A STUDY ON ANALYZING THE IMPACT OF GST ON AUTOMOBILE

INDUSTRY WITH REFERENCE TO FOUR WHEELERS

A project submitted to

University of Mumbai for partial completion of the degree of

Master in Commerce (Advanced Accounting)

Under the faculty of Commerce

By

KATARMAL DIVYABEN LILADHAR

ROLL NO: - 07

Under the Guidance of

ASST.PROF. SUNIL VISHWAKARMA

SHREE LR TIWARI DEGREE COLLEGE OF ARTS, COMMERCE & SCIENCE

December, 2023 Shree L.R. Tiwari educational campus, Kanakia Park,

Mira road, Thane, Maharashtra - 401107

 SHREE LR TIWARI DEGREE COLLEGE OF ARTS, COMMERCE & SCIENCE

Shree L.R. Tiwari educational campus, Kanakia Park,

Mira road, Thane, Maharashtra - 401107

Certificate
This is to certify that Miss Katarmal Divyaben Liladhar has worked and duly
completed her Project Work for the degree of Master in Commerce (Advanced
Accounting) under the Faculty of Commerce in the subject of Advanced Accounting
and her project is entitled, “A STUDY ON ANALYZING THE IMPACT OF GST ON
AUTOMOBILE INDUSTRY WITH REFERENCE TO FOUR WHEELERS” under my

supervision.

I further certify that the entire work has been done by the learner under my guidance and
that no part of it has been submitted previously for any Degree or Diploma of the any
University.

It is her own work and facts reported by her personal findings and investigations

Dr. Sanjay Mishra Mr.Sunil Vishwakarma

I/C Principal Programme Co-ordinator

Internal Examiner External Examiner

Date of submission:
 Declaration by learner

I the undersigned MISS KATARMAL DIVYABEN LILADHAR here by, declare that
the work embodied in this project work titled “A STUDY ON ANALYZING THE
IMPACT OF GST ON AUTOMOBILE INDUSTRY WITH REFERENCE TO
FOUR WHEELERS” forms my own contribution to the research work carried out
under the guidance of Asst.Prof SUNIL VISHVAKARMA is result of my own research
work and has not been previously submitted to any other University for any other
Degree/Diploma to this or any other University.

Wherever reference has been made to previous works of others, it has been clearly
indicated as such and included in the bibliography.

I here by further declare that all information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.

KATARMAL DIVYABEN LILADHAR

Name and signature of the learner

Certified by

MR. SUNIL VISHVAKARAMA

Name and signature of the Guiding teacher

 Acknowledgment

It is my pleasure to thank all the people who have helped me directly or indirectly in
completion of this project work. I take this humble opportunity to express my gratitude
to all of them.

I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me chance to do
this project.

I would like to thank my Principal, Dr. Sanjay Mishra for providing the necessary
facilities required for completion of this project. I take this opportunity to thank our
Coordinator Asst.Prof. Sunil Vishwakarma for his moral supports the guidance.

I would also like to express my sincere gratitude towards my Project Guide Asst.Prof.
Sunil Vishvakarma whose guidance and care made the project successful.

I would like to thank my College Library, for having provided various reference books
and magazines related to my project.

Lastly, I would like to thank each and every person who directly or indirectly helped me
in the completion of the project especially my Parents and Peers who supported me
throughout my project.
 INDEX

SRNO PARTICULARS PAGE NO

CHAPTER 1 INTRODUCTION 2-50
1.1 Definitions 3
1.2 Historical Background 4-13
1.3 About Automobile Industry 14-15
1.4 GST on cars 16-19
1.5 Components 20-21
1.6 Comparison between pre and post Gst rates 22-23
1.7 Pros and cons 24-25
1.8 Benefits 26
1.9 Demerits 27
1.10 GST on used cars 28-30
1.11 Issues 31-35
1.12 GST on cars insurance policy 36-40
1.13 Examples 41-49
CHAPTER 2 RESEARCH METHODOLOGY 50-54
CHAPTER 3 REVIEW OF LITERATURE 54-59
CHAPTER 4 DATA ANALYSIS, INTERPRETATION AND 60-73
PRESENTATION
CHAPTER 5 CONCLUSION, SUGGESTIONS 74
BIBLIOGRAPHY 75
APPENDIX 76
 CHAPTER 1. INTRODUCTION

1.1 DEFINATIONS

GST Full Form is Goods and Services Tax.

Before learning more about Goods and Sevice Tax, let's try to understand how taxes in India work. The
Government of any country needs money for its functioning and taxes are a major source of revenue for
a Government. The taxes thus collected are spent by Govt. on the public.

These taxes are broadly classified into two types : Direct Tax and Indirect Tax

Direct Tax - Direct Tax is imposed on the Income of an individual. The amount of Tax payable varies
on the income earned by the individual from various sources such as salary, house rent income etc. So,
the more you earn, the more tax you pay to the Government which essentially means the rich pay more
tax in comparison to the poor.

Indirect Tax - Indirect tax is not imposed directly on income of individuals. Instead, it is imposed on
goods and services which in turn increase the cost MRP) of Goods and Services. Unlike direct tax,
indirect tax should be borne by the end customer, rich and poor alike., There are many indirect taxes.
Some of these are levied by the Central Government whereas some are levied by the State Government
making the indirect tax system an extremely complicated system.

GST has been introduced to replace multiple indirect taxes levied by State and Central Governments in
order to simplify the indirect tax system.

GST has replaced almost 17 of the existing state and central indirect taxes (more to come in the future)
such as central excise duty, additional customs duty, VAT, entertainment tax, service tax etc.

It is called as Goods and Services Tax because it is applicable on the supply of both Goods and Services.
 1.2 HISTORICAL BACKGROUND

When did GST start?

Several countries have already established the Goods and Services Tax. In Australia, the system was
introduced in 2000 to replace the Federal Wholesale Tax. GST was implemented in New Zealand in
1986. A hidden Manufacturer’s Sales Tax was replaced by GST in Canada, in the year 1991. In
Singapore, GST was implemented in 1994. GST is a value-added tax in Malaysia that came into effect
in 2015

History of GST in India

• 2000: In India, the idea of adopting GST was first suggested by the Atal Bihari Vajpayee Government
in 2000. The state finance ministers formed an Empowered Committee (EC) to create a structure for
GST, based on their experience in designing State VAT. Representatives from the Centre and states
were requested to examine various aspects of the GST proposal and create reports on the thresholds,
exemptions, taxation of inter-state supplies, and taxation of services. The committee was headed by
Asim Dasgupta, the finance minister of West Bengal. Dasgupta chaired the committee till 2011.

• 2004: A task force that was headed by Vijay L. Kelkar the advisor to the finance ministry, indicated
that the existing tax structure had many issues that would be mitigated by the GST system.

• February 2005: The finance minister, P. Chidambaram, said that the medium-to-long term goal of
the government was to implement a uniform GST structure across the country, covering the whole
production-distribution chain. This was discussed in the budget session for the financial year 2005-
06.

• February 2006: The finance minister set 1 April 2010 as the GST introduction date.

• November 2006: Parthasarthy Shome, the advisor to P. Chidambaram, mentioned that states will have
to prepare and make reforms for the upcoming GST regime.

• February 2007: The 1 April 2010 deadline for GST implementation was retained in the union budget
for 2007-08.
• February 2008: At the union budget session for 2008-09, the finance minister confirmed that
considerable progress was being made in the preparation of the roadmap for GST. The targeted
timeline for the implementation was confirmed to be 1 April 2010.

• July 2009: Pranab Mukherjee, the new finance minister of India, announced the basic skeleton of the
GST system. The 1 April 2010 deadline was being followed then as well.

• November 2009: The EC that was headed by Asim Dasgupta put forth the First Discussion Paper
(FDP) , describing the proposed GST regime. The paper was expected to start a debate that would
generate further inputs from stakeholders.

• February 2010: The government introduced the mission-mode project that laid the foundation for
GST. This project, with a budgetary outlay of Rs.1,133 crore, computerised commercial taxes in
states. Following this, the implementation of GST was pushed by one year.

• March 2011: The government led by the Congress party puts forth the Constitution (115th
Amendment) Bill for the introduction of GST. Following protest by the opposition party, the Bill was
sent to a standing committee for a detailed examination.

• June 2012: The standing committee starts discussion on the Bill. Opposition parties raise concerns
over the 279B clause that offers additional powers to the Centre over the GST dispute authority.

• November 2012: P. Chidambaram and the finance ministers of states hold meetings and set the
deadline for resolution of issues as 31 December 2012.

• February 2013: The finance minister, during the budget session, announces that the government will
provide Rs.9,000 crore as compensation to states. He also appeals to the state finance ministers to
work in association with the government for the implementation of the indirect tax reform.

• August 2013: The report created by the standing committee is submitted to the parliament. The panel
approves the regulation with few amendments to the provisions for the tax structure and the
mechanism of resolution.
• October 2013: The state of Gujarat opposes the Bill, as it would have to bear a loss of Rs.14,000
crore per annum, owing to the destination-based taxation rule.

• May 2014: The Constitution Amendment Bill lapses. This is the same year that Narendra Modi was
voted into power at the Centre.

• December 2014: India’s new finance minister, Arun Jaitley, submits the Constitution (122nd
Amendment) Bill, 2014 in the parliament. The opposition demanded that the Bill be sent for
discussion to the standing committee.

• February 2015: Jaitley, in his budget speech, indicated that the government is looking to implement
the GST system by 1 April 2016.

• May 2015: The Lok Sabha passes the Constitution Amendment Bill. Jaitley also announced that
petroleum would be kept out of the ambit of GST for the time being.

• August 2015: The Bill is not passed in the Rajya Sabha. Jaitley mentions that the disruption had no
specific cause.
• March 2016: Jaitley says that he is in agreement with the Congress’s demand for the GST rate not to
be set above 18%. But he is not inclined to fix the rate at 18%. In the future if the Government, in an
unforeseen emergency, is required to raise the tax rate, it would have to take the permission of the
parliament. So, a fixed rate of tax is ruled out.

• June 2016: The Ministry of Finance releases the draft model law on GST to the public, expecting
suggestions and view

• August 2016: The Congress-led opposition finally agrees to the Government’s proposal on the four
broad amendments to the Bill. The Bill was passed in the Rajya Sabha.

• September 2016: The Honourable President of India gives his consent for the Constitution
Amendment Bill to become an Act.
• 2017: Four Bills related to GST become Act, following approval in the parliament and the President’s
assent:
• Central GST Bill
• Integrated GST Bill
• Union Territory GST Bill
• GST (Compensation to States) Bill
The GST Council also finalised on the GST rates and GST rules. The Government declares that the GST
Bill will be applicable from 1 July 2017, following a short delay that is attributed to legal issues.

