, research articles,
government report, various publications regarding the said topic, as well as the reputed and
authentic websites are also taken for the help.

 Akshara Mahesh and Karthika K(2018) in her article “ Impact of GST on Automobile
Industry in India” This study entitles that decrease in rate of tax in luxury car it may rise
in sales but not in case of small cars. it might have positive influence after certain period
of time government have invigorated financial budget there is more chances in future for
growth in automobile industry.
 Neelavathi.K has expressed in her study “Impact of GST on Automobile Industry” The
accomplishment of GST changes from the origin public to the ingesting it could improve
41
 the GDP progress that could push attention for vehicle crosswise over classes .This will
effect the duty dwindling will outflow that may reduce in general cost of auto creating as
all valuations on input paid are counter stable with the yield obligation of GST.
 Tarunika on (June 6 2017) in his study “IMPACT OF GST ON REAL ESTATE AND
AUTOMOBILES SECTOR “The article delivers a inclusive opinion on the impact of
GST on the real estate and automobile sector It helps accepted easily it helps in
Sympathetic of GST would help policy makers gain superior public acceptance and
consequently easier to travel from the old taxation system. In the future, this study helps
to comprehend effect of GST and other sectors to the economy.
 Dhyan Vishnu prajwal N (November 11 2017) on his study “Impact of GST
Implementation on Share Prices - A Study on Automobile Industry” This study tells
about the automobile sector in India has facilitated from the introduction of the GST.
The tax rates have abridged and the shares have been traded at an higher rate after the
application of GST with increased returns. Thus GST for automobile industry is a win-
win condition for both the Shareholders and the manufacturers.
 Milandeep kour (November 2 2016) in his study of “A STUDY ON IMPACT OF GST
AFTER ITS IMPLEMENTATION” In this study there will be one tax system i.e. GST,
that will reduce obedience present load. GST will face many challenges after its
implementation and will result to give many benefits. In general through this study we
accomplish that GST play a active role in the growth and development of our country.
 Dr Krishna banana (January of1 2018) in his study “ AN ANALYSIS OF GST IMPACT
ON MOTORBIKE INDUSTRY IN INDIA” The Government of India has envisioned to
effect of GST to the Collecting segment in India. The goal of this exploration is the
effect of GST on Automobile and bike parts in India. 'Make in India' cause of the
Government of India is furthermore going to appeal in more distant risk into Indian bike
share making further development early stages in the coming years.

42
 Roshan Roy (may 2 2017) in his study “Project report on implications of Goods and
Service Tax (GST) on Automobile Industry of India” Automobile manufacturing is
Seeing forward to outline of GST. There are fairly a few apprehensions in GST model
which need to be lectured. Limitations and conditions on earnestness to tax credits on
assets used for business is also a foremost area of concern, and the credit mechanism
should be more liberal. Overall GST will be benediction for automobile industry.
 According to Tan and Chin-Fat (2000) , Malaysian understanding regarding GST was
still low. Based on study conducted by Djawadi and Fahr (2013) pointed out that
knowledge about tax is important to increase the thrust of authorities and also the
citizens.
 Tulu (2007) , indicate that other factors such as taxpayers’ attitude or morale found to be
the result of lack of awareness has found to have little impact on taxpayers’ attitude
towards taxation. A lot of individuals or taxpayers might want to comply in full with the
tax systems, but are unable to do so because they are not aware of and lack of
understanding their full obligations. Even they understand their obligations they may not
know how to comply with it because of there is no two way communications between
the authorities and taxpayers. Dup (2014) claimed that the ability of taxpayers to comply
with the tax laws have a strong relationship with tax awareness.
 Ehtisham Ahmed and Satya Poddar (2009) studied , “ Goods and service tax reforms
and intergovernmental consideration in India ” and found that GST introduction will
provide implies and transparent tax system with increase in output and productivity of
economy in India. But the benefits of GST are critically dependent on rational design of
GST.
 According to Palil et al. (2010) , Public awareness towards GST is low can happen due
to introduction of GST especially in the early years such as lack of familiarity with the
new system. There are several factors that discouraged customers from accepting GST
implementation in Malaysia and the most important factor among all is a fear of price
increase and will cause the inflation.
 (Saira et al, 2010) , Based on the history of the implementation by the other countries
around the world, most of the countries received a positive impact in terms of their
revenue, despite the success of GST implementation the Malaysian citizens still feel
uncertain with the GST, (Saira et al, 2010). The findings from the study showed that the
majority of Malaysians not convinced with the GST system .
 Dr. R. Vasanthagopal (2011) , Conducted a study on , “ GST in India : A big leap in the
Indirect Taxation System” and concluded that switching to seamless GST from current
complicated indirect tax system in India will be positive step in becoming Indian
economy . Success of GST will lead to its acceptance by more than 130 countries in
world and a new preferred form of Indirect Tax System in Asia also According to
Torgler (2011) , tax morale is important to taxpayer awareness. On the other hand,
research by Tekeli (2011) using multiple regression analysis show that tax morale has

43
insignificant relationship on tax awareness. A Tekeli (2011) conclusion is supported study by
regarding cause and consequences of tax morale.
 Research by Mustapha and Palil (2011) , stated that the influence of compliance
behavior towards individuals’ awareness has been proven in various researches. From
the findings of Razak and Adafula (2013); Santi (2012) they found that taxpayers’
awareness is significantly associated with tax compliance and this is also supported by
study Jatmiko (2006).
 Pall et al. (2013) , study by using multiple regression analysis, the researchers found out
that there are significant relationship between awareness and tax knowledge. When
individuals have knowledge related to the tax systems, people will be more willing to
respect the tax systems and improved individuals’ awareness. Further, Jatmiko (2006)
also conclude that awareness can be developed from the knowledge and the
understanding. Palil et al. (2013) and Jatmiko conclusions is also supported study by
Tayib (1998) identified that individuals’ awareness towards the tax system can increase
when the individuals has knowledge about the tax. This makes tax knowledge and tax
awareness has significant relationship and when the individuals or the taxpayers have
knowledge about it and it will make it easier for them to study and follow the tax rules.
 Djawadi and Fahr ( 2013) , This study is pointed out that knowledge about tax is
important to increase the thrust of authorities and citizens. The researcher used structure
equation modelling to examine the relationships between tax awareness and tax
knowledge and researcher found that tax knowledge has positive relationship with tax
awareness . Hence, taxpayers will be more aware about tax system when they have
knowledge and understanding towards the tax system.
 Pinki , Supriya Kamma and Richa Verma ( July 2014) studied, “ Goods and Service Tax
“ Panacea for indirect tax system in india “ and concluded that the new NDA
government in india is positive towards implementation of GST and it is beneficial for
central government , state government and as well as for consumers in long run if its
implementation is backed by strong it infrastructure.
 Agogo Mawuli (May 2014) studied , “ Goods and Service Tax An Appraisal “ and found
that GST is not good that low income countries and does not provide broad based growth
to poor countries. If still countries want to implement GST then the rate of GST should
be less than 10 % for growth.
 Boonyarat et al. (2014), the researcher used Structure Equation Modelling (SEM) to
examine the relationships between tax awareness and tax knowledge and the researcher
found out that tax knowledge has positive relationship with tax awareness. Hence,
taxpayers will be more aware about tax system when they have knowledge and
understanding towards the tax system.
 Nishitha Guptha (2014) in her study stated that implementation of GST in the Indian
framework will lead to commercial benefits which were untouched by the VAT system
and would essentially lead to economic development

44
 Jai Parkash ( 2014) . in his research study mentioned that the GST at the Central and the
State level are expected to give more relief to industry, trade, agriculture and consumers
through a more comprehensive and wider coverage of input tax set-off and service tax
set off, subsuming of several taxes in the GST and phasing out of CST.
 Venkadasalam (2014) , has analyzed the post effect of the goods and service tax (GST)
on the national growth on ASEAN States using Least Squares Dummy Variable Model
(LSDVM) in his research paper. He stated that seven of the ten ASEAN nations are
already implementing the GST. He also suggested that the household final consumption
expenditure and general government consumption expenditure are positively
significantly related to the gross domestic product as required and support the economic
theories. But the effect of the post GST differs in countries.
 International Journal of Scientist research and management (2014) , Girish Gargh
Assistant Professor from PGDAV College University of Delhi has published paper titled
Basic” Concepts and Features of good and service tax in India. In this paper he has
given the outline of GST and what does this tax system wants to achieve with threats and
challenges opportunities that the free market economy can bring.
 Mohammad Ali Roshidi (2016) , conduct a study on “ Awareness and perception of tax
payers towards Goods and Service Tax implementation. The study attempts to find out
what level of awareness and perception to GST taxpayers in Malaysia. This study only
consist of 256 civil service servants of the secondary school teachers in the kaula
kangsar, Perak. Data collected using questionnaire. The result shows that moderate and
majority of respondents give a high negative perception to the GST. The eventually
causes the majority of respondents did not accept implementation of GST in Malaysia.
 International Journal of innovative studies in sociology and humanities (2016) , A study
on impact of GST after implementation Milan-deep Kour and his co-authors Assistant
Professor from Eternal University himachal Pradesh talks about the impact of GST and
implementation of it, its benefit and challenges. He also emphasizes that GST is going to
change things in current situation .
 Ahamd et al. (2016) , found that the level of awareness of the GST is still not reached a
satisfactory level. This is because the study involved only general questions that should
be known by the respondents as end users. This cause the respondents gave high
negative perception of the impact of implementation of GST. The respondents received
less information and promotion of the authorities. Most of the respondents were unclear
whether the goods and services are not subject to GST. Furthermore, due to the lack of
information on GST, the respondents had a high negative perception. Therefore, the
government must convince that GST will not have a lasting impact on the public as
particularly convincing end users that no increase in prices of goods and services.
 Shakwipee ( 2017) , A study conduct on the inquring the level of awareness towards
GST among the small business owners in Rajasthan State, found that the main areas to
be focused include training errors and computer software availability.

