With the advent of New Era of Goods & Service Tax in India effective 1st July 2017, the dream of 1.2 billion Indians has become a reality. Goods & Services Tax Reform is just not the independent India’s biggest Economic Reform, but is also a Social Reform that is set to transform the country by increasing tax compliance, making the business disciplined and organized and dramatically reducing the burden of tax on the poor. The implementation of GST has marked the march of the aation in a new direction. India has put in place a modern and the best as well most suitable system of collection of Indirect Taxes by introducing some innovative methods like self police feature or tax collection at source on sale of specified Automobile Products.
GST has a unique design to unite India into single economic region in spite of the federal structure of the country having 29 States and 6 Union Territories along with the Federal Government at the Centre, now Automobile Products like Passenger Cars or Motor Cycles would be available to consumers on the incidence of similar indirect tax, which will eliminate tax competition amongst the dealers situated in different States. The unique model of GST is an example for other Federal Nations to follow if they desire to adopt the new system of Goods & Services Tax in place of their existing Indirect Tax Collection Mechanism. The newly introduced GST is a model of co-operative federalism that saw the Centre and States coming together and pooling their resources with full consensus. This achievement is the strength of Team India as it worked in concert.
Prime Minister of India Hon’ble Shri Narendra Modi has termed GST as ‘Good & Simple Tax’. He further said that GST is a tax for a new India, a Digital India. It does not just promote ease of doing business, but also shows the way forward as a ‘Way of Doing Business’.
GST will also put an end to tax-terrorism and the Inspector Raj by making sure that all grey areas are eliminated. The unorganised parallel economy may fade away in near future. The self-policing feature of GST shall ensure the recording of every transaction in the supply chain, so that the Input Tax Credit could be availed by the recipient of the supply of goods or services, even though some restrictions have been placed under specified circumstances where Input Tax Credit could not be availed by the purchase of a Motor Vehicle. The avoidance of GST would be difficult due to its design along with the compliance mechanism.
The Hon’ble Finance Minister Shri Arun Jaitley said that ‘The Old India was economically fragmented. The New India will create one Tax, one Market for One Nation’. The new levy will turn India into a common market by scrapping barriers between the States. The business will be carried on with fair competition and pure economic considerations rather than the tax competition.
Goods & Services Tax will boost GDP Growth to about 7.4% in this very year of implementation, which may further increase as the ripple advantageous effects of GST in the economy will materialise. GST will augment the Government resources both for Centre and State, allowing greater spending on the welfare of the people in India. The combined effect will allow citizens to spend more which shall increase business in the country. Once the real advantages of GST would comeforth in the Indian Economy the benefit of spare money with the consumers will boost the automobile market resulting in better sales of automobiles as well as auto components. There would be an indirect advantage of GST to automobile industry due to better road infrastructure providing quality roads with more connectivity resulting in accessibility of the remote areas for economical needs as well as tourism, this will increase the demand of automobiles.
The imposition of Compensation CESS at different rates between 1% to 13% on almost all varieties of automobiles is a regressive step which will give a dent to the market as these varieties of automobiles will become costlier even after the allowance for Input Tax Credit as well as advantages of efficiencies in the auto industry business. Further, the road tax at the time of registration of new automobile under Motor Vehicles Act as well as for its renewal after certain period has not been subsumed in GST, the adverse effect of this tax will remain present and will not allow GST to become the best tax system.
The new regime of GST will also greatly boost India’s attraction as an Investment Destination and act as a catalyst for export of automobiles as well as auto components produced at cheaper cost in India. The removal of cascading effect of tax as well as smooth refund of tax paid at all the earlier stages will make the Indian automobiles as well as auto components, globally competitive. The ripple effect of GST will substantially enhance the business efficiencies in all its forms and requirements.