Tax Structure before GST

• Before the implementation of GST, Taxation laws between the Centre and states were clearly
demarcated. There were no overlaps between the fiscal powers, whatsoever. The Centre would levy
tax on goods manufacture, except alcohol for consumption, narcotics, opium, etc.
• The states had the power to charge tax on the sale of goods.
• The Centre would levy the Central Sales Tax that was collected by the originating states.
• The Centre was also levying service tax on all types of services.
• Additionally, the Centre was charging and collecting additional duties of customs
on goods that were imported into or exported from India. This tax was levied in addition to the Basic
Customs Duty. This additional duty of customs is referred to as Countervailing Duty (CVD) and
Special Additional Duty (SAD) and it counter balances excise duties, state VAT, sales tax, and other
such taxes.
The introduction of the GST regime made amendments to the Constitution so that the Centre and states
are empowered at the same time to levy and collect GST. This concurrent jurisdiction of the states and
Centre also requires an institutional mechanism that ensures joint decisions are taken about the structure
and operation of GST.

Constitution (One Hundred and First) Amendment Act, 2016

In order to address prevalent issues in taxation, the Constitution 122nd Amendment Bill was put forth
in the 16th Lok Sabha on 19 Dec 2014.

• The Bill suggests levy of GST on all goods and services, except alcohol that humans consume.
• The tax is levied as Dual GST by the Centre and states/union territories. The component levied by the
Centre is Central Tax - CGST, while that levied by the state is State Tax - SGST. The tax levied by
union territories is Union Territory Tax - UTGST.
• The Centre would levy the GST on inter-state trade or imports of services and goods. This tax is
referred to as Integrated Tax - IGST.
• The Central Government will also levy excise duty on tobacco products, in addition to GST.
• The tax on five petroleum products, i.e., high speed diesel, crude, petrol, natural gas, and Aviation
Turbine Fuel (ATF) will be outlined later after a decision is made by the GST Council.
September 2016: A Goods and Services Tax Council (GSTC) was created by the union finance minister,
revenue minister, and ministers of state to take decisions on GST rates, thresholds, taxes to be subsumed,
exemptions, and other features of the taxation system. The state finance ministers mentioned that the
EC would be a platform for states where there would be discussions of their regional issues. The GST
Council is a separate entity that would oversee the implementation of the GST system.

Decisions taken by GST Council

Some of the major decisions taken by the GSTC so far are:

• There would be four tax rates under the GST regime, i.e., 5%, 12%, 18%, and 28%. Some goods and
services were also classified as exempt from tax.
• A cess above the peak rate of 28% would be levied on certain sin and luxury goods.
• The administrative control over 90% of taxpayers with turnover less than Rs.1.5 crore would be with
the State tax administration. 10% of control would be with the Central tax administration.
• Administrative control over taxpayers having turnover above Rs.1.5 crore would be equally divided
between the State and Centre tax administration.

Goods and Services Tax Network

Goods and Services Tax Network (GSTN) was set up as a private company in 2013 by the Government
under Section 25 of the Companies Act, 1956. GSTN is expected to offer the front-end services of
registration, payment, and returns to taxpayers. It would also develop back-end technical modules that
will be utilised by 25 states that have opted in.

GSTN has also identified 34 IT and financial technology companies and tagged them as GST Suvidha
Providers (GSPs). These organisations will develop applications that will be used by taxpayers when
they interact with GSTN.
 Key features of the GST regime

The GST system is characterized by the following features:

• GST is applicable on the “supply” of services or goods as opposed to the earlier concept of taxation
on goods manufacture, sale of goods, or service provision.
• GST is a destination-based tax structure unlike the origin-based structure that existed previously.
• CGST, IGST, and SGST/UTGST are levied at rates that would be mutually agreed upon by the states
and Centre.
• GST will replace the central taxes mentioned below:
• Duties of Excise (medicinal and toilet needs)
• Central Excise Duty
• Additional Duties of Excise (Goods of Special Importance)
• Additional Duties of Customs (CVD)
• Service Tax
• Special Additional Duty of Customs(SAD)
• Additional Duties of Excise (Textiles and Textile Products)
• Cesses and surcharges
• GST will subsume the following state taxes:
• Central Sales Tax
• Entry Tax
• State VAT
• Luxury Tax
• Purchase Tax
• Entertainment Tax, except that levied by local entities
• Taxes on lotteries and gambling
• Taxes on advertisements
• State cesses and surcharges
• Taxpayers with annual turnover of Rs.20 lakh is exempt from GST. For special category states, this
cut-off is Rs.10 lakh. An option of compounding is available to small-scale taxpayers with annual
turnover of Rs.50 lakh or below. The choice of threshold exemption and the compounding scheme
are optional.
• Input credit of CGST shall be used only for paying CGST on the output. Similarly, input credit of
SGST/UTGST will be used only for the payment of SGST/UTGST. Therefore, the two channels of
input tax credit cannot be cross-utilised, except for the payment of IGST for inter-state supplies.The
 GST implementation – Teething issues and current state of play GST has started changing India’s
perception not just for policy makers in other countries but also for global investors especially in the
context of big auto players. With the advent of GST, India has moved the value chain and the tax
system is almost on a par with countries that have good indirect tax structures, including those in
China. One of the biggest challenges in the GST implementation was the technology infrastructure
and experience of compliance given that since Day Zero; there were bugs, the portal had a slow
response rate and performance related issues. The Government constituted a committee to address the
issues and it is working on improving the tax payer experience and various steps at simplification of
process are being introduced. The implementation of the E-way bill also brought with it operational
as well as technology challenges for which the Government took additional time to get the framework
up and running.
The portal was revamped and was introduced in February 2018 and is completely functional since April
2018 on a pan India basis. The automation of the E-waybill system is a welcome relief from the previous
practice of manual checking of way bill information at check posts in different States which led to
different interpretations and maintenance of different types of documentation/ records based on State
VAT law provisions. Multiple tax rates (5%, 12%, 18% and 28% excluding cess where applicable) is
another aspect which complicates the taxation system and leads to unwarranted classification disputes.
The GST law also prescribes for a levy of compensation cess on certain specific goods including certain
categories of motor vehicles. Further, the applicable rate also depends upon value-based classification
(footwear, apparel etc.), specification based classification and based on status of buyers. The
Government has indicated that it will continue to work on rationalization of rates and try to move
towards a more simplified tax rate structure, certain initial steps in this regard have already been taken.

An important aspect of the implementation of a new law is to have a quick and robust dispute prevention
and restitution mechanism. Acknowledging the need for suitable clarifications, the Authority for
Advance Ruling (AAR) has been set up in multiple jurisdictions across India. The AAR has been fairly
proactive in disposing off advance ruling applications, especially in Karnataka, Maharashtra, Kerala and
Gujarat. However, given that the AAR has been constituted at a State level, there have been contrary
rulings by two different AARs. This indicates a need for a central management team. In this regard, the
Union Cabinet has recently approved the creation of National Bench of the Goods and Services Tax
Appellate Tribunal (GSTAT) which is the forum of second appeal in GST laws and the first common
forum of dispute resolution between Centre and States.
 Transition from one regime to another is always a difficult process and it was no different in the present
case. The Government did allow for transition of all input tax credits in the books of accounts to the new
regime, subject to fulfillment of prescribed conditions. This step taken by the Government was
appreciated by the industry. However, the nuances for interpreting the conditionals of availing such
credit were not appropriately addressed. For e.g. while the Krishi Kalyan Cess (‘KKC’) was available
as input credit under the previous regime, there was no clarity on transitioning it to GST. Further,
subsequently, it was clarified in an Advance Ruling 1 that this was ineligible for transition. In the
amendments to the law introduced with retrospective effect, this position has been revalidated.

The GST law2 has now been amended in order to clarify with retrospective effect from 1 July 2017 that
the cesses levied under the pre-GST laws shall not be a part of the transitional input tax credit under
GST. Due to revenue collection challenges in the initial months, the Government also issued numerous
notices disputing eligibility of transitional credit, thereby imposing more rigorous documentation/
compliance requirements on players already reeling under transition challenges. Further, in some cases,
there was a technology challenge i.e. eligible transitional credit did not reflect on the GST portal or
dealers were unable to file the prescribed forms online.

The Government has addressed these concerns by extending the due dates for filing transitional return
(Form GST TRAN-1) for some taxpayers who have huge amounts that are blocked due to procedural
challenges. Further, even after one year of GST go-live, there had been a deferment of implementation
of provisions relating to advances and purchases from unregistered vendors, Tax Collection at Source
(TCS) for ecommerce players and Tax Deducted at Source (TDS) for works contractors which led to an
atmosphere of ambiguity for existing businesses as well as those looking to set up new ventures. One of
the focus areas for

Benefits of GST Implementation

Key benefits of the GST announcement are detailed below:

1. As mentioned above, the GST system will create a common national market that boosts foreign
investment.
2. The cascading effect of taxation will be mitigated.
3. There will be uniformity in laws, rates of tax, and procedures across states.
4. The GST regime is expected to boost manufacturing activities and exports. This would, in turn,
generate more employment and lead to the growth of the economy.
5. Indian products would be more competitive in the international markets.
6. The GST system is likely to improve the overall investment climate in India.
7. Uniformity in the rates of SGST and IGST will reduce tax evasion to a large extent.
8. The average sales burden experienced by companies is expected to come down, thereby increasing
consumption and boosting subsequent production of goods.
9. GST is a simpler system of taxation with smaller number of exemptions.
10. There are automated and simplified methods for processes such as registration, refunds, returns of
GST, tax payments, etc.
11. All interactions will be handled by the common GSTN website.
12. The input tax credit process will be more accurate and transparent, as electronic matching will be
performed.
13. The final price of most goods will be lower when taxation is at the New GST rates. There will also be
a seamless input tax credit flow between the manufacturer, retailer, and supplier of service.
14. A huge segment of small-scale retailers may be either exempt from tax or may benefit from low tax
rates based on the compounding scheme. Consumers will further benefit if purchases are made from
these small retailers.
1.3 ABOUT AUTOMOBILE INDUSTRY

India has a robust automotive industry which ranges from a two wheelers to four
wheelers as well as a presence in varieties of commercial vehicles. It is now heading
towards electrification, albeit slowly. With increasing spending capacity, high
levels of product awareness, rapidly evolving expectations and demand
for personalized products & services, customers are taking the center stage of the
entire automotive ecosystem. Understanding changing customer needs and having
the ability to serve them differentially will be a key competitive advantage. Further,
major regulatory interventions, such as the accelerated transition from BS IV to BS
VI, adoption of electric vehicles, safety rules and stringent vehicle standards are
leading to a shift in vehicle technology.