45
  Vineet Chauhan (2017) , Conduct a study on “ Measuring Awareness about
implementation of GST.” A study survey of small business unit of Rajasthan State in
India. The study seeks to evaluate the awareness of the business owners about GST
difficulties they face to encase of the current awareness about it. 148 small business
owners were analyses in order to identify the awareness about GST from Rajasthan state
and the kind and extent of relief provided and the implementation of the provision under
GST Law.
 Bar hate (2017) , found that people have no doubt whatsoever regarding the proposed
benefits of GST irrespective of their business type, legal status of business for the reason
being they feel irritated by the present system which appears to be cumbersome. Most
respondents believe that GST will bring monetary gains to their business and do not
anticipate any significant boost in tax compliance costs. Interestingly, respondents
expect the spending on tax compliance to go down after GST is implemented. The lack
of information coupled with the apathy towards reforms may paralyze the speedy
implementation of this system especially in small towns where still not a single
orientation programs have been planned and executed till date by competent authorities.
 Poona m (2017) , The biggest problems in Indian tax system like Cascading effect & tax
evasion, distortion can be minimized by implementing GST. After amalgamation of local
state and central taxes competitiveness of industry, exporter and company will increase.
The extra revenue which can be generated from broaden tax base structure can be
utilized for the growth of nation. In economy tax polices play an important role because
of their impact on efficiency and equity. Indirect tax reforms have been as integral part
of the liberalization process since new economic reforms.
 Times of India (26 July, 2017) , page no 1&17 it is stated that Sweet makers are
confused with fixing the tax for their products as the ingredients used in the sweets are
taxed separately as raw material and as finished goods the products its taxing is different
ex. Plain burfi is 5% taxed but chocolate burfi is fixed with 28%. Plain burfi mixed with
other dry fruits is of 12%. This taxing system makes the Sweet makers to get confused
on how much GST to be fixed for which product.
 Times of India dated ( 27 July , 2017) , stated that the GST implication across different
places for the same product has wider differences which the consumers are unaware,
resulting them in surprise. Ex A Rasamalai sold in counter at a shop is taxed with 5% but
if it is served in the hotel it is taxed with 18% this has resulted in difference of
consumers shopping to purchase the similar products 39.
 DECODING FUTURE OF INDIA TIMES OF INDIA. 10/12/18

GST has been a major structural reform of the current government. Replacing multiple taxes and
cesses of state and central governments into a single tax has been a major relief to trade and
industry. At the same time reduction in overall tax incidence has brought relief to the end-
consumers. The IT driven tax filing system of GST has made it difficult for intermediaries in the
value added chain to evade taxes.

46
The movement of goods across the country has become faster and less cumbersome with the help
of a single e-way bill carried by the transporter, and because of abolition of state check posts.
GST has given a big boost to the manufacturing sector as a whole, which will accelerate the
growth of the economy.
Initial difficulties faced in implementation of GST were not unexpected. However, they were
quickly resolved because of the flexibility shown by the GST council in correcting course. The
experience of other countries where GST was introduced shows that all of them faced some
teething troubles for the initial two to three years. As compared to Australia and Malaysia, the
Indian experience shows that GST has settled down fairly well. Now GST has much wider
acceptability even among MSMEs.
The question now is what GST’s future course should be in India. So far, the government has
gone by the maxim ‘the best should not be the enemy of the good’. But we must continue on a
quest for the best. Having implemented GST in a vast country like India after taking 31 states on
board, it is time to perfect the system gradually.
In order to move towards an ideal GST, we must set an agenda for the next three to five years. Our
first attention should go in the direction of stabilising revenue both for states and Centre. While
states are already comfortable because of the compensation mechanism in which 14% incremental
growth rate of revenue is assured, the Centre still needs to worry about its revenue.
GST revenue is undoubtedly going to get a major boost when the government implements the
new system of return filing in which there will be perfect matching of invoices for availing input
tax credit. At present, the total tax liability declared by registered dealers every month is Rs 5 lakh
crore, of which approximately a lakh crore is paid in cash and the remaining Rs 4 lakh crore is
settled by way of input tax credit. Even if we stop 10% leakage in wrong availment of input tax
credit, it will mean that to that extent, the monthly GST paid by cash should go up from Rs 1 lakh
crore to Rs 1.4 lakh crore.
Second, an attempt should be made to bring all excluded items into GST one by one in the next
three to five years. This includes five petroleum products, electricity, real estate and alcohol in that
sequence. Among the petroleum products, the two items which can easily be brought into GST are
natural gas and aviation turbine fuel (ATF).
Exclusion of certain items from GST creates distortions such as cascading of tax and reversal of
input tax credit. Since tax on diesel and petrol gives substantial revenue to states and Centre, it is
obvious that bringing them into the GST net will be a difficult decision. But this is doable with
proper tax structuring of petroleum products, divided between GST and cess.
The items of electricity duty and potable alcohol, on which at present only states have the power
to impose levies, can also be brought into the GST net by imposing only state GST on them. But
inclusion of these items will help in removing input tax credit blockages; it will be both more
efficient for industry and more affordable for consumers. By bringing petrol, diesel and potable
alcohol into GST, the rate at which these items are sold to consumers will be common across
states.

47
Third, we must try to rationalise the rate structure as and when the scope for revenue sacrifice
increases with rising revenues. Initially, we can move from a four slab structure to a three slab
structure, and gradually to a two slab structure. Multiplicity of slabs creates classification
disputes and duty inversions, necessitating blockage of funds and refunds. Also, modest rates
result in better compliance.
If we have to move to a three slab structure, no new item should now move from 18% to 12%, or
12% to 5%, or 5% to zero in the interest of revenue neutrality. If we deviate too much from the
mean or median rate slab, it will be difficult to then increase GST on these items when the
country aspires to have a single slab GST. We can easily set the goal of having a two slab
structure by the end of fifth year from now.
Fourth, in the present GST system there are certain items where input tax credit is not allowed
which breaks the chain. Some of these sectors are restaurants (GST rate on restaurants is 5% but
without input tax credit), transport vehicles, oil or gas pipelines, telecom tower. Exclusion of
items from availing input tax credit results in accumulated credit and has a cascading effect.
The attempt here is to suggest a road map. The pace of actual implementation can be based on
revenue growth and practical considerations of consumer interest.
 The authors of this article are Mukesh Butani, partner, BMR Legal & Tarun Jain an
advocate. Views are personal. With assistance from Joseph K Antony, advocate.
The run-up to the enactment of the GST design revealed that the rate-structure dominated the
Parliamentary debate on Constitution Amendment Bill. Its was intensely debated by economists
and experts, besides, of course, politicians. The central idea was to arrive at a ‘Revenue Neutral
Rate’ (RNR), a median rate accompanied with a merit (concessional) and demerit (akin to ‘sin
taxes’) rates keeping in mind the fiscal impact and burden on the common man. The committee
led by then chief economic adviser, Arvind Subramanian, arrived at a range-bound RNR of 15-
15.5%. Despite recommendations, the current GST design has a seven-rate structure for goods
(nil, 0.5, 3, 5, 12, 18, and 28) and five for services (nil, 5, 12, 18, and 28). The levy of GST
compensation cess adds another tier to this rate structure. The present clamour in the national
debate seems to be pitched for two changes: (i) obviating or pruning the 28% tier and (ii) merging
the 12% and 18% tiers (where most of the goods and services are taxed), i.e., more in line with the
RNR model. In this article, we analytically position these alternatives to adjudge their merit,
suitability and importance.

The political rhetoric notwithstanding, a nuanced analysis which factors in both economic and
administrative view-points reveals that making these choices is not a simple matter. The original
GST rate structure was arrived at by consolidating the pre-GST tax incidence on the various
goods and services and transposing them in the GST rate schedule. Thus, for instance, luxury
hotels, cars, etc, that were subject to higher tax rates found themselves in the 28% bracket.

From an economic standpoint, as the 13th Finance Commission’s Task Force on GST also
acknowledged, standard rates are ‘highly regressive … [as] the incidence of taxation on articles
consumed by the common man will rise, while the rate of tax on luxuries will

48
fall’. In addition, the price-elasticity analysis and revenue-augmentation capacity also endorse the
necessity for a higher tax rate. Thus, a demand to permanently do away with the highest tax-
bracket of 28% may gain some political mileage but will be detrimental to the interest of the
common man as the latter will end up subsidising consumption of luxurious and sin-goods.

High tax-rate, in general, is unviable for the economy as it discourages consumption and directly
affects economic output. Simultaneously, it could lead to inflationary pressure as tax is a major
component of the supply price. Conversely, a moderate tax-rate promotes compliance by
discouraging clandestine supplies as high rates discourage domestic manufacturers, encourage
imports and increase the propensity of smuggling. The current customs duty on gold and its
negative fall-outs establish this fact. Recent tariff curbs on non-essential imports will encourage
domestic manufacturing in the medium- to long- term.

There are additional benefits accompanying a two- or three-tier tax-rate structure. First, the
current spate of advance rulings reveals that classification and rate disputes have begun to occupy
the attention of authorities. Most rulings currently being sought are on the rate slab and the desire
of business to claim a concessional rate. Merger to bring to effect a harmonised rate would
significantly curtain classification disputes (due to tax- arbitrage), and doubles up as a measure to
unshackle GST of litigation.

Second, trimming the tax-slabs causes business woes on account of inverted duty structure to also
diminish. To illustrate, all supplies to Railways are currently pegged at 5% whereas most inputs
used for making such supplies are taxed at 18%. This results in excess input credit accumulation
which results in working-capital bottlenecks and, in most cases, incremental cost, as business can’t
absorb by way of input credit. This facet is critical as GST is based on a value-added tax model
wherein the input credit feature forms the core element of the tax design, and also ensures that
business remains neutral to the tax regime. With lower tax-rates, the very reasons for inverted
duty structure would vanish.

Merging tax-slabs augurs well for Make-in-India. This is principally on account of (i) overall
reduction in tax incidence, (ii) simplification of the tax-regime, and (iii) obviating the state-bias
with some goods attracting 5% or 12% vis-à-vis 18%, etc. These positive fallout can be reserved
for domestic supplies by necessary changes in the customs duties.

While the issues that a multiple tax-rate structure faces are important, they are not always
overwhelming. The current GST design is a work-in-progress. It is important to allow time for
stabilising collections, assessing the status on compensation to states and GST’s overall impact on
Centre’s fiscal policy. Petroleum products, which form the bulk of consumption and contribute
most to indirect tax collections (of Centre and states), are presently outside GST. Permanently
excluded from the GST design is alcohol, a significant source of tax revenue, and its inclusion
will entail a constitutional amendment. Real estate transaction costs such as stamp duties are also
not a part of the GST structure. Besides, several levies are yet to be subsumed in the GST
design—levies on vehicles,

49
electricity tax, toll tax, etc, muddy the harmonised framework that GST ought to represent. These
are the real mid- to long-term challenges.

Added to the long list is the Union government’s solemn obligation to ensure that the states’
revenues attain a y-o-y growth of 14%, failing which a compensation provision kicks in. Fiscal
pressure for attaining the monthly collection of Rs 1 lakh crore of revenues is a significant road-
block that is a hurdle for further reform. In a recent statistical revelation by the finance minister, it
was stated that only six states had achieved the revenue-growth target, while seven were very near
to achieving it. However, eighteen states are still lagging on revenue collection targets. This is
bound to put further pressure on the Centre’s fiscal discipline. Tax-analytics and reinforced
compliance, no doubt, expand the tax-base, but they don’t provide the maneuverability to permit
decisions which have an impact on tax collection, such as abolishing the 28% slab or merging the
standard slab of 18% and 12%. It cannot be overstated that buoyancy in revenue collections is
necessary for national growth and stability, besides fiscal discipline.

