Automotive & GST-Part 2

The Goods and Services Tax is one of highlights of the first half of 2017 (after a particular actress let slip the details of nepotism practiced in Bollywood). Last time we discussed how GST has impacted the prices of bikes. This time, we shall evaluate how the cost of commercial vehicles have swayed post the launch.

Commercial vehicles account for about 3% of the total vehicles on the streets of India. The production of these commercial vehicles is expected to grow to 2.0 million units annually by 2026. A major chunk of the population is dependent on state run vehicles which is a good thing (more public transportation vehicles mean lesser private vehicles on the streets and thus, an inadequate attempt at pollution control).

 

 

Examples of commercial vehicles include taxi cabs, auto rickshaws, mini trucks, trucks, buses and coaches among others. There are two sub-divisions in the commercial vehicles category – three wheelers and commercial vehicles. Different sized trucks are used for transportation of goods while buses, coaches, cabs and ricks are preferred modes of transportation by people who can’t afford private vehicles.

Before GST, the tax incidence on commercial vehicles was 30.2% whereas three wheelers which were not taxed for NCCD attracted a levy of 29.2%. The Good and Simple Tax, as the Prime Minister puts it, is marginally beneficial for three wheelers as the new tax rate is 28%. Commercial vehicle manufacturers will also be able to bask in its benefits with the new tax levy being 28%. There are also public transport vehicles that can accommodate anywhere from 10 to 13 passengers. For the purpose of taxation, such vehicles have been placed in the same tax bracket as luxury cars. The GST on these is going to be 28% plus an additional levy of 15% thereby bringing up the total rate to 43% as compared to the earlier tariff of 27.8%.

Tata Motors, the largest commercial vehicle manufacturer in the country, announced price cuts in the range of 0.3% to 4.21% for the cargo carrying commercial vehicles. They also declared cost reduction up to 8.2% for passenger transport vehicles. This trimming is not only to pass on the GST benefits to the customers but also to subsequently boost demands.

Comprehensively, the passenger vehicles are unaffected and barring minor fluctuations, there should be no long-lasting negative consequences of the Goods and Services Tax.