This is creating significant challenges, not only for the automotive industry and
supplier ecosystem but also in related sectors such as energy, oil & gas,
transportation, and urban development. Also, the development of
smart infrastructure (e.g. smart cities), alternative modes of transportation and the
drive to enable electric vehicle charging infrastructure will change the face of
mobility infrastructure.

India is emerging as a priority market for global automotive companies. Indian

companies are globalizing as well. Thriving in such an environment will need a
clear strategy and the ability to manage risks and build organization capability.

The Indian auto industry is one of the largest in the world. The industry accounts for 7.1 per cent of the
country's Gross Domestic Product (GDP). Almost 13% of the revenue from central excise is from this
sector and claims a size of 4.3% of total exports from India. Despite its contribution to the economy and
growth potential, this sector has been combating the hardship of high tax rates for substantially a long
period of time now with central excise duty ranging between 12.5% to 30% coupled with introduction
of multiple cesses at revenues whims and fancies, most recent being infrastructure cess.

In GST, Automobile Dealers will be collecting and paying CGST and SGST (i.e. Central GST and State
GST on intra-state sale of vehicles. Further, in case of inter-state sale of the vehicles, they will be
collecting and paying IGST (i.e. Integrated GST, which is nothing but the summation of CGST + SGST).
Impact of GST on various aspects is as examined below:
 IMPACT ON CREDITS

Post GST, Automobile dealers are not able to avail CENVAT credit on the following indirect taxes paid
by them:

• CST Paid on purchase of vehicle, spares, consumables, accessories and assets;

• Excise Duty paid on purchase of vehicles, spares, consumables and accessories;

• NCCD, Auto Cess and Infrastructure Cess paid on purchase of vehicles;

• CVD paid on any imported Spares, accessories and consumables;

• SBC paid on input services;

• Reversal of proportionate CENVAT credit of service tax due to trading activity – Showroom Rent,
Advertisement expenses etc. In GST, all the above duties/ taxes will get subsumed, therefore dealers
should be able to avail the input tax credit of all its procurements of goods/ services except for few
restrictions laid in the GST Law.

1.4GST ON CARS

The automobile industry is among the fastest-growing and leading sectors of India. This sector alone
accounts for 49% of the country’s manufacturing GDP and 27% industrial GDP. It also provides
jobs to over 37 million individuals. As a result, at least 15% of the country’s total GST collection is
attributed to the automobile industry. Further, the implementation of the new tax regime or GST on
car system has benefited some segments more than others.

What is GST on Cars?

Typically, GST on car depends on several factors. Some of the prominent factors include –
▪ Classification
▪ Fuel type
▪ Usage
Let’s take a close look at the tables discussed below to find more on car GST rates levied on specific
factors.
 a). GST on car based on category
This table highlights the GST on vehicles as per their category.

GST
Pre-GST
Category of car Model Rate on
Tax Rate
Car

Small cars with an engine Volkswagen Polo, Hyundai Grand i10,

28% 18%
capacity less than 1200cc Maruti Suzuki Swift, and Tata Tiago.

Medium size cars with an

Honda Amaze, Nissan Kicks, Maruti
engine capacity over 1200cc 39% 18%
Baleno, and Tata Nexon.
and less than 1500cc

Lamborghini Aventador, Bugatti

Luxury car with an engine
Chiron, Toyota Land Cruiser, Land 42% 28%
capacity above 1500cc
Rover, etc.

SUVs with an engine Renault Duster, Mahindra TUV, Jeep

45% 28%
capacity above 1500cc Compass, Maruti Vitara Brezza, etc.

Mahindra eVerito and Mahindra e20.

Electric vehicles Electric vehicles owners receive a direct 20.5% 12
deduction of 7.5%

b). GST on car based on fuel type

GST
Fuel and engine type Fuel tank Pre-GST
Model rate on
of car capacity Tax Rate
car
Sub 4-meter cars with Maruti Suzuki Dzire, Toyota
an engine for Less than 1.2l Etios Liva, Hyundai Grand i10, 31.5% 29%
Volkswagen Polo, etc.
petrol

Sub 4-meter cars with Mahindra TUV 300, Hyundai

an engine for Over 1.5l i20, Maruti Suzuki Vitara 33.25% 31%
Brezza, Ford Ecosport, etc.
diesel

For petrol
Sub 4-meter cars with – more than
an engine for both 1.2l Subcompact SUVs and sedans 44.7% 43%

petrol and diesel For diesel –

less than 1.5l

Larger than 4-metres Tata Hexa, Mahindra Scorpio,

SUVs for petrol and Any capacity Ford Endeavour, Mercedes- 55% 43%
diesel engine Benz GLC, etc.

For petrol –
Larger than 4-metres
over 1.2l
non-SUVs for petrol Hatchbacks and sedans 51.6% 43%
and diesel engine type For diesel –
over 1.5l

Mahindra e20, Mahindra

Electric cars Nil 20.5% 12%
eVerito, etc.

Additionally, a standard GST rate of car along with additional cess is levied on vehicles. Like, GST,
cess is also dependent on the category and engine capacity of cars. The rate of cess levied on various
types of automobiles can range between 1 and 15%.
Previously, sales of used cars attracted VAT, and in some states, a composite rate and Excise/VAT were
not applicable on advance received for supply of goods. Many states provided the Original Equipment
Manufacturers (OEMs)/component makers with different investment-linked incentive schemes. The two
main components of this scheme were subsidies and interest-free loans allied with VAT/CST payable
on sale.
Sale of goods/service without any form of consideration was exempted from being taxed under VAT
and Service tax. Importers and dealers were ineligible for the CVD and excise duty paid by OEMs
(Original Equipment Manufacturer).When goods were transferred from the factory, excise duty had to
be paid but no VAT/CST was applicable under previous tax laws. These vehicles were exempted from
the NCCD/auto cess: 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 on Electric Vehicles

Originally electric vehicles (EV) and their key accessories such as EV chargers and EV charging stations
featured a GST rate of 18%. But, the 36th GST Council meeting held on the 27th July 2019 reduced the
GST rate on electric vehicles to 5%. The same 5% GST rate is also applicable to EV chargers and
charging stations as announced at the same meeting. This reduced rate is effective from 1st August 2019
onwards. It is important to note that this 5% GST rate will be applicable to all EV irrespective of whether
they are for private use or commercial use.
1.5COMPONENTS

These pointers focus on the influence of GST on automobile industry and its components.
▪ Consumer
Previously customers used to pay two both excise and VAT on the purchase price of bikes and cars.
On average, the combined rate used to range between 26.5% and 44%. With the introduction of the
GST regime, the rates and charges levied on vehicles have reduced. It has come down to a range
between 18% and 28%. This allows customers to pay a lower rate of tax on their purchase and
facilitates easy savings.
▪ Manufacturer
GST on a car has reduced the overall cost of manufacture by subsuming previous taxes. Thus,
manufacturers tend to benefit significantly because of this tax regime. It further improves the supply
chain mechanism and enables them to procure automobile parts at a cheaper cost.
▪ Dealer and Importer
Both dealers and importers benefit under the GST regime as it enables them to claim an input tax
credit, which was not possible earlier under the old system of taxation. IGST covers the excise paid
on transfer of stock, whereas the advance received against the supply of goods is taxed as per GST
norms.
The automobile industry has been struggling for over a year now. Factors like – economic slowdown,
liquidity crisis, inflation and slumping sentiment among others have negatively affected the
industry’s domestic sales.

1.6COMPARISON BETWEEN PRE AND POST GST COST ON

CARS

All of the above taxes gets subsumed in the GST, therefore the procurement cost to that extent will
come down as explained below in a tabulation format:

Procurement cost in the Post GST Regime:

Type of Vehicle Excise Cst Nccd- Infra Total Purchase

vehicle cost auto cess tax cost
cess
Small car 400000 12.50% 1.10% 2.00% 1% 66400 466400

Medium 750000 24% 1.10% 2.00% 2.50% 222000 972000

car
Luxury 2000000 27% 1.10% 2.00% 4% 682000 2682000
Car
Suvs car 1600000 30% 1.10% 2.00% 4% 593600 2193600
Procurement cost in the GST Regime:

Type of vehicle Igst Cess Total tax Purchase Reduction

vehicle cost cost in gst in
purchase
cost
Small car 400000 18% ----- 72000 400000 66400
Medium 750000 18% ----- 135000 750000 222000
car
Luxury 2000000 28% 2% 600000 2000000 682000
car
Suvs car 1600000 28% 2% 480000 1600000 593000

Note: Since IGST and cesses shall be fully available as credit in the GST regime, therefore they will not
form part of purchase cost and can be set-off from output GST payable on sale of the vehicl

1.7 PROS AND CONS OF GST ON AUTOMOBILE INDUSTRY

1.Taxation and variation in price of automobile According to ICRA research, there is no clarity on
the rate of taxation but it is predicted that tax benefit can be availed by small car and two-wheeler
segment and reduced price would ultimately boost the demand whereas bigger cars and SUV should
have to pay high tax. According to ICRA viewpoint there could be 8-10%decrease in vehicle rate if GST
turn out to be 18%.

2. Input tax credit It means at time of paying tax on output you can reduce the tax already paid on
input. Under model GST law capital goods covers only those goods which are used at the place of
business of supply of goods’ thus only goods which are used in place of business of OEMs seems to be
eligible for availing input credit .So, this poses a challenge to the OEMs in availing credit to the tools in
the vendor permission which cost is recovered by vendor. Thus, either cost of tooling would increase
for OEMs or they will have to find out some alternative in the form of in-house development.
3. Unified market With the introduction of GSTwhole country would be treated as one market as price
of the product would be same everywhere due to removal of cascading effect of taxation under model
GST law.

4.Job work and GST Job work is processing the goods supplied by principal to complete a part or
whole of the process GST law allow principal to send taxable goods without paying taxes to job worker
and must be bought back to principal in 180 days.

5. Time of supply for payment of GST Under GST the liability for payment of CGST and SGST will
arise at the time of supply of goods at earliest of :

• Date of removal of goods

• Date on which goods are available to recipient

• Date of invoice • Date of receipt of payment with respect to supply

• Date of receipt of goods as shown in the book of account of recipient

6. Dealer incentive scheme and GST 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.
This requires a deeperanalysis. 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.

7. Impact of GST on logistics Model GST law is expected to ease out the various bottlenecks and
complexities involved in transportation of goods using road logistics.

8.GST is yet to provide clarity on taxation for excise duty or vat exempted manufacturing unit Under
the proposed GST regime treatment of exemption is not clear at present. However, industry expect
thatexisting unit would most likely to reap benefit till the scheme expire.Ashok Leyland and hero
MotoCorp is burning example.

9. 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 is procured on payment of excise duty and CST, such
excise dutyand 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 has 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.