The GST Council, constituted in September 2016, has had unanimity in its functioning and
decisions that are largely undeterred by political consequences an, hence, is reflective of
cohesiveness and maturity. Given that, so far, no state has deviated from its recommendations,
notwithstanding political pressures, point towards no dilution of political will to take GST reform
forward. However, the larger imperfections in the design, that were consciously left out from the
original scheme, need to be addressed. The rate structure woes will themselves perish in this
grandiose paradigm.

 Archit Gupta, Founder & CEO of ClearTax is the author of this article
The Central Board of Indirect tax and Customs (CBIC) has issued the format of annual returns
under the Goods and Service Tax (GST). The Taxpayers have to file their first GST annual returns
pertaining to the Financial Year 2017-18 by December 31, 2018.
The government has introduced different types of annual return keeping in mind the various
categories of taxpayers. For instance, GSTR-9 for regular taxpayers and GSTR-9A for
composition scheme taxpayers have been issued. All the taxpayers registered under GST except
input service distributors, casual taxable persons, non-resident taxable persons and persons liable
to deduct tax at source, and are required to file the annual returns.
Here are some key points one must keep in mind before filing the annual returns
for the FY 2017-18:
1. Reconciliation of the books of accounts and tax invoices are issued during July 2017 to Mar
2018 is of utmost importance; this should match the turnover declared in the audited financial
statements. It is important for the figures in the books of accounts and the invoices to match or
else the GST paid will be incorrect. Along with the invoices, debit and credit notes shall also be
in agreement with books of accounts.

50
 2. Stock transfer between the units/branches of the company should be matched with the books
of accounts to avoid any discrepancy in the stock-in-hand balance of the books and that of the
GST data.
3. Matching of e-way bill data with the tax invoices issued during the period is also very
necessary. The e-way bill data state-wise should be carefully mapped with the invoices to keep
track of the goods transported and GST paid thereon.
4. Taxpayers should ensure that all the purchase & other service invoices are accounted for in the
books of accounts and input tax credit has been duly availed. Any disparity between the input tax
credit claimed and tax paid on purchases will result in an incorrect claim of ITC in GST returns.
5. Once the purchase invoices are in agreement with the books of accounts, the taxpayers should
ensure that the purchase data is duly uploaded by the suppliers; this data will be reflected in the
GSTR-2A form.
6. Before going forward with filing the annual returns, the taxpayers should reconcile all the
monthly or quarterly GST returns with the books of accounts. The taxable, exempted and non-
GST turnover should be carefully matched. Any difference should be immediately corrected.
7. Ensure that the invoices on which input tax credit has been claimed should be paid within 180
days to the suppliers. If not, the credit availed on the same will be reversed and the taxpayers will
be liable to pay such amount along with the interest and penalty if any.
8. While reconciliation the GST paid by electronic cash or credit ledger, the taxpayers should
also account for GST paid under Reverse Charge Mechanism (RCM) on the applicable
expenses.
9. Make sure that you follow the tips mentioned above, before the December 31, 2018. The
rationale behind the filing of the annual return is to consolidate and declare all the information
furnished in the monthly or quarterly GST returns during the year.
 Keeping it simple: Reconciliation of GST data in 5 steps
Reconciliation under Goods & Services Tax (GST) is about matching the data filed by the
supplier with those of the recipients and recording all the transactions that have taken place during
that period. The reconciliation process ensures that no sales or purchases are omitted or wrongly
reported in the GST returns.

The taxpayers must reconcile their data on a regular basis with that of the vendors to claim
eligible Input Tax Credit (ITC). The process of reconciliation is simple, but can be time-
consuming, as the taxpayers are required to continuously keep an eye on any discrepancy or
mismatches that may affect the ITC claim.

This article will bring about clarity to an otherwise tedious process in less than 5 easy steps.

1. Under the reconciliation process of GST for the financial year (FY) 2017-18, the
taxpayers are required to mandatorily file all the periodic GST returns. Even if the due
date for a particular GST return is missed, it should be filed along with the interest or the
late fees as applicable. As long as the GST returns are not filed, matching and

51
reconciliation process will not take off. The taxpayers need to update their books of accounts and
align the tax returns accordingly. Unless and until all the GST returns are filed, the taxpayers
won't be able to claim adequate ITC.

2. Furthermore, the taxpayers should identify the mismatches and correct the relevant
entries in the books of accounts. They should also amend these details in the coming GST
return filing period. GST laws do not allow for revision of tax returns filed in the
previous periods. However, it does allow for filing of the corrected entries via an
amendment return in the next periodic return. These amendment entries should be filed in
GSTR 1 & GSTR 3B, accordingly.

Make sure you carefully match the purchase register with GSTR 3B (uploaded month wise) and
with GSTR 2A details (uploaded by the supplier). It is important to streamline the books of
accounts, the GSTR-3B return, and GSTR-2A form to fully avail the ITC on the relevant
purchases; otherwise, the taxpayer will lose ITC claim and will end up paying extra taxes.

3. The congruity between the books of accounts and the GST returns is crucial for
claiming ITC. Additionally, taxpayers while claiming ITC on purchases should keep a
check on taxes paid under the reverse charge mechanism. However, a taxpayer can only
avail credit of taxes paid under reverse charge mechanism only if the goods and/or
services are used or will be used for purpose of business.

4. Communication is the key, especially amongst the vendors and customers. This
coordination results in uniform reporting of the details in the GST returns. Chances of
mismatches, omission or incorrect entries are reduced when the suppliers' and the
recipients' synchronize their details and then file GST returns. It is also very important to
identify the non-compliant vendors, interact with them, and resolve the queries; this will
help the recipients maximise ITC. Now, advanced reconciliation software can help
reduce this communication gap between the suppliers and the recipients. These software
enable the users to send a reconciliation mismatch report to the vendors or suppliers to
resolve any issue arising out of it.

5. Lastly, the taxpayers should report all the rectified sale or purchase transactions of the
FY 2017 -18, for the September returns. This September 2018, the returns are to be filed
by 20 October 2018. This is the last chance for the taxpayers to report and correct all
differences filed in tax returns of FY 2017-18.

Any taxpayer who has not claimed ITC in the preceding months can avail the same in the
subsequent months, but not later than the filing of annual return i.e GSTR -9 or filing of GST
returns for September month of the subsequent financial year, whichever is earlier. Any
amendments or changes to the previously filed returns can be done within the same timeline.

GST reconciliation is a recurring event, it must be performed periodically to claim maximum

credit and to avoid mismatches on a larger scale. The taxpayers shall

52
communicate the queries with his recipients or vendors at the earliest and file error-free returns

 Vidushi Gupta & Vinti Agarwal, research fellows at Vidhi Centre for Legal Policy are
the authors of this article
The legal permissibility of levying a cess over and above GST has been a source of constant
debate, which has amplified in importance and relevance in the past few weeks. To begin with, the
Supreme Court (SC) recently passed a judgment upholding the constitutional validity of GST
Compensation Cess and observed that the Centre has the power to levy such a cess. Though, at
present, no other cess is imposed over GST, a Group of Ministers (GoM) has been constituted to
examine the feasibility and legality of levying a cess to compensate Kerala for the loss caused due
to floods.
While the Court’s decision has upheld the constitutionality of the compensation cess, the
reasoning adopted and its interpretation of various Constitutional provisions raise many other
issues regarding the interface of the Constitutional framework and GST. In this article, we
examine the implications of the SC’s judgment, on the legality of any cess that may sought to be
imposed in the future over and above GST.
In the case of Union of India v. Mohit Minerals Pvt. Ltd., while declaring the levy of
compensation cess to be legally permissible, the SC relied on multiple provisions. First, reference
was made to Article 270 of the Constitution that deals with distribution of taxes between Centre
and state to conclude that the Parliament is authorised to levy cess. Secondly, the SC held that the
Centre’s power to tax goods and services under Article 246A of the Constitution is a specific
power that has a wide import. From a combined reading of these two provisions, the Court
concluded that the Centre is empowered to levy a cess on supply of goods and services. Section 18
of the Constitution (Hundred and First Amendment) Act, 2016, which requires the Centre to
compensate states on account of loss caused due to the introduction of the GST regime was also
considered by the SC. Lastly, as a response to the respondent’s submissions claiming that a cess
would violate the intent of the Hundred and First Amendment, the court clarified that that
amendment was enacted to subsume various cesses, however, there was no bar imposed on the
fresh levy of cesses over and above the GST. Thus, from a holistic reading of all these provisions,
the SC upheld the constitutionality of compensation cess.
Though the observations of the Court were with respect to the compensation cess, the reasoning
behind the court’s decision could lead to the conclusion that any cess can now be levied on supply
of goods and services by exercising powers under Article 246A read with Article 270. However,
such an interpretation of the judgment is likely to open the Pandora ‘s Box to numerous similar
levies in the future that may undermine the coherence and uniformity aimed through GST.
For starters, the Court has not stated that the power to levy cess is restricted to only specific
circumstances. There is also no similar restriction in the bare text of Article 246A. Thus, if the
reasoning applied in the Mohit Minerals case is adopted, it seems like the Centre and states have a
carte blanche to levy cess over and above GST and may not even need prior approval of the GST
Council.

53
The resultant situation is likely to contradict the spirit of the GST framework and revert the
economy back to the previous regime where multiple levies and consequent cascading were
prevalent. The GST was aimed at eliminating these problems to formulate a single nationwide
market. In fact, various amendments were made to the Constitution that further underlined the
intent of maintaining a ‘one nation one tax’ policy. Articles 271 and 248 were amended to restrict
the government’s power to levy a surcharge and invoke residuary provisions to impose a further
tax on goods and services covered under the GST.
Before resorting to Article 246A and Article 270 to validate future levies of cess, it is important to
acknowledge that the SC’s judgment in the Mohit Minerals case is specific to the levy of
compensation cess. There is a specific provision that mandates the Centre to compensate states for
loss caused due to implementation of the GST i.e., Section 18 of the Constitution (Hundred and
First Amendment) Act, 2016. While it is true that the aforementioned provision did not
significantly contribute to the SC’s decision, there is no definitive answer as to whether the
outcome will change in case of other levies that may not be supported by a constitutional mandate.
Therefore, in our view, the debate surrounding the legality of cess over GST is far from over.
 Impact of GST on the Automobile Industry. Cleartax.in
Importers/dealers can cheer as they would be able to claim the GST paid on goods imported/sold
whereas previously, they were ineligible to claim the excise duty and VAT paid. Excise paid on
stock transfer would be covered by IGST under the GST law. Advance received for supply of
goods will also be taxed under GST. GST would help the manufacturers in procuring auto parts at
a cheaper cost due to an improved supply chain mechanism under GST.

GST on car and bikes are kept under the 28% bracket and a list of cess to be levied on a different
kind of automobile has also been declared by the Indian government. Cess has been levied on
different kind of automobiles ranging from 1 to 15%. We have created an infographic for an
understanding of different cess rates applied on different kind of automobiles. GST will be
beneficial for the people in the market for small family cars like Alto, Santro, Nano, Datsun Go as
a minimum cess of 1% has been charged over and above the GST rate of 28%. Bikes which have
an engine of greater than 350CC like Enfield 500CC or Harley Davidson etc would be charged
GST at the rate of 28% and an additional 3% cess would be levied. It is difficult to understand the
placement of yachts, aircraft, personal jets under the 3% cess bracket along with the small cars
having engine
>1200CC and <1500CC instead of the 15% cess.

There are a lot of free services/warranties offered by the car manufacturers due to the competitive
nature of the industry. These free goods/services were not taxed under previous tax laws. Under
GST, the free services/ warranties would also be eligible for taxation. GST reduces the cost of
manufacturing of cars and bikes due to the subsuming of different taxes levied previously. Under
GST, the taxes would be charged on consumption state rather than the origin state, which would
give a boost to the growth rate of the automobile industry.

 The New Tax Regime Curbing India’s Black Economy indiaexpert.com

54
Last week, the government stated that states and union territories have been paid Rs 52,077 crore
since July 2017 to compensate them for the shortfall in their tax revenue. After the last goods and
services tax (GST) council meeting in July, it was reported that several states and union territories
have reported shortfall in revenue of up to 43%.

Given this background, should the GST council have announced cuts in tax rates on several
items? Reports suggest that the bureaucracy was unhappy with this decision since it could lead to
an increase in the fiscal deficit. This is an election year, so, there will be pressures for additional
expenditures which would lead to a widening of the deficit unless more resources are garnered.
The finance ministers of Kerala and Punjab criticised the manner in which these decisions were
taken in the GST Council and argued that federalism is being dented.

Prime Minister Narendra Modi, addressing the nation in his ‘Mann ki Baat’ in June, had hailed
GST as a “celebration of honesty”. He said, “Everything is technologically processed so there is
no scope for irregularities in taxation, as it used to be prior to the launch of GST.”

The moot point is: are revenues from GST more buoyant than earlier?

In all, 1.1 crore businesses are registered under GST – initially only half of them filed returns and
paid tax. The number has risen to 70% but the tax collection has hardly increased. After crossing
Rs 1 lakh crore of collection in April 2017 (due to year-end factors) it was Rs 95,610 crore in
June 2018. But refunds are also pending so this figure may not be very different from the earlier
monthly figures in 2017-18.

The finance minister had earlier announced that 5% of the businesses pay 95% of the tax. So,
mere filing of more returns does not necessarily translate into more tax payment.

Honesty implies that the black economy is declining. BJP, during its election campaign in 2014,
had promised that it would be able to curb the black economy quickly. The government launched
demonetisation hoping to eliminate the black economy. But with all the old notes coming back to
the RBI, that proved to be futile.
Demonetisation is a one-shot measure which can’t stop the process of black income generation.
GST, in contrast, can potentially check this process. But will it?

Businesses generate black incomes via under and over invoicing of their sales and purchases. A
trader selling 100 yards of cloth at Rs 10 per yard may declare only 95 yards sold at Rs 9.5 per
yard. A sale of Rs 1,000 is shown as Rs 902.50 via under invoicing. Black income of Rs 97.50 is
generated. To produce this textile, the producer may have bought cotton worth Rs 300 but
declared it as Rs 350 via over invoicing and generated a black income of Rs 50.

He may have employed two workers and paid them Rs 20 each but may declare that he had
employed three people and paid them Rs 25 each. This is muster roll fudging and another black
income of Rs 35 accrues. He also over invoices overheads, like,

55
transportation, entertainment and so on. Thus, 20% of the revenue becomes black income while
the white income, the declared profit becomes negligible.

There is a catch. If person A buys from person B (whether raw material cotton or the finished
cloth), then A would want to show a higher cost while B would want to show a lower revenue.
This is feasible only if there are two books of accounts and it will escape detection if the tax
authorities cannot match the invoices.

Earlier, without computerisation of accounts of all businesses, the tax authorities could not match
the billions of invoices generated monthly by businesses. GST and computerisation changes this
by enabling the matching the invoices of sellers and buyers. Both have to file returns on the GST
network (GSTN). Each business has to register and is allotted a number (GSTIN) and all their
invoices carry this number so that they can be cross checked. Since, theoretically, all transactions
from raw material to the final product/service are tracked this is feasible in principle.

So, theoretically, due to computerisation, mis-invoicing is not possible and black incomes cannot
be generated by businesses in legal activities. Of course, illegal activities like producing spurious
drugs, adulterating food and smuggling can continue to generate black incomes.

However, what if no bill is issued and transactions remain outside the GST network from
beginning to end? Cases of fake billing to claim input credit have been surfacing with regularity.
Various exemptions granted under GST make this easy. The exemptions were necessitated by the
need to serve multiple goals such as keeping essential goods cheap by not taxing them, or leaving
small businesses out of the GST network so as not to adversely impact them. These exemptions
and multiplicity of tax rates has made GST complex.

Complexity in rules enables black incomes to be generated. Officials scrutinising the accounts of
a business are unable to catch manipulation of complex rules in the short time they have. That is
why taxation should be simple, which is possible if it does not try to achieve multiple goals. GST
has become complex because of its faulty design and the massive data requirements.

Black incomes are also generated by misclassification of goods. Perfectly fine chemicals may be
shown as scrap sold at throw away prices. Ceramic tiles may be declared as damaged and sold at a
discount. Further, multiplicity of tax rates enables businesses to misclassify goods and services
and evade tax. Professional fees can be under invoiced since they have few inputs. Doctors seeing
25 patients may claim that they have seen 20 patients.

The e-way bill introduced to track movement of goods and check black income generation has
also added to the complexity. Scrutiny of the content of the vehicle is required and this has
encouraged the reappearance of the inspector raj. Without checking, misclassification becomes
easy. Under GST, trucks can be stopped for checking

56
anywhere and not just at the state borders. The police seem to be doing this and there are reports
of extortion of money.

Changes in laws often lead to problems and GST is no different. Crooked businesses have to
develop new ways of bypassing the new laws. For example, in 1982, when a law was introduced
in Mumbai to acquire under-valued flats, transactions stopped. But, within 18 months, they
revived and exceeded the old level because a way was found of circumventing the new law.

Reports of evasion of GST are slowly growing, implying that the process of discovery is on.

GST cannot check the process of black income generation in spite of computerisation; its form is
changing. The need is to transform the human element but then GST would not be needed to
generate `honesty’ and tackle the black economy.

 GST Impact on Cars and Spare Parts Industry in India

The automobile Industry is coping up with the GST regime as the government is very cautious particularly
for this sector. The industry of automobiles is tremendously big which tackles the manufacturing of a
very large chunk of cars and bikes every year. The population across the nation is also the major factor of
this turbulence as it constantly seeks for dynamic technology and newer models. The GST subsumes
almost all the taxes under its ambit like excise, VAT, sales tax, road tax, motor vehicle tax, registration
duty which will further benefit the procedural ways of the automobile industry.
The GST or Goods and Services Tax Bill was introduced to create a uniform tax structure throughout the
country. It replaced several cascading taxes levied by the state and central governments. Here we will talk
about GST rate applicable to cars in India, so before making a move just take a ride of this article.
GST Rate Based on the Basis of Car Category
Small Cars: Small cars such as Hyundai Grand i10, Tata Tiago, Maruti Suzuki Swift, and
Volkswagen Polo attract tax equal to 18% which is 10 % less compared to a tax equal to 28%
applied earlier.
Mid-size Cars: Tax rate on some mid-sized cars like Honda Amaze, Maruti Baleno, Tata Nexon,
and Nissan Kicks has been reduced from 39% to 18%.
Luxury Cars: Luxury cars owners also get a tax deduction of 14% for cars such as Bugatti Chiron,
Land Rover, Toyota Land Cruiser, Lamborghini Aventador, and so on. Now only 28% tax will be
applied.
SUVs: SUVs such as Renault Duster, Jeep Compass, Maruti Vitara Brezza, Mahindra TUV, etc.,
will tax rate of 28% now which is a 17% direct reduction from the total tax levied previously.
Electric Vehicles: There is a 7.5 % direct deduction for electric vehicles now owners have to bear
tax equal to 12% only earlier it was 20.5%.
In the previous form of taxation, advance received on goods supply is not attracting Excise/VAT
and composite rate while in some of the states there is VAT applicable on used cars sales. While
many of the states do make available OEM Original Equipment Manufacturers

57
(OEMs)/component manufacturer linked with a various investment linked incentive scheme. The
significant components can be considered as interest-free loans and subsidies being attached with
CST/VAT paid on the sales.
It is also learned that the selling of goods and services unattached to a form of consideration is
exempted from taxes under the service tax and VAT. While the dealers and importers are not
eligible for the excise duty and CVD which is paid by the OEMs (Original Equipment
Manufacturer). The current tax rules mentioned that VAT/CST is not applicable but excise duty is
certainly on the tax part while transferring any goods from the manufacturers place and factories.
As these vehicles have exemptions from auto cess/Nccd: electrically operated vehicles, three-
wheeled vehicles, hydrogen vehicles based on fuel cell technology, vehicles used solely as taxis,
the ones used by physically handicapped persons, hospital ambulances.
GST Rate Based on Fuel Type
Sub 4-metre Cars
Petrol engines less than 1.2l: Cars such as Toyota Etios Liva, Maruti Suzuki Dzire, Hyundai
Grand i10, Volkswagen Polo among others have been levied with a GST rate equal to 29%, so
getting a 2.5% reduction from the earlier tax regime.
Diesel engines more than 1.5l: Casrs such as Ford Ecosport, Hyundai i20, Maruti Suzuki Vitara
Brezza, Mahindra TUV 300, etc., attract a GST equal to 31%.
Petrol engines more than 1.2l and diesel engines less than 1.5l: Subcompact sedans and
subcompact SUVs with petrol engines larger than 1.2l and diesel engines smaller than 1.5l attract
taxes equal to 43%.
Larger than 4-metre SUVs: SUVs having petrol or diesel engines, irrespective of the
displacement, such as Mercedes-Benz GLC, Tata Hexa, Mahindra Scorpio, Ford Endeavour, etc,
attract a tax equal to 43% compared to 55% from the previous regime.
Larger than 4-metre non-SUVs: Hatchbacks and sedans having petrol engines larger than 1.2l and
diesel engines larger than 1.5l, like Maruti Suzuki Ciaz and Honda City attract a tax equal to 43%,
a reduction of 8.6% from the previous tax regime.
Electric cars: Electric cars like Mahindra eVerito and Mahindra e20, were required to pay a tax of
12% now earlier it was 20.5%.
Impact of Current GST on the Vehicle Industry
The GST has been beneficial for the end consumer, dealer, as well as the manufacturer. The
Impact of GST on the automobile industry for each segment is as given below, make sure to take
a look:
Consumer: As you can observe from above, the overall tax rate levied on automobiles currently,
has reduced significantly as compared to the rates applicable before GST. Due to the beneficial
deduction owner has to pay a lower tax amount than before the introduction of GST.
Dealers/importers: Before the GST, Dealers and importers can’t claim VAT and excise duty, But
Now after the GST inclusion Importers and dealers in the automobile industry are getting all the
benefits from the new tax regime as they can claim the tax paid.