10. Lack of clarity on MOU incentives The investments by automobile companies are significant, and
have a 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
flowback of IPS, since GST on inter-state sales is not credited to the Origin State. Growth drivers have
turned supportive across segment.

1.8 BENEFITS

• The present levies such as NCCD and automobile cess which are out of credit mechanism would be
abolished with introduction of GST. Thus, reducing the additional cost burden.
• The practice of rate-buying which means buying of a product from the state where less tax is levied as
compared to other state would be stopped with introduction of uniform taxes across the country.
• The interstate tax which is currently levied with no credit mechanism adds to the additional cost would
now benefit from the introduction of Integrated Goods & Service Tax (I-GST) where credit would be
available.
• It is expected that eco-friendly/Hybrid cars would either be subject to lower rate of tax or exempted
from environmental point of view.

1.9 DEMERITS

• The difference in rate of luxury cars such as suv’s and small cars such as sedans is expected to continue
in GST.
• The levy of road tax which is imposed on usage of vehicle by the consumer is not expected to be
subsumed into the GST and would continue to be charged in the same old fashion.
• Overall the GST would be beneficial for the automobile industry with the government promoting domestic
manufacture and taxing the high end cars with higher rate. As high-end automobiles imported would be charged
by import duty which would not be subsumed in the GST.

1.10GST ON USED CARS

Originally used cars featured the same rate of GST as well as compensation cess as applicable to
new vehicles. However the rates were subsequently brought down in order to boost the used car
market. The currently applicable rates include 12% for smaller pre-owned vehicles i.e. petrol cars of
engine capacity up to 1200cc and diesel cars of engine capacity up to 1500cc. The applicable rate of
GST on used cars with engine capacity exceeding 1200cc for petrol and 1500cc for diesel cars is
now 18%.

While lower GST rates compared to the earlier 28% have definitely helped, the most significant
change has been the revision of rates applicable to compensation cess. As of 25th January 2018,
compensation cess for all used cars irrespective of size was revised to nil in case no input tax benefit
has been claimed under CENVAT credit or in lieu of any other taxes paid. The following is a
representative list of taxes applicable to used car sales in India after implementation of GST on car
(pre-owned) sales

TYPEOF GST ON USED COMPENSATION TOTALTAXAPPLICABLE

USEDCAR VEHICLE CESS

Petrol Car with 12% NIL 12%

engine capacity
up to 1200cc

Petrol Car with 18% NIL 18%

engine capacity
over 1200cc
 1.11 ISSUES

1. GST payable on advances

One of the biggest issues for the sector post implementation of GST was the
requirement to deposit GST on receipt of advance which was leading to significant
blockage of working capital. It is a common practice in this sector to receive
advances from dealers/ distributors as well as customers and thus, taxing the
advance was leading to a significant working capital blockage. However, the
requirement to pay advances was done away with w.e.f. November 15, 20177,
which was a welcome relief for the industry players.

2. GST on sale of second handed cars

GST is leviable only on margin i.e. Sale Price less Purchase Price/ Depreciated
Value i.e. no GST in case the margin is negative. Clarity was also provided on
Original Equipment Manufacturers (‘OEMs’) using cars for display, exhibition
etc.

3. Valuation

Unlike the erstwhile Indirect tax regime, under GST there is no Maximum Retail
Price (MRP) based valuation, which applied to parts sold in the after sales market.
For all the OEM and auto component product segments, uniform transaction
valuation methodology is to be followed. The automobile industry has seen
significant disputes under central excise valuation like:

• Inclusion of State or Industrial Promotion Subsidies (IPS)

retained by the manufacturer • Deducibility of post-sale discounts
from the dutiable value under excise
• Treatment of PDI charges and other dealer reimbursements, advertisement
charges recovered from dealers etc.,

• Sales through marketing companies and mutuality of interest

 • Receipt or payment of subventions in the distribution chain

The GST law continues with the concept of ‘Transaction Value’ which is a welcome
measure. The Transaction value shall be adopted where the supplier and buyer are
not related and price is the sole consideration for sale. Some of the significant
valuation points arising out of the GST legislation are as follows:

• Subsidy: As per the GST law, any subsidy that are provided by the State
Government or Central Government are excluded from the levy of GST. The
majority of automobile manufacturers enjoy special benefits from the State
Government in the form of State IPS. These subsidies are generally given in
the form of refund of taxes paid or as a soft loan. Exclusion of subsidy from the
taxable value could be considered as a welcome change.

• Discounts in normal trade practice: Where a company intends to provide deduction

for discounts either before or at the time of supply of goods, the same would be
allowed subject to the condition that the amount of discount is shown in the invoice
issued by the company.

• Post supply discounts: Under GST law, the post supply discounts are allowed as
a deduction in the taxable value subject to fulfillment of following conditions:

– Amount provided as discount should be a direct consequence of an

agreement with the customers. – Such agreement should have been executed
either before or at the time of supply of goods. – Proper document evidencing
issuance of discount to be provided to the customers.
– Discount amount should be specifically linked to those relevant supply invoices
that were initially issued by the taxable person at the time of supply of goods.

– Input tax credit should be duly reversed by the customer.

There are practical challenges in claiming post sale discounts especially in the
context of practice followed by the automobile industry, as these discounts or
incentives are not applied to specific invoices and could be schematic or
seasonal.
While all business usually offer different types of marketing schemes and offers, in
the automotive sector, the industry is structured in a way that the manufacturers/
importers offer a variety of pre and post-sale discounts to dealers, while the dealers
also have various onward schemes/ promotions for customers (where the cost
is sometimes fully or partly borne by the dealer, similarly by the automotive
company and sometimes shared with third parties, such as financing companies).
The secondary market schemes in this sector are distinctive and the players have set
up different transaction models (costs being shared by manufacturer/ trading
company or distributors). While the industry players, during implementation of GST
have taken positions relating to different types of marketing schemes, a conclusive
clarification on the same is still not available. Further, in some States, officers at the
ground level have also raised queries relating to the positions taken.

4. Valuation in case of supplies to ‘Related Parties’ -

Under GST Law, any supply of goods or services or both between related persons
or distinct persons, as per Section 25, when made in the course or furtherance of
business, will be treated as supply even if made without any consideration and such
supply would attract GST.

The valuation in case of supply to ‘related parties’ has always been a key area of
litigation under erstwhile excise regime. Under the GST regime also, the valuation
in case of related party transactions especially in case of cross border transactions
continues to remain a complex area due to open ended valuation rules and lack
of clear guidelines.

Rule 28 of the Valuation Rules provides the following sequential options to be

adopted in case of supplies between related persons:

• Open Market Value (‘OMV’) of such supply

• Value of supply of goods or services of like kind and quality

• 110% of the cost of supply of such good services or

• Reasonable means consistent with the principles and general provisions of section 15
Another option available for when goods are intended for further supply ‘as
such’ (such as manufacturing company to trading company), is to value goods
are 90 percent of the final sales price.

Further, the second proviso to Rule 28 states that where the recipient is eligible for
full input tax credit, the value declared in the invoice is deemed to be the open
market value of the goods or services and therefore would be acceptable from a
valuation perspective. Whether the declaration of a nominal value in the invoice
by the supplier simply due to the availability of input tax credit to the recipient,
would be acceptable to tax authorities needs a careful consideration.

5. Export Refund/ Rebate

While there was ambiguity surrounding the mechanism/ process of seeking export
related refunds/ rebates at the time of the GST implementation, as highlighted
above, the Government has focused on setting up a process for speedy disbursal of
pending IGST refund claims and streamlining of the refund process.
However, there as various restriction to export rebates claimed under Rule 96(10)
which will need to be and analyzed.

6. Abolition of multiple cesses and transition credits

In the erstwhile Indirect tax regime, the automotive sector was required to pay
certain duties/ surcharges on over other Indirect tax levies. Some such duties were
National Calamity Contingency Duty, Infrastructure Cess, Tractor Cess,
Automobile Cess etc. Under GST, the only additional cess relevant for the industry
is the GST Compensation Cess.

Further, the Industry followed a practice of availing the credit of Education Cess and
the Secondary and Higher Education Cess (‘cesses’) in Form GST TRAN-1, but the
Government has recently but retrospectively amended the GST Law with effect
from 1 July 2017 to exclude these cesses from the eligible duties to be transitioned
to GST. As a result, the Department is issuing notices to recover the cesses, the
credit of which was taken in Form GST TRAN-1 along with interest. This step is a
 point for many industries to start reversing the Education Cess and the Secondary
and Higher Education Cess, the credit of which was taken in Form GST TRAN-1.

7. Job Work

There are various job work models relevant for this sector and at the onset of GST
there was considerable ambiguity surrounding aspects such as the procedure for
principal – job work related transactions, valuation etc. An extensive clarification
on clearance of goods from job worker premises issued vide Circular 8
highlighting the appropriate treatment in case of different types of job work
transactions. A quick summary of the key aspects clarified is as follows:

• Use of own goods by Job worker: The job worker, in addition to the goods received
from the principal, can also use its own goods for providing the job work services.
However, there have been Advance Rulings issued on this point, which raises a few
questions around the final treatment of the same.

• Registration of job worker: Job worker is required to obtain registration only in cases
where its aggregate turnover (to be computed on pan-India basis) in a financial year
exceeds the threshold limit regardless of whether the principal and the job worker
are located in the same State.

• Supply of inputs/ capital goods by job worker

_ Sending goods to a job worker is not a supply as such. However, it acquires the
character of supply when the inputs/ capital goods (other than moulds and dies, tools etc.)
sent by the principal for job work are not received back or further supplied by the principal
within the specified time i.e. one year and three years respectively from the date when it
was sent out to the job worker.

– In such cases, return of goods by the job worker would also be treated as a supply
and would be liable to GST. The job worker would be liable to pay GST if it is
liable to be registered (if over the threshold limit for registration), else, the
principal has to pay GST on reverse charge basis.

– Further, in such cases, the principal would need to consider such goods delivered
to the job worker as a supply made on the date of original delivery of the goods
 to the job worker and to be disclosed in the return for the period in which the
period of one year/ three year expires. The principal will be required to pay tax
along with interest for the intervening period.

• Documents for movement of goods

– The principal has to issue a delivery challan for sending the goods to a job worker.
Subsequent dispatch of goods from one job worker to another job worker can
be done on the basis of fresh delivery challan issued by the first job worker or
by endorsing the original delivery challan issued by the principal to next job
worker.

– In case of direct delivery by the supplier of the goods to the job worker on
behalf of the principal, the job worker’s name and address should be
mentioned as consignee on the supply invoice.

• Input tax credit on inputs/ capital goods procured

– The principal would be eligible to claim credit of GST charged on the inputs/
capital goods, irrespective of whether such goods are received by the principal
and delivered to the job worker by its or directly delivered to the job worker by
the original supplier.