58
Manufacturers: The current GST system subsumes all previous taxes that reduce the overall cost
of manufacturing. Therefore, carmakers also getting all the benefits from the new tax regime.
They are also reaching more customers.
The introduction of GST has been a great relief in automobile sectors it is a beneficial step
because, besides the vehicle, services and warranties offered by carmakers are also taxed, and
there is a discount in almost every stage. Some of them were not even taxed earlier but now
almost everything is being taxed under the GST system. Anyone can notice that the GST regime
focuses on the consumption state more than the origin state, which provides a way better growth
structure for the automobile industry.
GST vs VAT: Simple Way to Describe the Differences
GST and VAT are both counter approach taxation system by the government to the held valuation
of goods and services across the nation. Talking about the older tax system, i.e. value added tax it
was the earlier method of applying taxes on the general public while the goods and services tax is
held to change this course of action towards the consumers.
Tax Based System
The value-added tax is also a summary based tax in which the taxpayers were held to submit their
tax return on a certain period of time with a summary of sales and purchase. While in the Goods
and service is a transaction based tax system which will need to submit sales transactions
everything on time with complete and correct data.
Mode of Operation
The earlier VAT was an offline mode of taxation in which a person has to file a return on an
actual file and has to submit in-person at income tax department nearby with an accountant
attested statement. While the goods and services are totally based upon online medium and will
take each and every returns and tax data online with matching concept.
Return to be Filed
Under GST, taxable person will be required to file the details of all the sales electronically by 11th
day of every month in GSTR-1 succeeding the taxable month and simultaneously he has to file the
summary of information about sale and purchase by 20th day of month in GSTR-3B succeeding
the taxable month. Annual return should be filed up to 31st December in GSTR- 9 of next
financial year.
Recommended: How to File GST Return Online in India
For Composition dealers, there is annualy return GSTR-4 which will be filed on 30th April. While
VAT system the seller has to file quarterly VAT returns and at the same time assessee has to file
Sales register and purchase register. And at the end of the year, the assessee is liable to file annual
return too. In many states generally, Vat dealer is liable to file quarterly returns but in some states
like Maharashtra and Karnataka, there is monthly return provision too.
Input Tax Credit
After the introduction of GST Law, this cascading effect will be eliminated because in GST we
can take Cenvat Credit of interstate sales Purchase as well as in GST we can take credit even

59
after sales of Services. Thus the prices of Goods and services become low and ultimately the
inflation rate become down and economic growth will increase.
While under VAT system tax credit for CST cannot be taken against VAT payable so it leads to
cascading effect.
Cost Reduction
The introduction of GST law will ultimately result in cost reduction of goods as there will be a
single tax levied that is goods and service tax.
While under VAT law a trader cannot utilize credit of other indirect taxes like service tax credit
etc. for payment of VAT liability so it will result in an increase in the cost of goods.
Tax on Interstate Sales
Under GST law IGST will be levied in case of inter-state sale and purchases. While under VAT
Law CST is levied on inter-state purchase and sales of goods.
Input Tax Credit Mismatch
Under GST law the biggest problem of ITC mismatch will get solved as all the details of sales
will be filed till the 11th day of next month and all the summarized details of sale and purchase
will be filed by 20th of next month. So as all the details will be timely filed and then the monthly
return will be filed so all the details will be cross-tallied.
While under VAT system there is a very big issue of ITC mismatch as there is no such system for
filing details of sales and purchase by some specified date before filing the VAT return which
gives rise to Input tax credit mismatch.

Thus, there are a number of differences between GST and VAT. And GST will be a probable
solution for different issues in VAT system

 Automobile industry woes and the conundrum of a cut in the GST rate (livemint.com)
The fear of slowing automobile sales tipping over into a recession is mounting. The
industry is pinning its hopes on a cut in the goods and services tax (GST) rate from 28%
to 18% to reverse the trend. But the government has to balance several aspects of growth
and fiscal prudence.

Indeed, the spotlight is on 20 September, when the GST Council is to meet and the uncertainty on
the rate cut would come to an end.
To be sure, industry will welcome a rate cut as it could spur latent demand. Analysts estimate that
a 10% cut in the GST rate would imply a 7-8% reduction in on-road prices, and boost retail sales
of two-wheelers and passenger vehicles (PVs).

According to Kavan Mukhtyar, partner and leader (automotive) at PwC India: “Such temporary
measures, called pump priming in economics, are often used to activate

60
demand in a crucial industry, which has a multiplier effect on many other sectors." It would
surely help trim BS-IV inventory.

That said, the GST rate cut may not help the cause of commercial vehicles (CVs), where the
decision to buy depends not only on the price, but also on the returns the owner generates
from his investment in a truck.

While India has effectively used excise duty cuts to propel auto sales during the slowdown
in FY09 and FY14, the scenario is not the same now. “For investors, a temporary GST cut
now and likely revival in the second half of FY20 demand could complicate the FY21
scenario, particularly for two-wheelers and diesel PVs, besides medium heavy commercial
vehicles (MHCVs), where a GST rollback will be an additional overhang over and above the
expected sharp price increase post shift to BS-6 from 1st April, 2020," said Arya Sen, equity
analyst at Jefferies India Pvt. Ltd.
In Brazil, too, when the government reinstated a consumer tax on new vehicles (price hike
of 4.5- 7%) in a scenario of an economic slowdown, auto sales declined.
Yes, the auto industry in India is in the doldrums. In August, CV sales dropped by 39%,
PVs by 32% and two-wheelers by 22%.
At the same time, the GST Fitment Committee assessment of a ₹50,000 crore fiscal impact
from a 10% GST rate cut on vehicles, is a spoke in the wheel.
That’s not all. Muktyar of PwC India said that a lower GST rate would hit state government
finances. Hence, there could be resistance from states to cut rates, unless they are
compensated in some manner.
Be that as it may, investors in the auto universe seem to be optimistic either of a GST rate
cut or that the worst is behind. The Nifty Auto index, which fell sharply since mid-April due
to demand uncertainty and an overall slowdown, has gained 7% last week, when the
government hinted that it was considering a GST rate cut

61
CHAPTER 4

DATA ANALYSIS AND INTERPRETATION

In this chapter we have represented the data which was collected with the help of
questionnaire. The data collected is represented with the help of tables and various types of
graphs, diagrams, etc.

Table no. 4.1

Age Count of Age percentage

Group
18-30 27 65.85%
30-40 14 34.15%
above 40 0 0.00%
Grand 41 100.00%
Total
The table represents the age group of various respondents and the graphical representation of
the above table is given below

Age

34%

18-30 30-40
66%

above 40

The above pie diagram represents the age of the various respondents, and we can see that
there are 34% respondents of age 18-30 and 66% respondents of the age 30-40.

Table 4.2

62
marital Count of Marital percentage
status status
Married 20 48.78%
Unmarried 21 51.22%
Grand Total 41 100.00%
The said table states the marital status of the respondents out of 41 respondents 20 are
married respondents and 21 are unmarried respondents the above data is represented in the
form of the pie diagram below.

Marital status

Married Married
Unmarried 49% Unmarried
51%

The above data states the marital status of various respondents as there are 51% respondents
are unmarried and 49% respondents are married.

Table 4.3

educational Count of Educational percentage

qualification Qualifications
Graduate 23 56.10%
HSC 10 24.39%
Post 5 12.20%
Graduate
SSC 3 7.32%
Grand Total 41 100.00%
The said table states the educational qualification of the respondents as there are 23
respondents are graduate , 10 are HSC and 5 respondents have done post graduate degree
and only 3 respondents have done SSC out of 41 respondents.

63
 SSC
7%

Post Graduate
12%

Graduate
56%
HSC
25%

The above data represents the educational qualification of the respondents the data is as
follows 7% ssc, 12% post graduate, 25% hsc, and 56% of respondents are graduates.

Table 4.4

occupation Count of percentage

Occupation
private job 14 34.15%
retired 1 2.44%
self 26 63.41%
employed
Grand 41 100.00%
Total
The above table shows the occupation of various respondents out of 41 respondents 14 are
doing private job, 1 respondent is retired and 26 respondents are self employed. The above
data is represented with the help of pie diagram below.

64
 Occupation

34%
private job
retired
self employed
63%
3%

The above graph represents the percentage of occupation of the respondents as we can see
that there are 14 respondents are doing private job, 1 respondent is retired and there are 26
respondents who are self-employed which is highest as it contains 63 percent of total
respondents.

Table 4.5

annual income Count of Annual percent

income
1-3 lakh 22 53.66%
3-5 lakh 12 29.27%
Above 5 lakh 5 12.20%
less than 1 lakh 2 4.88%
Grand Total 41 100.00%

The table states the annual income of the respondents of which 22 are in the group of 1 to 3
lakh, 12 respondents are in the group of 3 to 5 lakh, and 5 respondents are in the group of
above 5 lakh, and only 2 respondents are in the group of less than 1 lakh.

65
 25

20

15
percent
10 Count of Annual income

0
1-3 lakh 3-5 lakh Above 5 less than
lakh 1 lakh

The above graph represents the percentage of the annual income of various respondents there
are 53 % respondents whose annual income is in the group of 1 to 3 lakh 29 % are in the
group of 3 to 5 lakh,12 % are in the group of above 5 lakh, and only 4 % are in the group of
less than 1 lakh.

Table 4.6

knowledge about Count of do you know about goods and service percent
GST tax ?
yes 40 97.56%
no 1 2.44%
Grand Total 41 100.00%

The above table states the information related to the knowledge of gst of respondents there
are 40 respondents who said yes and only 1 respondent who said no relating to the knowledge
of the gst. The above data is presented in the form of graph below.