– The job worker can claim credit on inputs etc. used by it to

supply job work services. • Direct supply of goods from job
worker’s premises
– Direct supply of goods from job worker’s premises by the principal would be
regarded as supply by the principal and not by the job worker. In such cases, all
the compliances would need to be made by the principal, as if it is the supplier.

– Waste and scrap generated during the job work can be supplied by the job
worker directly from its place of business if it is registered. If it is
unregistered, the principal can also supply such waste and scrap from job
worker’s premises.

8. Vendor Tooling
 The Central Board of Indirect Taxes and Customs (CBIC) has issued Circular no.
47/21/2018-GST dated 8th June 2018 contemplating the following tax
implications on vendor tooling transactions between OEM and a component
manufacturer:
Points yet to be clarified

• Practical difficulties in distinguishing between the above scenarios

• GST implications on tooling scenarios where the tool is developed by the

component manufacturer and ownership transferred to OEM;

• Availability of ITC on GST charged by the component manufacturer in instances

where the OEM and component manufacturers are in two different states;

• GST implications on tooling transactions where OEM and component manufacturer are related
parties.

Clarifications have been provided on scenarios for inclusion/ non-inclusion of

amortization cost on child parts made out of moulds supplied on FOC basis. In the
industry, it is a general practice that for tools, moulds, dies, jigs and fixtures
manufactured by a vendor/ component manufacturer, the ownership is transferred to
the OEM whereas the possession remains with the vendor. Such tools are then used
to manufacture parts and components by the vendor. Under the previous regime, the
value of tools provided by an OEM to a tool vendor/ component manufacturer was
includible in the value of manufactured components for payment of excise
duty. Under GST, these may be construed as two supplies i.e. supply of tool by
vendor to the OEM and supply of components manufactured using those tools. As
per the clarification9 issued by authorities, value of moulds and dies, jigs and fixtures
need not be included in the value of job work services provided its value has
been factored in the price for the supply of job work services by the vendor. In this
regard, there are some additional aspects to be assessed, such as what would be the
flow of documentation when multiple parties (OEM, tool vendor, manufacturer/ job
worker) are involved. Some companies structure these transactions as a sale
and lease back, the GST implications of which also need to be carefully evaluated.

Other Focus Areas and Open Issues

 9. Classification of completely built units vs. kits

A long standing issue in this sector pertains to the classification of vehicles in kit
form at the stage of imports. Typically, vehicles can be imported as Completely
Built Units (‘CBUs’), Semi Knocked Down (‘SKD’) kits, Completely Knocked
Down (‘CKD’) kits OR as parts and components. Moreover, there can be various
levels of SKD / CKD kits, depending on the level of dis-assembly. The fundamental
difference in import at varying stages of construct of the vehicle are the extent of
localization or element of processing/ manufacture in India. In case of CBUs, there
is little or no processing required on the vehicles in India. In SKDs, there is limited
assembling activity required to be undertaken in India. In case of CKD kits, there is
assembling activity required to be undertaken in India, while in case of import of
parts and components only, the entire manufacturing of the vehicle is undertaken in
India. For various historical policy reasons, typically the customs duty rates on
vehicles imported in CKD/SKD form depends on the varying stages of construct
differs, with Customs duty on CBUs being the highest, whereas duty on import of
only parts and components being relatively lower. This issue of classification of
imported auto parts has come up for consideration before various forums numerous
times and now the stakes are considerably high given that the effective Customs
duty on import of such vehicles could be over 180% of the import value. Given the
same and tribunal level rulings on the same, it is imperative that there is absolute
clarity around classification and rationalization of duty rates in relation thereto.
10. Classification of parts

While a number of auto parts and components are built for specific purposes, there
could be more than one way of application of such parts/ components, in absolutely
different ways. Chapter 87 of the GST rate schedule has a distinct heading for
automobile parts, along with a corresponding (higher) rate whereas such items
(based on their use) could also be classifiable under other more specific Chapter
headings. This could lead to considerable ambiguity surrounding applicable rate, for
e.g.: bearings may be classifiable under Chapter 82 (18%, whereas, automobile parts
are classifiable under Chapter 87 (28%). Similarly, classification of other items such
as windshields, fasteners, nuts bolts, locks etc. could also be disputed. In such a case,
the industry players have two options i.e. adopt the highest rate on a conservative
basis (which could lead to an increased price in the hand of the final customer) or
seek an advance ruling on classification in such cases. Also, refund on account of
invested duty structure could be explored. However, this is one area in which
clarifications would be welcome.

11. After market transactions

In this industry, there are different kinds of aftermarket transactions in which

different roles are played by the OEM, Indian National Sales Company, dealer and
customers (depending on of supply chain model and marketing schemes adopted).
The after-market transactions may consist of warranty, extended warranty, annual
maintenance contracts (AMC), paid services, etc. The issue of composite supply vs.
mixed supply vs. single supply needs to be tested in case of warranties, AMCs,
repair works, painting jobs, body-building works, etc. For instance, in case of
comprehensive AMCs contracts, the dominant intent is to keep the vehicle in
a running and well-maintained condition and not to merely supply parts used in
repair. Therefore, even though the supply of goods may be of high value, these are
still incidental to the overarching requirement of maintenance and thus, it is to be
seen whether the same may be termed as a composite supply of service attracting
GST accordingly.

However, in a GST circular on ‘Clarifications of certain issues under GST’ dated 8

June 2018 issued by CBIC, one of the issues addressed was “How is servicing of
cars involving both supply of goods (spare parts) and services (labour), where the
value of goods and services are shown separately, to be treated under GST?” In this
regard, it was clarified that the taxability of supply would have to be determined on
a case to case basis looking at the facts and circumstances of each case. Thus, where
a supply involves supply of both goods and services and the value of such goods
and services supplied are shown separately, the goods and services would be liable
to tax at the rates as applicable to such goods and services separately. Thus, the after-
market transactions in automobile industry need to be analyzed properly in terms of
facts of each case and the manner in which the transactions are undertaken.
An advance ruling on this issue is while reviewing a comprehensive annual
maintenance service, which also involved incidental supply of spare parts/ goods,
the authority ruled that since the supply of service is for one and fixed price – is
naturally bundled with the incidental supply of goods and thus, should be
construed as a composite supply of service.

Every registered person under GST is entitled to take credit of the input tax charged
on supply of goods or services or both which are used or intended to be use in the
course or furtherance of his business. However, availment of the ITC is subject to
four conditions namely, possession of tax invoice/debit note/such other tax paying
document; receipt of goods and /or services ; payment of tax appropriately to the
Government; and filing of the GST return.

A peculiar situation in auto industry exists where dealers make warranty

replacements to customers on behalf of the OEMs and charge the same to OEMs,
the same would be subject to levy of GST. Since, the OEMs would not receive the
goods, the credit of the GST charged by the dealers may not be available to the
OEMs as one of the four conditions of availing ITC is that the registered person
should have received the goods. The industry is exploring several options such as
“Bill to OEM and Ship to customer”, treating the warranty replacement as
composite supply of service and availing the credit as services without actual
receipt of goods etc.

12. Free Services

For overseas auto manufacturers, overseas headquartered companies are heavily

involved in activities relating to research & development, brand marketing, region
wise marketing initiatives, central procurements (especially on Information
Technology such as software). While, in some cases there is a clear charge for
these transactions, from a Transfer Pricing perspective, certain activities may
qualify under the head of ‘stewardship function’ with no identifiable charge. It is to
be reviewed, however, from a GST perspective, as to whether such transactions
would qualify as free services being provided by the overseas entities to the Indian
entities. If yes, the same would be liable to GST under a reverse charge mechanism.
It is imperative to analyze all such transactions to evaluate as to whether some of
these could be construed as free services being provided by the overseas entities to
the Indian company. In case such services qualify as taxable services, the valuation
of the same needs to be agreed and practical steps to be taken (such as Chartered
Accountant certificate certifying cost allocation) to mitigate potential disputes.

13. Exemption for Export under FTP 2015 - 2020

The Foreign Trade Policy 2015-20, as notified by the FTDR Act, 1992, would
continue under the GST legislation thereby facilitating exporters to procure goods
under special export incentive schemes like Advance Authorization scheme (AA)
and Export Promotion Capital Goods Scheme (EPCG), etc. Further, under GST,
the incentive schemes would provide exemption to exporters from payment of IGST
and the compensation cess leviable thereon. The said exemption was initially
available till 31 March 2018 which was further extended up to 31 March 2019. The
industry is expecting that the said exemption should be continued even after 31
March 2019 for various reasons. Furthermore, the possibility to convert into an EOU
could be explored by the OEMs after getting a feasibility analysis done qua a long-
term intention to engage into exports.

14. Input Service Distributor vs. Cross Charge

Under GST, supplies between State registrations of an entity are subject to tax,
even if the same is without consideration. In view of this, companies are required
to undertake analysis of activities undertaken by head office for its branches and
vice versa; identify the value of such services and discharge tax liability thereon
or distribute it in by obtaining an Input Service Distributor registration. The said
exercise involves huge effort and time. Further, it leads to complexities and
additional GST compliances.
 15. Area based exemptions

In pre-GST regime, industry used to enjoy fiscal benefits in the North Eastern
region, Himachal Pradesh, Uttarakhand and J&K in the form of excise duty
exemptions/ refunds. Under GST, those refund benefits have been withdrawn and
are proposed to be compensated/refunded as budgetary support. The current
proposal restricts refunds to the extent of prescribed percentage of CGST / IGST
payout in cash (i.e. after adjusting all input credits) for units in the fiscal benefit
zones for area based exemptions whereas percentage of SGST benefit for State
Industrial policy. This may result in substantial reduction of the quantum GST
refunds as compared to the present benefit available or extend the period required
to accrue the benefit and may make units unviable. Further, it is to be highlighted
that the proposed refund model seems to restrict the eligibility of refund to only
actual manufacturers, thereby not addressing concerns related to principal
manufacturers who operates through business models such as third party
manufacturer (3Ps) and job working arrangements, mainly in Himachal &
Uttarakhand. Thus, the quantum impact of such change in the benefit schemes
should be carefully evaluated to ensure that the principle of promissory estoppel is
upheld. Further, some industry players have also filed writ petitions against this
reduction in the quantum of benefits, which are currently pending.

16. State Incentives

The investments by automobile companies are significant and have a multiplier

effect on the State’s economy. As highlighted above, majority of the automobile
manufacturers enjoy special benefits from the State Government in the form of
State IPS, which are given in the form of refund of VAT/GST paid or as a
loan. With the introduction of GST, taxes move from the originating State to
consumption State. This would result in significant reduction of flow-back of IPS
since GST on interstate sales is not credited to the originating state. The OEMs are
seeking the SGST paid to the State as subsidy from the Government. 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 effect on project viability for some of the (newer)
projects could be severe. A similar impact of the period required to extend the
period to accrue the IPS would in all likelihood be experienced here.

17. Supply of cars/ parts/ components on FOC basis for testing purposes

The cars manufactured in the plant are registered in the Company’s name in the
same State. In such a case, no GST should be payable on self-billed cars.
However, in case the cars are transferred from one State’s registration to another,
given that branches in different States would qualify as distinct taxable entities,
GST would be payable on such stock transfer. However, it is unclear if temporary
movement of such cars should attract GST as a supply, and it so, on what value?
FOC supplies to third parties should not be liable to GST. Position on the same
should be confirmed by the authorities.

18. Sale of old car by customer to the dealer not in exchange of any car

The term supply includes supplies for a consideration in the course of furtherance of
business. Given the same, the question is whether the customer is not selling these
old vehicles in the course of furtherance of business, and thus, the transaction should
not be subject to GST liability in the hands of the customer. However, such
a position needs to be confirmed by the authorities. Further, in case it is a registered
taxable entity (such as a company), GST would be payable.

19. Cars sent for exhibitions/ events

In case cars are moved for the purpose of exhibition or event, the same remains
within ownership and control of the Company and applied for self useand thus,
should not be liable to GST. In needs to be analyzed as to whether such supplies
should be treated as FOC supplies between distinct persons/ related parties and
should be subject to GST.
20. Free Service Coupon vouchers

These coupons will be issued at the time of sale of the vehicle. As per the time
of supply rule, GST on such coupons needs to be paid immediately on the date
of issue of such vouchers. As per the policy of some manufacturers, the amounts
in respect of such coupons will be redeemed to the dealers only once
the customer brings the vehicle for repair to the workshop. Therefore, dealers
would have to pay tax on such coupons immediately on its issue but the said
taxes can be collected from the automobile manufacturers only when the vehicle
comes for the repair leading to unnecessary blockage of funds in taxes.

Disclaimer: The above-mentioned updates are intended for informational purposes

only. They constitute some select important points in the GST law. There could be
other additional features that too may be important.All images in this presentation
are protected by copyright, trademark, patent, trade secret and other intellectual
property laws and treaties. Any unauthorised use of these images may violate such
laws and shall be punishable under appropriate laws. Our sharing of this
presentation along with such protected images with you does not authorise you to
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employing any data mining, robots or similar data and/or image gathering and
extraction methods in connection with the presentation.

1.10 GST ON CAR INSURANCE

How GST has impacted vehicle insurance

The effects of GST on car insurance are closely tied to the parameters of risk and premiums. Before
GST on vehicle insurance came into being, auto insurance premiums were inclusive of service tax.
Thus, all vehicle insurance, including car insurance and two-wheeler insurance as well as insurance
riders taxed premiums at a rate of 15% under the original service tax system. After the enforcement
of GST on vehicle insurance, this rate has gone up to 18% on premiums payable. Hence there has
been a hike in the cost of insurance due to GST being levied.
Impact of GST on Car Insurance Premium

This can be broken down further. Prior to the introduction of GST on car insurance, the service tax
on car insurance premiums stood at 15% . When broken down this amounted to 14% as service tax,
0.5% as Krishi Kalyan cess and 0.5% Swachh Bharat Cess. After the new system came into force
the car insurance GST rates stood at 18% which resulted in policyholders having to pay 3% more
on premiums than they would have had to prior to GST without accounting for inflation and other
factors.

How GST Impacts Customers?

If, for example, your annual car insurance premium stood at Rs. 10,000 without tax prior to GST,
you would have had to pay 15% of this sum or Rs. 1500 as service tax and your final premium
amount would have stood at Rs. 11,500. Now, if the GST rate of 18% is substituted in this case, the
premium amount comes out to be Rs. 11,800 which is Rs. 300 more than you would have paid in
the time before GST on car insurance was levied.

GST on Car Insurance in India

However, possessing third party insurance at the very least, is mandatory when purchasing and
driving vehicles on Indian roads. With the higher car insurance GST rates now levied, vehicle
owners now pay higher premiums to possess even this basic level of coverage. In order to make
their products more attractive, service providers are now enhancing insurance products with features
like more coverage, cashless garages, flexible plan structures, discounts on online purchases and
high quality customer service in order to balance out the effect of higher car insurance GST rates.
If you’re seeking car insurance, you can avail all of these and more by choosing the car Insurance
plan available on the Finserv MARKETS portal.
 1.3 How did the price of car change due to GST?

Previously, two major taxes were charged to the consumers of cars which were VAT and excise duty.
The combined rate would range anywhere between 26.5% and 44%. As compared to this, the GST rates
on cars are much lower ranging between Nil and 28%. This has reduced the price of cars and benefited
consumers. Price comparison of SUVs, sedans and hatchbacks is shown below:

SUV:-

Particulars Pre- GST (Rs) Post- GST (Rs)

Cost of manufacturing 10,00,000 10,00,000

Excise duty at 30% 3,00,000 –

Production cost 13,00,000 10,00,000

Transportation, etc. 10,000 10,000

Sales charge 25,000 25,000

Base amount for tax calculation 13,35,000 10,35,000

VAT at 14%/ GST at 28% 1,86,900 2,89,800

Cess at 15% – 1,55,250

Price 15,21,900 14,45,050

 Sedan:

Particulars Pre- GST (Rs) Post- GST (Rs)

Cost of manufacturing 8,00,000 8,00,000

Excise duty at 27% 2,16,000 –

Production cost 10,16,000 8,00,000

Transportation etc. 10,000 10,000

Sales charge 25,000 25,000

Base amount for tax calculation 10,51,000 8,35,000

VAT at 14%/ GST at 28% 1,47,140 2,33,800

Cess at 15% – 1,25,250

Price 11,98,140 11,94,050

 Hatchback:

Particulars Pre- GST (Rs) Post- GST (Rs)

Cost of manufacturing 5,00,000 5,00,000

Excise duty at 12.5% 62,500 –

Production cost 5,62,500 5,00,000

Transportation etc. 10,000 10,000

Sales charge 25,000 25,000

Base amount for tax calculation 5,97,500 5,35,000

VAT at 14%/ GST at 18% 83,650 96,300

Cess at 1% – 5,350

Price 6,81,150 6,36,650

Under GST, the price of small cars or hatchbacks reduces primarily due to the cumulative lower tax
rates as shown in the above calculations. In the above example, we have considered a scenario where
the manufacturer is directly selling the cars to consumers through his showroom.

If we consider that the manufacturer sells it to a dealer and thereafter the sale takes place to the consumer,
price would further reduce. It is due to the removal of the tax-on-tax effect that existed in the erstwhile
regime, i.e., Cenvat credit could not be offset from output VAT.
What is the value of supply to compute GST and cess on cars?

(A) Value of supply: Under GST, the value of supply is the money that the seller collects from the
buyer in exchange for the sale of goods or services. In the case of related parties, GST is charged on
transaction value. Transaction value is the value at which unrelated parties would transact in the normal
course of business.

For example, Mr A buys Hyundai Grand i10 for Rs.6.5 lakh from a dealer and accessories. Then, GST
and cess are calculated as follows:

• Sale price: Rs.6,50,000 (value of supply)

• GST rate at 18% (comes under the category of small cars)
• GST cess at 1%
• Total value: Rs.6,50,000 + Rs.1,23,500 = Rs.7,73,500

(B) Discounts in normal trade practice: If a dealer provides deduction in the sale price by way of
discounts before or at the time of supply and shows such discount in the invoice, it is excluded from the
value of supply. If such discounts are not reflected in the invoice, then GST must be paid on the same.

(C) Post supply discounts: Post supply discounts are allowed as a deduction from taxable value only if
the following conditions are met:

1. Discount provided should be a direct consequence of an agreement with the customers.

2. Such an agreement should be executed either before or at the time of supply of goods.
3. ITC should be reversed by the customer.
4. The discount should be linked to the relevant supply invoice, which was initially issued by the
taxable person at the supply of goods.

(D) Insurance, registration etc. as reimbursements: A dealer collects various amounts as a pure agent
such as insurance, registration charges, credit card swiping charges etc. GST will not apply on amounts
collected as a pure agent. But, if he collects amounts over and above the actual amounts incurred then
in that case, GST would be charged on the same.
 What is the differential tax rate applicable to cars?

Leasing of vehicles purchased and leased before 1st July 2017, would attract GST at a rate equal to 65%
of the applicable GST rate (including Compensation Cess), also at the time of sale as per Notification
37/2017 Central tax.

What is the GST rate with HSN code on cars?

The GST rate on cars depends on several factors such as fuel type, length and engine capacity. HSN
code for cars is covered under Chapter 87.

Based on engine capacity

Category Model HSN GST Compensation

Code rate cess

LPG or CNG vehicles with Volkswagen Polo, Hyundai 8703 18% 1%

engine capacity not exceeding Grand i10, Maruti Suzuki Swift,
1200cc and length not etc.
exceeding 4000mm

Diesel vehicles with engine Honda Amaze, Nissan Kicks, 8703 18% 3%
capacity not exceeding Maruti Baleno
1500cc and length not
exceeding 4000mm

Engine capacity greater than Lamborghini Aventador, Bugatti 8703 28% 17%
1500cc Chiron, Toyota Land Cruiser

SUVs (Engine capacity Renault Duster, Mahindra TUV, 8703 28% 22%
greater than 1500cc) Jeep Compass, Maruti Vitara
Electric vehicles Mahindra eVerito and Mahindra 8703 5% Nil
e20. Electric vehicles owners
receive a direct deduction of 7.5%

GST on import of cars

Import of cars attracts IGST. The value considered for calculating IGST is the assessable value + basic
customs duty.

For example,

• Assessable value= Rs.5,00,000

• BCD= Rs.50,000
• Value for charging IGST= Rs.5,50,000
• IGST at 18%= Rs.99,000

To promote ‘Make in India’, the government has increased customs duty on imported cars:

• Semi knocked down kits of passenger vehicles- Increased to 30% from 15%.
• Completely knocked down kits of passenger vehicles- Increased to 15% from 10%.

Customs duty is included in the value for charging IGST. This will lead to an increase in IGST amount
as well. Thereby increasing the overall price of the product.

Exemptions under GST for cars

GST on used cars: Dealers of used cars pay GST on the difference between the selling and the buying
price to eliminate the cascading effect of taxation. In case the margin is negative, then there is no need
to pay GST. Also, the government has exempted GST on the purchase of used cars from unregistered
dealers.

The GST rate is Nil on vehicles used by physically disabled persons.