66
 knowledge about goods and service
tax
2%

yes
no

98%

The above graph is the representation of the data which was represented in the tabular form
above as we can see there is 97 % respondent responded as yes and only 1 respondent
responded as no out of 41 respondents.

Table 4.7

knowledge about automobile knowledge about automobile sector percentag

sector e
yes 40 97.56%
no 1 2.44%
Grand Total 41 100.00%

The above table states the knowledge of the respondents regarding the automobile sector.
And we can see there are 40 respondents who said yes they have the knowledge regarding the
automobile sector and 1 respondent responded as no out of 41 respondents. The above data is
represented with the help of diagram below.

67
 2%

yes
no

98%

As we can see the data which is given in the tabular form is presented with the help of pie
diagram above as 98 percent are having the knowledge about the automobile sector and only
2 percent said they don’t know the knowledge of the automobile sector.

Table 4.8

compliance Count of do you think GST will be easier to percentage

comply with
difficult 13 31.71%
don't know 10 24.39%
easier 18 43.90%
Grand 41 100.00%
Total

The said table states the 41 respondents who responded to the compliance with gst 13
respondents responded as difficult 10 respondents responded as no and 18 respondents
responded as easier to comply with the gst. The above data is presented in the graphical form
below.

68
 compliance with gst

32%
44% difficult
don't know
easier

24%

The above graph represents there are 44 % respondents who said it would be easier to comply
with gst and 32% respondents responded as it would be difficult and 24% respondents
responded as don’t know regarding the compliance of gst.

Table 4.9

software equipped to Count of does your current software is equipped percenta

handle gst to handle the GST ge
no 4 9.76%
yes 37 90.24%
Grand Total 41 100.00%

The data presented in the form above states the software is equipped to handle gst as 37
respondents responded as yes and 4 respondents responded as no out of 41 respondents. The
above data is presented in the graphical form below.

69
 software is equipped to handle the GST

10%

yes
no

90%

The above pie diagram is the presentation of the information which was presented in the
tabular format. As there are 10 % respondents who responded as no there current software is
not equipped to cope with the GST and 90% respondents responded as yes that there current
software is equipped to cope with GST.

Table 4.10

plan to cope with count percentage

GST
yes 37 90.24%
no 4 9.76%
Grand Total 41 100.00%

The said table states whether the respondents have specific plan or policy to cope with the
GST. And we can see there are 37 respondents who have responded as yes and 4 are
responded as no which was out of 41 respondents the above data is represented in the form of
graphical representation below.

70
 plan to cope with GST

10%

yes
no

90%

As we can see in above graphical representation there are 90% respondents who have
responded as yes they have specific plan or policy to deal with the GST, and only 10% of
respondents stated as no as their response.

Table 4.11

software solution for Count percentage

client
no 10 24.39%
yes 31 75.61%
Grand Total 41 100.00%

The above table states the information about the respondents are having the software solution
for the client and as we can see there are 10 respondents who have responded as no and 31
respondents who have respondent who have responded as yes which is out of 41 respondent.
The above data is represented in the form of graphical representation below.

71
 100%
100%
99%
99% 24.39% 75.61%
98% percentage
98% Count
97%
97%
96%
no
yes

The data which is in the tabular form is represented in this graphical form as we can see there
are 24.39% respondent responded as no because they don’t have software solution for the
client. And 75.61% respondents responded as yes that they have software solution for the
client.

Table 4.12

threshold exemption count of the percentage

limit respondents
correct 11 26.83%
don’t know 3 7.32%
too high 15 36.59%
too low 12 29.27%
Grand Total 41 100.00%

In this regard we asked out our respondent their view regarding the threshold exemption limit
and we received following responses out of 41 respondents 11 correct, 3 don’t know, 15 too
high, 12 too low. The above tabular data is represented in the form of graph below.

72
 Threshold exemption limit

29% 27%
correct
dont know
too high
7%
too low

37%

As we can see there are 29% responded as the threshold exemption limit is too low and 37 %
respondents answered as it is too high, 7% respondents responded as don’t know and 27%
respondents stated it as the threshold exemption limit is correct.

Table 4.13

AVAILABLE COUNT PERCENTAGE

LEGISLATION
no- need more clarity 15 36.59%
yes - satisfactory 26 63.41%
Grand Total 41 100.00%

The above table states that the available legislation is satisfactory or not whether it needs
more clarity. There are 15 respondents responded as no it needs more clarity and 26
respondents states as yes it is satisfactory. The above data is represented in the form of
graphical representation.

73
 available legislation

37%
no- need more clarity
yes - satisfactory
63%

The above pie diagram is the representation of the data which was in the tabular form as we
can see there are 63% of respondent responded as yes it is satisfactory that the available
legislation and 37% respondents answered as no it needs more clarity.

Table 4.14

GST affected the Count of does GST affected percentage

overall sale of vehicles on the overall sale of vehicles
no 8 19.51%
yes 33 80.49%
Grand Total 41 100.00%

In this regards we asked out to our respondents that whether the gst affected the overall sale
of vehicles as we can see that there are 8 respondents who responded as no the GST not
affected the overall sale of vehicles. And 33 respondents out of 41 respondent responded as
yes the GST gas affected the overall sale of vehicles.

74
 does GST affected on the overall sale
of vehicles

20%

no
yes

80%

This data is derived from the tabular information presented in this pie diagram we can see
that there are 80% of respondents who have responded as yes that the gst has affected the
overall sale of the vehicles and 20% of respondents responded as no the gst has not affected
the overall sale of the vehicles.

Table 4.15

GST GST affected the advance booking of percentage

affected vehicles
the
advance
booking of
vehicles
no 10 24.39%
yes 31 75.61%
Grand 41 100.00%
Total

As we can see in the above table we have collected the data regarding does GST affected the
advance booking of vehicles from 41 respondents and we have got 31 as yes it has affected
the overall sale of the vehicles. And 10 respondents have responded as no it does not have
affected the advance booking of the vehicles. The above data is represented in the form of
graph below.

75
 GST affected the advance booking of
vehicles

24%

no
yes

76%

The above graphical representation states that the gst affected the advance booking of
vehicles as we have got 76% response as yes it has affected the advance booking of vehicles
and 24% vehicles as no it does not affected the advance booking of vehicles.

Table 4.16

know about GSTN Count of do you know about GSTN percentage

server server
no 3 7.32%
yes 38 92.68%
Grand Total 41 100.00%

The data regarding whether the respondent has tge knowledge about the GSTN server as we
have go following responses out of 41 respondents 38 as yes and 3 as no the above data is
presented in the graphical form below.

do you know about GSTN server

7%

no
yes

93%

76
As we can see in the above pie diagram there are 93% respondents who responded as yes
they know about GSTN server and 7% respondent responded as no they don’t know about the
GSTN server.

Table 4.17

experience with GSTN experience percentage

server count
bad 4 9.76%
good 37 90.24%
Grand Total 41 100.00%

The data related to the experience of the respondents with the GSTN server is collected and
represented in the tabular form as we have 37 respondents who responded as good experience
with the GSTN server and 4 respondents responded as bad experience with the GSTN server.

experience with GSTN

10%

bad
good

90%

The data which was presented in the tabular form is presented in the graphical form as we can
see the 90% of respondent responded as they have good experience with the GSTN server
and 10% of respondents responded as bad they have bad experience with the GSTN server.

Table 4.18

potential of automobile industry to generate revenue after count percentage

GST
Don't know 5 12.20%
No 9 21.95%
Yes 27 65.85%
Grand Total 41 100.00%

77
The data related to the potential of automobile industry to generate revenue after GST
implantation is collected and presented in the tabular form. 27 respondent have responded as
yes the automobile industry has potential to generate revenue after the GST implementation 9
responded no and 5 responded as they don’t know. The above data is been presented in the
graphical form below.

potential of automobile industry to

generate revenue after GST

12%

Don't know
22%
No
Yes
66%

The tabular data is represented in the graphical form as 66% respondent responded as yes the
automobile industry has the potential to generate revenue after implementation of GST, 22%
responded as no and 12% of respondent responded as they don’t know.

Table 4.19

satisfaction Satisfaction with the deadline percentage

with the given for GST compliance
deadline for
GST
compliance
no 9 21.95%
yes 32 78.05%
Grand Total 41 100.00%

The data related to the satisfaction with the deadline given for gst compliance as we have
received 32 responses as yes and 9 responses as no . the given data is been presented in the
form graph below.

78
 satisfaction with the deadline for GST
compliance

22%

no
yes

78%

As the tabular data is presented in the form of graph as there are 78% responses that they are
satisfied with the deadline for gst compliance and 22% responded as no they are not satisfied
with the deadline given for the compliance.

Table 4.20

does GST increased the burden of GST increased the burden of percentag
compliance compliance e
no 7 17.07%
yes 34 82.93%
Grand Total 41 100.00%

The above data collected and represented in the tabular form as the respondent were asked
whether GST increased the burden of compliance and we have the following responses 34
responses are yes that GST has increased the burden of compliance and 7 respondent
responded as no. the above data represented in the graphical form below.

79
 GST increased the burden of
compliance

17%

no
yes

83%

The above graphical representation states that the 83% responses are reporting yes the GST
has increased the burden of compliance. And 17% responses reported as no that the gst does
not increased the burden of compliance.

Table 4.21

do you know about various tax slabs of know about various tax slabs of percentag
GST GST e
no 2 4.88%
yes 39 95.12%
Grand Total 41 100.00%

The data related to the knowledge of respondent regarding the various tax slab in the GST is
collected and classified. As we have 39 responses reporting yes they know the various tax
slabs of the GST. And 2 respondent responded as no out of 41 respondents. The above data is
presented in the graphical form below.

80
 know about various tax slabs of GST

5%

no
yes

95%

The tabular data is presented here in the graphical form as there are 95% responses reporting
as yes they know various tax slabs and 5% responses are no they don’t know various tax
slabs of GST.

Table 4.22

do you think GST will become positive GST will become positive for percentag
for commercial vehicle sale commercial vehicle sale ? e
no 9 21.95%
yes 32 78.05%
Grand Total 41 100.00%

The data related to the GST will become positive for commercial vehicle sale is been
collected and classified. As we have total 41 responses in which 32 responses are yes that
GST will become positive for commercial vehicle sale and 9 responses are no GST will not
become positive for commercial vehicle sale the above data is been presented in the graphical
form below.

81
 GST will become positive for
commercial vehicle sale ?

22%

no
yes

78%

The above diagram represents the information about the GST will become positive for
commercial vehicle sale as we have following responses 78% responses are yes that GST will
become positive for commercial vehicle sale and 22% said no it will not become positive for
commercial vehicle sale.

Table 4.23

Should government should government percentage

eliminate cess on car eliminate cess on car
under GST under GST.
no 9 21.95%
yes 32 78.05%
Grand Total 41 100.00%

The related to government eliminate cess on car under GST is been collected and classified as
there are 9 respondents responded as no government not to eliminate cess on GST and there
are 32 respondents in the favour that government should eliminate cess on car under GST .

82
 should government eliminate cess on
car under GST.

22%

no
yes

78%

The tabular data is represented in the form of graph here as we have 78% responses stating
yes government should eliminate cess on the car and 22% are no government should not
eliminate cess on car under GST.

Table 4.24

how GST has impacted the pricing of GST has impacted the pricing of percenta
final vehicles final vehicles ge
dont know 9 21.95%
price to customer has decreased 22 53.66%
price to customer has increased 10 24.39%
Grand Total 41 100.00%

The data related to the GST has impacted the pricing of final vehicles is collected and
presented in the tabular form. As here we have 9 responses as don’t know 22 responses are
of price to customer has decreased and 10 are of that price to customer has increased. The
data below is presented in it’s graphical form below.

83
 GST has impacted the pricing of final
vehicles

22% dont know

24%

price to customer has

decreased
price to customer has
increased
54%

As we have the graphical data which states that 24% of respondent responded as price to
customer has increased due to GST and 22% said they don’t know and 54% respondents
stated that the prices to customer has decreased due to GST.

Table 4.25

are you facing issues in claiming refund facing issues in claiming refund percent
under the GST regime under the GST regime age
no 6 14.63%
yes 35 85.37%
Grand Total 41 100.00
%

The data related to facing issues in claiming refund under GST regime is collected and
classified below as 35 respondent responded as yes they are facing issues in claiming refund
under the GST regime. And 6 respondent out of 41 respondent responded as no. the graphical
representation of the data is given below.

84
 facing issues in claiming refund
under the GST regime

15%

no
yes

85%

Here is the graphical representation of the facing issues in claiming refund under the GST
regime. There are 85% responses as yes that they are facing issues in claiming refund under
the GST regime and 15% responses state they are not facing the issues in claiming refund
under the GST regime.

Table 4.26

do you purchased any vehicle after purchased any vehicle after percent
implementation of GST implementation of GST age
no 4 9.76%
yes 37 90.24%
Grand Total 41 100.00
%

The related to the purchased any vehicle after implementation of GST is collected and
classified as we have 37 responses as yes they have purchased vehicle after the
implementation of GST and 4 respondent responded as no they did not purchased any vehicle
after implementation of the GST. The above data is represented in the form of graphical form
below.

85
 purchased any vehicle after
implementation of GST

10%

no
yes

90%

The above graphical representation states that there are 90 % respondent responded as yes
they have purchased vehicle after the implementation of GST. And 10% respondent
responded as no they have not purchased any vehicle after implementation of GST.

Table 4.27

what kind of vehicle you have what kind of vehicle you have purchased percentage
purchased?
commercial vehicle 22 53.66%
Non-commercial vehicle 19 46.34%
Grand Total 41 100.00%

The data related to the what kind of vehicle the respondent has purchased that is commercial
vehicle or non-commercial vehicle as we are having 22 respondent as they have purchased
commercial vehicle. And 19 respondent responded as non-commercial vehicle which is out of
41 respondents.

86
 what kind of vehicle you have
purchased

46% commercial vehicle

54% Non-commercial vehicle

This is the graphical representation of what kind of vehicle the respondent have purchased
after the implementation of the GST. As there is 46% responses are in the form of non-
commercial vehicle and 54% responses are as commercial vehicle.

Table 4.28

do you know the difference between difference between commercial and non- percentage
commercial and non-commercial commercial vehicles
vehicles
no 6 14.63%
yes 35 85.37%
Grand Total 41 100.00%

The above data is related to the whether the respondent knows the difference between
commercial vehicle and non-commercial vehicle as we are having 35 responses as yes they
know the difference between the commercial and non-commercial vehicle and 6 responses as
no. the data below is interpreted in the graphical form.

87
 difference between commercial and
non-commercial vehicles

15%

no
yes

85%

The above data is stating the 85% of respondent responded as yes and 15% responded as no
that they don’t know the difference between the commercial vehicle and non-commercial
vehicle.

Table 4.29

how GST has impacted the GST has impacted the employment in percentage
employment in automobile sector automobile sector
decreased employment 7 17.07%
increase employment 6 14.63%
somewhat affected 25 60.98%
worst affected 3 7.32%
Grand Total 41 100.00%

The data related to the how GST has impacted the employment in automobile sector. As we
are having following responses out of 41 responses. 7 as decreased employment 6 as increase
employment 25 as somewhat affected and 3 as worst affected. The above data is represented
in the graphical form below.

88
 GST has impacted the employment in
automobile sector

7%
17%
decreased employment
increase employment
15%
somewhat affected
worst affected
61%

Here is the graphical form of tabular data as we are having 61% responses somewhat
affected 15% stated that GST has impacted the employment in automobile sector.17% as
decreased employment and 7% respondents responded as GST has impacted the employment
in automobile industry.

Table 4.30

do you think GST will improve the GST will improve the economic percen
economic condition of the country condition of the country tage
no 4 9.76%
yes 37 90.24
%
Grand Total 41 100.00
%

The data related to the whether the respondent think that the GST will improve the economic
condition of the country. And out of 41 respondent 4 responded as no GST will not improve
the economic condition of the country. And 37 respondent responded as yes that the GST will
improve the economic condition of the country. The above data is represented in the
graphical form below.

89
 GST will improve the economic
condition of the country

10%

no
yes

90%

The graphical representation of the GST will improve the economic condition of the country
is as follows as 90% of the respondent stated as yes GST will improve economic condition as
10% as no the GST will not improve the economic condition of the country.

4.31

which segment has affected most segment has affected most with percentag
with effect of GST effect of GST e
commercial segment 29 70.73%
Non-commercial segment 12 29.27%
Grand Total 41 100.00%

The above table states that which segment has affected the most with effect of GST is
collected and classified. As out of 41 responses there are 29 responses who responded as
commercial segment and 12 reported as non-commercial vehicle segment the majority is in
the commercial segment so according to our survey commercial segment has affected the
most with effect of the GST.

90
 which segment has affected most
with effect of GST

29%
commercial segment
non commercial segment
71%

The graphical representation of the data states that there are 71% of responses as the
commercial segment has affected the most with the effect of GST and 29% responses are that
non commercial segment which has got the less response with compared to commercial
segment.

Table 4.32

are you satisfied with the way satisfied with the way GST introduced in the percentage
GST was introduced in the country
country.
no 13 31.71%
yes 28 68.29%
Grand Total 41 100.00%

The above data is collected and classified with are respondent satisfied with the way GST
was introduced in the country. As we are having 28 as yes responses that theses respondents
are satisfied with the way GST was introduced in the country. And there are 13 responses as
no that they are not satisfied with the way GST was introduced in the country. Majority of
people are satisfied with the way the GST was introduced in the country. The above data is
represented in the graphical form below.

91
 satisfied with the way gst introduced in the
country

32%

no
yes

68%

As we can see according to our survey there are 68% responses who said yes they are
satisfied with the way GST was introduced in the country. And 32% respondent responded as
no they are not satisfied with the way GST was introduced in the country, as we can see
majority of respondent responded as yes according to our survey which was based on the
questionnaire.

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CHAPTER 5

FINDING SUGGESTION AND CONCLUSION

FINDINGS
1. Implemented in 2017, the Goods and Services Tax (GST) is a non-discriminatory tax
with its effects being seen across various sectors
2. According to responses we have come to know that 98% of respondents are aware
about goods and service tax and only 2% respondent reported they don’t know about
goods and service tax.
3. This research shows that 98% of respondents know about the Indian automobile
industry and only 2% of total responses recorded as they don’t know about
automobile industry.
4. The majority is vast who states that they have specific plan and policy to cope with
GST.
5. The automobile sector is mainly comprised of commercial and non-commercial
vehicles, with the former consisting of vehicles like three-wheelers, minibuses, etc.
and the latter comprising of personal vehicles (including SUVs, budgeted cars, luxury
cars, etc).
6. The respondents were having the knowledge about commercial segment of vehicles
and non commercial segment of vehicles.
7. Many of the advance bookings of the vehicles got affected due to the implementation
of GST in the country.
8. Many of our respondents were already know about various tax slabs in the GST.
9. There are multiple future implications which an also be traced when we talk about
GST’s impact on the automobile sector.
10. From the end-consumers’ point of view point, GST has resulted in a mixture of
positive and negative impact.
11. Before GST implementation and unification of taxes, we had a series of indirect taxes
in India, wherein every state had their own indirect tax structure. Now, after GST
implementation, all these taxes have been subsumed to one tax.
12. GST has enhanced the manufacturing of automobiles by reducing taxes to one and
made the taxation system less complicated than before.
13. Transfer of vehicles to other people will be liable for GST, irrespective of whether the
transaction is intra-state or inter-state.
14. GST has been good from a compliance standpoint. The previous state-wise
compliance system has now been replaced with a single window for all compliance-
related matters though according to our research we came across that many of our
respondents feels the compliance of the GST has increased it might be due to the new
tax regime.
15. The effect of GST in the final price to the customer is decreased the which we have
collected with the help of the questionnaire.

93
 16. Presently GST is not giving that good result, but in future the persons of the country
will praise that the government has taken good step to improvise the tax system in the
entire country.
17. GST being a good step was converted in to ill-conceived and dangerous tool to put the
economy into well, when it was decided to implement it from July 2017 in an
unprepared mode. That’s why many of our respondents are not happy with the way
GST was implemented in the entire country.
18. Most of the public are aware of GST through mass Media.
19. Many of our respondents reported that the GST reforms will help india to improve it’s
economic condition.
20. The major founding we came across through our research is that the respondents
responded as the employment has affected in the automobile industry due to the
implementation of the GST.
21. The commercial vehicle segment, comprising of vehicles used for transportation of
goods and people, vehicles used for execution of business services and three-wheelers
has been heavily affected by GST
22. As compared to commercial vehicles, GST has had relatively low impact on non-
commercial vehicles.

CONCLUSION
For the businesses in the automobile sector, GST has been good from a compliance
standpoint. The previous state-wise compliance system has now been replaced with a single
window for all compliance-related matters.

Multiple taxes have been subsumed under GST such as CST, VAT, Service Tax, Entry Tax,
Excise Duty, etc. Now, corporates need to deal only with GST officers rather than going to
different officers for the various tax departments.

From the Government’s point of view, it has also been beneficial because of GST revenue
sharing between the Centre and States.