Input tax credit on motor vehicles

Section 17(5) talks about blocked credit and thereby disallows ITC on certain motor vehicles. ITC is not
available on motor vehicles used for transport of persons with a seating capacity of less than or equal to
13 persons including the driver. ITC is available when vehicles are used for below purposes:

Lets elaborate on the availability of ITC on cars:

1. Employer giving the car to the employee for business use- As per section 17(5), clause (a) and
clause (aa), ITC can be claimed on motor vehicles used for business purposes. If the car is given
to the employee for personal use, then ITC cannot be claimed.
2. ITC on demo cars (at showrooms)- The general rule is that the ITC of motor vehicles with a
seating capacity less than 13 persons are blocked as per section 17(5). But, in the case of car
dealers, the demo car is not purchased with an intention for retail sale. So, it can be treated as a
capital asset, and full ITC can be claimed.
3. ITC on renting of cars for business or employee transport- As per section 16(1), all registered
persons can claim ITC on goods or services used in the course or furtherance of business. Also,
ITC is available on leasing/renting of motor vehicles with seating capacity more than 13 persons
as per amended section 17(5). Thus, in this case, an employer can claim ITC on GST charged by
the service provider to rent motor vehicles only if the approved seating capacity is greater than
13 persons.
4. Transport business purchasing cars for passenger transport service or cabs- If a person is in the
transportation of passengers, he can claim ITC on such vehicle purchase.
 CHAPTER 2 RESEARCH METHODOLOGY

2.1 OBJECTIVE PF THE STUDY.

The Objective of the study is to find implications of Goods and Service Tax (GST) on
automobile industry of India, whether it will act as a boon or bane for industry. The other sub-objectives
are as follows:

- Sub-Objectives :-

• To study how Auto loans will get impacted after GST implementation
. • How GST will affect Automobile industry.

2.2 SCOPE OF THE STUDY

1. To understand the conceptual framework of GST.

2. To know the significance of GST

3. To analyse the impact of model law GST on Indian automobile sector.

4.To find out the growth drivers across segment

2.3 LIMITATIONS OF THE STUDY

1. The questionnaire is ignored by the some group of people.

2. Due to the pandemic we have to dependent on the internet sources.
3. Resources such as library not available due to present scenario.
4.Most people lack the depth of knowledge needed for it.
5.Most of them didn’t have a Car so it was very difficult to gather the proper Data from the questionnaire.

2.4 SIGNIFICANCE OF THE STUDY

1. The main significance of the study is to gain knowledge about rules and regulations of pre and post
gst act.
2. To understand the problems face by the person in understanding the gst and to overcome it.
3.Through survey the opinions of the persons can be compared with the actual scenario .
4. The main purpose was to study how the automobile industry have grow.
5. Study helped in understanding the different rate system of the cars.

2.5 BRIEF PROBLEM OF THE STUDY

The study is about the impact of gst on automobile industry with reference to four wheelers
The study consists of the following points :-
1.This study shows the current scenario of the gst.
2.GST is the new tax which was enforced on 1st july 2017.
3.In this study the new rules and regulations are explained.
4.The study focuses on the rates after the implication of the gst.
5.The questionnaire show the opinion of the public at large.
6.The study also has the information about the rate of used car.
7.Everybody must be aware of the motor vehicle act 2019.
8.car must be registered with the proper law.
9.liscence must be there.
10.This study shows us how one tax system has change the whole market

2.6 SAMPLE SIZE

Population :500
Sample size 156
Sample unit :Public at large
 2.7 DATA COLLECTION
A. Primary Data :- Data which are collected fresh and for the first time and thus happens to be original
in character. Primary data are gathered for specific purposes.
Example :- Questionnaire.

B. Secondary Data :- Data collected from primary data (Questionnaire) they are already exist somewhere
for the purpose of study this data is collected.

2.8 TECHNIQUE AND TOOLS

• The study is depended on only secondary data

• The period of the study is limited
• I have collected data from:-

a) Friends and family .

b) My colleagues
c)
2.9 METHOD OF DATA COLLECTION
Random Sampling Method:-
Random sampling method is used to collect the information. This method is a subset of individual( a
sample) chosen from a larger set (a population). Each individual has the same probability of being
chosen at any shade during the sampling process and each process and each subset of k individual has
the same probability of being chosen for the sample as any of the subset of the k individual.

2.10 HYPOTHESIS
● NULL HYPOTHESIS
GST had not made a considerable impact on the profitability of the Indian automobile industry.
● ALTERNATE HYPOTHESIS
GST had made a considerable impact on the profitability of the Indian automobile industry.
Hypothesis 1
. The common people is un- aware to GST in India (confined to unified taxation.)
Hypothesis 2.
The common people is afraid of the up-market possibility and rise in prices due to increased taxation
due to GST .
H0: There is no positive significant impact of GST
H1: there is a negative significant impact of GST
 CHAPTER 3 REVIEW OF LITERATURE

1. 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 GST Implication on Sales of
Automobile Industry with Reference to Tata Motors http://www.iaeme.com/IJMET/index.asp 1567
editor@iaeme.com government have invigorated financial budget there is more chances in future for
growth in automobile industry

2. 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 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

3. 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

4.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.

5.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
6.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.

7.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.

8.Kajalchaudhary,MilandeepKour,BaljinderKaur, Surjan Singh: (2016,”A STUDY ON IMPACT OF

GST AFTER ITS IMPLEMENTATION”)International Journal of Innovative Studies in Sociology and
Humanities,Volume:1. The study fulfilled that GST helps to get rid of multiple taxation , it will reduce
the burden at present ,imported and Indian goods would be taxed at the same rate. Many Indirect Taxes
like Sales Tax, VAT are eliminated because there will be one tax system.

9.Mr.S.DKharde: (2017,“IMPACT OF GST ON INDIAN AUTOMOBILE INDUSTRY”), International

Journal of Emerging Technologies and Innovative Research,volume:4.The paper covered the overall
impact of GST on automobile sectors in India and made comparative studies between pre tax policy and
GST policy on automobile industry. Author also concluded on GST impact on the economic
development of the country.

10. Pinki, SupriyaKamna, RichaVerma: (2014,“Good and Service Tax: Panacea For Indirect Tax System
In India”),Tactful Management Research Journal, volume:2. The study opined that the current
government in India has optimistic attitude regarding GST as it is beneficial for both central and state
government.
11. Kumar R (2016) has identified the Impact of GST on Indian Economy with an evaluation of GST
and preceding taxation system, and determined that after implementation of GST, manufacturers,
wholesalers and retailers can recover easily input taxes in the form of tax credits

12. Lourdunathan F and Xavier P (2016) has exposed that the challenges prospects of implementing
GST, finishing that GST will fetch one nation one tax that will discharge producers and consumers from
several taxes.

13. Sharma R (2017) identified impact of GST on automobile industry, the study concluded that
automobile industry can developed one of the important contributors for the economic growth of the
country as well as it helps in growing the employment opportunity. They were fruitfully able to analyse
different tax rate levied on vehicles during pre and post period of GST.

14. Ms. Charmi Karia: A Study on Impact of GST on Automobile Sector in India 53 Jain T., Agrawal,
Goyal A (2017) asserted that impact of GST on real estate and automobile sector, the study recommends
that the real estate and automobile sector can increase from GST if they are appropriately furnished for
the transformations in the business environment.

15. Chaudhri Krishna Ramesh (2016) stressed that study on impact of GST after its implementation, the
study rewarded that GST helps to dispose of multiple taxation, it will reduce the burden at present,
imported and Indian goods would be taxed at the same rate. Many indirect taxes like sales tax, VAT are
abolished because there will be one tax system.

16. PD KHAR (2017) has noted that impact of GST on Indian automobile industry, the paper enclosed
the overall impact of GST on automobile sectors in India and made comparative study between pre-tax
policy and GST policy on Automobile industry. Author also concluded on GST impact on the economic
development of the country.

17.Goods and services tax in India - A positive reform for indirect tax system” studied by Akanksha
khurana and Aastha Sharma (2016), concluded that since independence, GST is the biggest and the most
impact tax reform. It would remove all the existing indirect taxes and will be levied on manufacture,
sale and consumption of goods and services. It will also help in uniting the country economically by
making the nation one tax effective. This research talks about the objectives, background and the impact
of GST in the current-day tax scenario of India. Further, it explores the many opportunities and benefits
brought in by GST by classifying it into the different sectors being affected by it.

18.Nidhi Garg (2019) studied, “Impact of GST on Various Sectors of Indian Economy” and concluded
that GST is a consumption tax levied on the supply of goods and services. The main idea behind it is to
remove the cascading effect of taxes and implement the one nation one tax scheme by bringing the entire
nation under one tax. To move the taxation of economy to the destination based consumption tax is the
main objective of the government of India. Many existing taxes like Excise Duty, VAT, entertainment
taxes, state surcharge and several other surcharges on supply of goods and services have been removed
due to the implementation of GST. The research paper focuses on the main concept, features and its
impact on the different sectors of Indian economy.

19.Nair Sreeja Sivankutty and B Sudarshan Chakravarthy (2017) studied, “Impact of Goods and Service
Tax on the Banking Sector” and called GST the game changer of the Indian economy. The introduction
of such a tax reform would lead to the rationalization of the tax content in product price and enhance the
ability of various business entities to compete globally. The impact of GST on the Banking Industry of
the country has been discussed in this research. It has talked about how the GST has a very minimal
positive effect on the banking industry. Introduction of GST proved to be challenging due to the higher
tax rates on several services as compared to the preGST tax mechanism. Challenges like state wise
registration requirement, place of supply of goods and services, taxability of interest reversal of input
tax credit on capital goods, accompanied by the increase in fees on various financial services to 18%
has put GST in a negative light for this industry.

20. Priyanka Yadav and Dr. Manoj Kumar (2019) studied, “Impact of GST on various sector of Indian
economy” and concluded that GST is a consumption based tax collected from manufacturer, sale and
consumption of goods and services which would further help in transforming the country into one
integrated common market. This paper helps in understanding the concept of GST and further discusses
its benefits. Also the paper gives insight on the impact of GST after its implementation on Indian
economy with sectoral impact and in the end draws a conclusion that it is a god tax reform but difficult
to implement in a huge economy like India. GST will have a lot of long term implications both from the
perspective of the consumer and the government.
21.Anand Deo (2017) studied, “Goods & Services Tax (GST) – Impact analysis &road ahead” and
concluded that GST has a positive impact on various sectors of the economy. The imperfect GST that
India now has is still superior to the inefficient indirect tax system that it has replaced. But two things
need to be done now. One being the complexity of the GST structure right now, as well as its novelty,
will mean that companies will take time to figure out their tax liabilities. There will be honest mistakes.
The government would do well to give taxpayers the benefit of doubt for few months. There should be
regulatory forbearance to avoid the prospect of overenthusiastic tax officials assuming that every
mistake is a crime. Indian economy is a complex one and thus people will take considerable time to
understand this tax reform.

22.V. Lavanya, Dr. D. Pradeep Kumar, Dr. T. Narayana Reddy (2017) studied, “Impact of GST on
Automobile Sector in India” and concluded that the industry has potential to grow to become a major
economic contributor. The Government of India has also realized the importance of Automobile industry
in the Indian economy and hence is currently working on Automotive Mission Plan 2026 to set targets
for the industry for the year 2026. The objective of this research paper is to analyse the impact of GST
on Automobile sector in India. Due to the implementation of GST, taxes moves from the origin state to
the consumption state due to which overall economic activity is expected to increase and it could expect
a better GDP growth that should push demand for vehicle across categories.
 Chapter no 4. Data Analysis, Interpretation and Presentation
Graph no . 4.1

Table no 4.1
Gender percentage No. of responses
Male 58% 90
Female 39% 61
Other 3% 4

Interpretation –
Table 4.1 points out the classification of a gender of a sample study from respondents.
From the above table it is clearly observed that there are 58% are male and 39% are female.
 Table no. 4.2
Age Percentage No. of responses
Below 25 47% 72
25-40 35% 53
Above 40 18% 28

Graph no. 4.2

Interpretation-
Table no. 4.2 points out the classification of age of sample study from respondents.
From the table, it is clearly observed that there are 47% respondents are in the age group of below 25
years, 35% are between 25-40 and 18% from above 40.
 Graph no. 4.3

Interpretation-
From the above data it is observed that the occupation of respondents are 16% are Businessman, 32%
are serviceman, 15% are professionals, 12% are housewives and 25% are students.
Occupation Percentage No. of responses
Businessman 16% 25
Serviceman 32% 50
Professionals 15% 23
Housewives 12% 18
Students 25% 39
Table no 4.3
 Graph no. 4.4

Table no. 4.4

Annual Income Percentage No. of responses
Between 0-200000 61% 95
Between 200000-500000 32% 50
Above 500000 7% 10
Interpretations-
The above table is about the annual income of the respondents it is clearly observed that the 61%
respondents are having the annual income between 0-200000,32% are having the annual income
between 200000-500000 and 7% respondents are having income above 500000.
 Table no. 4.5
Choices Percentage No. of respondents
Have car 73% 113
Don’t have a car 27% 42

Graph no.4.5 how many respondents have own car?

Interpretation- Table 4.5 points out the classification of the respondents are having there own car and
the respondents don’t have car.
From the above table it is clearly observed that the 73% of the respondents have car.
And 27% of the respondents don’t have car.
From the analysis of the table the majority of the respondents have own car.
 Graph no. 4.6

Table no. 4.6-Do you have any knowledge about the gst on car?
Choices Percentage No. of respondents
Have knowledge 73% 112
Don’t have knowledge 27% 43

Interpretations-
Table 4.6 points out the classifications of the respondents are having knowledge about the gst on cars.
From the analysis of the table there are 73% of the respondents have knowledge about the gst on cars.
And 27% of the people don’t have knowledge about the gst on cars
From the table it is clearly shows that the majority respondents have knowledge about the gst on cars.
 Graph no. 4.7 Which car respondents have?
Interpretations-
Graph no. 4.7 shows that the which car people have.
From the above graph it is observed that the 43% of the people have small cars.
31% of the people have the medium cars, 12% of the people have luxury cars, 7% of the people have
suvs and the 7% of the people have electric cars.
 Graph no. 4.8
Choices percentage No.of responses
Govt. has taken initiative 83% 129
Govt. has didn’t take initiative 17% 26

Interpretations
Table no. 4.8 is about the whether government had taken the proper initiative in the explaning the gst
knowledge to the common people.
From the above table it is clearly observed that the 83% of the people says that the government has
taken the initative to explain gst to common people.
From the above table it is clearly observed that the 17% of the people says that the government didn’t
take the initiative to explain the gst.
 Graph no. 4.9

Choices percentage No. of responses

Have car from 0-2 years 44% 68
Have car from 2-4 years 34% 53
Have car from 4-5 years 10% 15
Have car more than 5 years 12% 19
Table no 4.9
Interpretation-
Table no 4.9 points out the question is about the how long a car has been purchased.
From the above table it is observed that the 44% of the people have car from 0-2 years, 34% of the
people have car from 2-4 years, 10% of the people have car from 4-5 years, and 12% of the people
have car from 5 years and more.
 Graph no 4. 10

Table no.4.10
Choices Percentage No. of responses
All family member drive 50% 77
Other family member drive 32% 50
Only one who drive 18% 28

Interpretation-
Table 4.10 is the question about the usage of the vehicle
From the above table it is observed that the 50% of the respondents says that the they and all family
member drive car equally.
From the above table it is observed that the 31% of the respondents says that the their other family
member drive the car.
And 19% of the respondents says that the only one who drive a car.

Graph no. 4.11

 Table no. 4.11
Choices percentage No. of responses
Have car insurance 73 113
Don’t have car insurance 27 42

Interpretation-
Table no. 4.11 shows that the 73% have car insurance and 27% don’t have the car insurane.
 Table 4.12 The above question is about the main benefits while buying the car
From the above data it is observed that the:-
1)price:- from the ranking freom 1 to 5 it is observed that the price is on the rank one among the all.
Most of the people prefer that the price is the important component for the buyer
2)speed :- the data shows that he speed has ranked equally between 1 and 2 preferance
3) mileage :- as we know the mileage is the important factor for each buyer .from the ranking system
system mileage has raked at 60%
4)safety:- the safety is very impotant for the person the safety is ranked at the 70 %
5) comfort :- the comfort is the one that each on wants from the cars
6)maintenance :- the maintainance is the must for every buyer..it also helps in long lasting of the car
From the above data it can be conclude that the

1) Price :-80%
2) Speed :-60%
3) Mileage:- 60%
4) Safety:-65%
5) Comfort:-70%
6) Maintenance:-62%
So by comparing all it is concluded that the price is the most important factor.
 Table no. 4.13

Choices percentage No. of responses

Positive impact 66% 102

Negative impact 34% 53

Interpretation-

Table no.4.13 show that the question about the impact of gst on cars

From the above table shows that the 66% of the people says that it is a positive impact of gst on the cars.

From the above table shows that the 34% of the people says it is a negative impact of gst on the cars.
The above question is about the suggestions from the respondents
 CHAPTER 5 CONCLUSION, SUGGESTIONS.

CONCLUSIONS

Implementation of GST seemed to be positive for automobile industry interms of improved efficiency
in road logistics ,lower price of small car and two-wheeler so that now these would not be a thing of
luxuries rather would become part and partial of everyday life and lower taxation would likely to be key
benefit of GST for automobile industry but still greater clarity is awaited on the multiple facet of draft
model of GST law such as treatment of tooling cost ,tax for job worker ,dealer, exemption issue of vat
etc. needs to be addressed. Thus the epitome of research paper is expectation of lower taxation is likely
to be positive for automobile demand although in the near term, customer may hold back on their
purchase till more clarity on new taxation emerges ,as a result new vehicles sale may decline in near
future .Proper GST administration and dispute resolution (more importantly on inter-state transactions)
is very critical. The industry is also expecting the procedural changes to be notified in advance, and may
require a lead time of at least six months before introduction of GST

SUGGESTIONS

The researcher has found that no automobile manufacturer can produce every kind of spare part and
accessory, and both investors and suppliers need suitable policies to be put in place for them to expand
production and market share. Indian Automobile has a lot of scope for both two wheelers and four
Industry Analysis wheelers due to development in infrastructure of the country. The growth rate of
Indian Automobile is so fast that by 2021 Indian Industry will be world 7 largest manufacturers in all
sections. The Indian auto market is still untapped the majority of the people in country don’t own a four
wheeler and all the major auto companies are trying to increase their sales by several moves. By
analyzing the current trend of Indian Economy and Automobile Industry say that there is lot of scope
for growth. India’s Automobile market has evolved and shifted to set foot on an accelerated growth path.
Emerging markets become increasingly important and India’s role among these becomes progressively
significant, both domestic and the acquisition of Indian Automobile companies by global majors and the
success of Indian firms in the generics markets have been for the last few years”
 BIBLIOGRAPHY

https://gst.caknowledge.in/impact-gst-automobile-sector/

 http://www.ey.com/in/en/newsroom/news-releases/ey-gstimpact-on-the-auto-industry

 https://www.legalraasta.com/gst/impact-of-gst-on-automobilesector/

 http://auto.economictimes.indiatimes.com/news/policy/benefitschallenges-for-auto-sector-in-
gst-bill/53541153

 http://www.abplive.in/auto/gst-bill-how-it-affects-the-autosector-391864

 http://www.caclubindia.com/articles/impact-of-gst-onautomobile-dealers-industry-28910.asp

 http://www.gstinindia.in/GST-on-Automobiles-sector.aspx

 https://www.linkedin.com/pulse/impact-challanges-gstautomobile-industry-india-manish-
goyal  http://www.usstaad.com/Blog/news-reviews/impact-gst-carprices/

 http://economictimes.indiatimes.com/articleshow/53678594.cms
?utm_source=contentofinterest&utm_medium=text&utm_campa ign=cppst
 APPENDIX

1) Gender

a) Male

b) Female

c) Others

2) Age

a) Below 25

b) 25-40

c)Above 40

3) Occupation

a) Businessman

b)Serviceman

c)Professional

d)Housewife

e)Student

4) Annual income

a)0-200000

b)200000-500000
c)Above 500000

5) Do you own a car ?

a)Yes

b)No

6) Do you have any knowledge about the gst on cars ?

a)Yes

b)No

7) Which car do you own among the following ?

a)Small car

b)Medium car

c)Luxury car

d)SUVs car

e)Electric car

8) Do you think that the government has taken proper initiative to explain the knowledge of GST to
common people ?

a)Yes

b)No

9) How long ago did you purchase your vehicle ?

a) 0-2 years

b) 2-4 years

c) 4-5 years

d) 5 years or more

10) When it comes to daily usage of your vehicle which of the following statements fits you best?

a)Both myself and other household members drive it equally

b) Somebody else in the household drives it exclusively

c) I am primary driver of the vehicle

11) Do you have a car insurance ?

a) Yes

b) No

12) What are the main benefits you considered the most when you are buying a vehicle ?

1 2 3 4 5

1) Price
2) Speed
3) Mileage
4) Safety
5) Comfort
6) Maintenance
13) According to you what impact does the GST have on the cars?
a) Positive
b) Negative

19) Do you have any suggestions?

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