As the premise of GST states that it is a consumption-based tax rather than an origin-based
one, it will increase the revenue of many states because the number of consumers (from
States across the country) are more than the manufacturers (who are typically located in
clusters in few states).

Finally, from the end-consumers’ point of view point, GST has resulted in a mixture of
positive and negative impact. Because, on one hand we have an increased cost associated
with commercial vehicles which consequently inflates the selling price of daily consumed
goods. And on the other hand, the GSTN Council simplified the process of input credit
mechanism on manufactured goods and traded goods through the Anti-Profiteering Act, thus
providing relief to the end-consumers. This will encourage corporates/businesses to pass on
the benefit of the input tax credit to the common man on large scale by reducing the
maximum retail prices of goods.

94
In the non-commercial vehicle space, the varying rates based on the different categories and
engine-capacities of cars has been structured bearing in mind the household incomes of
different sections of society.

There are multiple future implications which an also be traced when we talk about GST’s
impact on the automobile sector. A few of them are as follows:

 The cheaper cost of vehicles will fuel their demand in the market and consequently
boost manufacturing growth. Also, with the GST rates of taxation being the same
across the country, there will be no differentiation of tax cost for the consumer when
procuring the vehicles from another state. This will reduce incidences of tax evasion
which occur due to consumers buying vehicles from the states other than where they
reside.

 With GST, things like multiple levels of taxation, elaborate tax compliance
obligations and cascading taxes will be a thing of the past. A simplified and fully-
automated tax mechanism will ensure better compliance.

 Another thing to note is that GST will reduce the cost of manufacturing due to the
subsuming of different taxes levied in the past. Since the taxes will be charged on
supply and consumption state rather than the origin state, it would give a boost to the
growth rate of the automobile industry.

 Now with CST out of the way, the companies will not need to maintain warehouses in
multiple states. This will help in consolidating the warehousing structure and can also
lower down the operational costs in the supply chain. Additionally, with the inclusion
of business overheads (advertising, business promotion, etc.) under ITC, operational
costs can be reduced even further.

Impact of GST on automobile sector particularly is considered as a positive thing as

manufacturers of automobiles will have to pay reduced taxes and ultimately customers will
also be benefited. Before GST, various taxes such as sales tax, road tax, sector tax, VAT,
motor vehicle tax, registration duty, etc. were imposed. All of these have been subsumed
to GST on automobile services. GST tax on automobiles has significantly reduced the cost of
transporting goods, as transportation anywhere in India doesn’t pass through check posts or
various taxes. It has, in fact, reduced the price of automobiles across the country when
compared to the prices before GST. The overall effect of GST on the automobile industry is
positive, as, on a whole, it has reduced the rate. Further, GST has enhanced the
manufacturing of automobiles by reducing taxes to one and made the taxation system less
complicated than before.

Indian Government proposing to implement GST as a tool to increase its revenue and reduce
its deficit. The implementation of GST is a changing face of India which is a welcome move
and the government should be well equipped for that which is a symptom of fast paced
economy. Findings of this study shows that the level of awareness on the benefits of GST
among Indians are still relatively low. It could be due to the lack of knowledge or information

95
regarding GST. For this reason, the government should reflect on how to increase the
knowledge of GST among citizen. Furthermore, they should put more effort in delivering
information and educating the citizen regarding GST, so that the citizen will have positive
view about this GST implementation.

SUGGESTIONS
1. The public suggested that there should be a smooth, transparent a simple transition
provisions which is easily understandable.
2. Special focus on awareness and training of all officers, professionals and assesses
should be given on GST.
3. Any disputes on GST introduction should be pro-actively addressed by way of speedy
redressal of cases.
4. An expert panel should be formed to recommend modifications to the Constitutions
and it should be published for the mass public.
5. The public also are not well informed on the benefits of the GST. Therefore, in order
to ensure efficient implementation of the GST, the government should come out with
a proper guideline to the society on the procedures for the implementation of GST.
6. Lastly, the government must ensure a good management of the income collected from
the GST.
7. The automobile wants the government to lend a hand by giving it an atmosphere that
promotes development of this industry.
8. Now the customer wins and remains the king after the implementation of the GST
9. Many large companies need to upgrade their enterprise resource planning a category
of business management software so as to accommodate the complexities of
calculating GST. Erp helps companies manage and monitor everything in the
organization, including supply chain, finance and even human resource functions,
SAP and oracle are the big players in the Indian ERP space.
10. Anti-profiteering provisions need reconsideration as these may unnecessarily cause
hardships to businesses. System should be made to ensure that this is not misused so
as to cause difficulties.
11. Advance Authority for Rulings should be active at the earliest as GST law is already
in force since July 1st, 2017.
12. Single cash ledger concept should be used instead multiple cash ledgers i.e. separate
cash ledger for CGST, SGST, IGST, interest, penalty etc. Further it is suggested to
allow partial / period payment of offset of tax so that an assessee can bear interest
only on the short payment.
13. The issues being faced by the exporters should be dealt with and the refund procedure
should be activated immediately.
14. Rates should be rationalized and reduced to make India competitive and in interest of
compliance and economic growth. The highest rate should be kept at 18% and there
should be only few items that fall in 28% slab. Daily use items such as soaps, cremes,
movie tickets, electrical goods should not be taxed at 28%.

96
 15. In respect of capital goods received on or after 01.07.2017 (Capital goods in transit),
transitional credit of tax paid in earlier regime should also be available. Transitional
input credit should also be available on goods or services are delivered or received
before the appointed date and the assessee received the invoices after appointed day.
16. Automotive manufacturers must take steps to mitigate these failures through
collaboration and the use of advanced technologies.
17. The government of india should encourage the people of country and every
organization to strictly compliance with the GST.
18. And government should initiate to minimizing the burden of compliance in the GST.
19. Automobile companies should conduct meetings with marketing & sales managers,
Production managers, and customer care officers to frame innovative strategies.
20. Automobile industry is looking forward to the introduction of GST. However, there
are quite a few concerns in GST model, which need to be addressed. Restrictions and
conditions on eligibility to tax credits on assets used for business is also a major area
of concern, and the credit mechanism should be more liberal. Overall, GST will be
boon for the automobile industry.
21. Companies need to upgrade their enterprise resource planning (ERP)
22. Proper GST administration and dispute resolution (more importantly on inter-state
transactions) is very critical.
23. GST rollout is one of the biggest tax reforms for India. Timely GST preparedness is a
key to smooth transition for industry, and we have a huge and experienced talent pool
that is fully geared for this.

BIBLIOGRAPHY AND WEBILOGRAPHY

o Taxmann's GST Ready reckoner.

o GST for The Layman
o The GST Manual with GST Law Guide & GST Practice Referencer
o Taxmann’s GST Acts with Rules & Forms [Bare Act]
o Chaurasia, P., Singh, S., & Sen, P. K. (2016). Role of Good and Service Tax in the
Growth of Indian economy. International Journal of Science, Technology and
Management.
o Empowered Committee of Finance Ministers (2009). First Discussion Paper on Goods
and Services Tax in India, the Empowered Committee of State Finance Ministers,
New Delhi.
o Kumar, N. (2014). Goods and Services Tax in India: A Way Forward. Global Journal
of Multidisciplinary Studies
o Khurana, & Sharma, A. (2016). Goods and Services Tax in India-A Positive Reform
of Indirect Tax System. International Journal of Advanced Research
o Vasanthagopal, R. (2011). GST in India: A Big Leap in the Indirect Taxation System.
International Journal of Trade, Economics and Finance

Webliography
https://cleartax.in/s/gst-returns

97
https://www.gst.gov.in/

http://www.gstindia.com/about/

http://indianexpress.com/article/what-is/gst-and-other-bills-approved-by-the-union-cabinet-
all-you-need-to-know-4578453/

http://indianexpress.com/article/explained/gst-bill-parliament-what-is-goods-services-tax-
economy-explained-2950335/

https://qz.com/943504/gst-answers-to-all-your-questions-about-indias-biggest-tax-reform/

APPENDIX
TITLE : A Study on impact of GST on automobile sector

I. Personal information:

1. Name
2. Age group
o 18-30
o 30-40
o Above 40

3. Marital status
o Married
o Unmarried
4. Education Qualification
o SSC
o HSC
o Graduate
o Post graduate
o Not educated
5. Occupation
o private job
o government job
o self employed
o retired
6. Annual income
o less than 1 lakh
o 1 to 3 lakh
o 3 to 5 lakh
o above 5 lakh

II) Survey questions

98
1. do you know about goods and service tax?
o yes
o no

2. do you know about automobile sector ?

o yes
o no
3. do you think GST will be easier to comply with ?
o easier
o difficult
o don't know
4. does your current software is equipped to handle the GST ?
o yes
o no
5. does your business have a policy for plan specifically to cope up with GST ?
o yes
o no
6. do you have any software solution for your client to handle the proposed GST ?
o yes
o no
7. do you think threshold exemption limit is correct ?
o too high
o too low
o correct
o don’t know
8. is available legislation regarding proposed GST is satisfactory or do you feel need
for more clarity?
o Yes – satisfactory
o No- need more clarity
9. what was the impact of GST on the sale of vehicles when it was introduced ?
o good
o bad
o worse
10. does GST affected on the overall sale of vehicles ?
o yes
o no
11. does GST affected the advance booking of vehicles ?
o yes
o no
12. do you know about GSTN server ?
o yes
o no
13. how was your experience with GSTN server ?

99
 o good
o bad
14. do you think automobile industry has potential to generate revenue after GST
implementation ?
o yes
o no
o don’t know
15. are you satisfied with the deadline given for GST compliance ?
o yes
o no
16. does GST increased the burden of compliance ?
o yes
o no
17. do you know about various tax slabs of GST ?
o yes
o no
18. do you think GST will become positive for commercial vehicle sale ?
o yes
o no
19. should government eliminate cess on car under GST ?
o yes
o no
20. how GST has impacted the pricing of final vehicles ?
o price to customer has increased
o price to customer has decreased
o don’t know
21. are you facing issues in claiming refund under the GST regime ?
o yes
o no
22. do you purchased any vehicle after implementation of GST ?
o yes
o no
23. if yes what kind of vehicle you have purchased ?
o commercial vehicle
o Non-commercial vehicle
24. do you know the difference between commercial and non-commercial vehicles ?
o yes
o no
25. how GST has impacted the employment in automobile sector ?
o increase employment
o somewhat affected
o decreased employment
o worst affected
26. do you think GST will improve the economic condition of the country ?

100
 o yes
o no
27. which segment has affected most with effect of GST ?
o commercial segment
o non-commercial segment
28. are you satisfied with the way GST was introduced in the country ?
o yes
o no

101