India on Friday (19 May) unveiled four rate bands under a new sales tax for services such as telecoms, insurance and restaurants, a move experts said could complicate compliance and leave businesses at the mercy of an intrusive tax bureaucracy. We do hope the Government will continue to extend the prevailing tax benefits for greener technologies which are purely based on the fuel efficiency and eco-friendliness.
It will stimulate demand and strengthen the automotive market in the country, paving the way for meeting the vision laid down in the Automotive Mission Plan 2016-26, he added.
The automobile sector will also see some benefits by virtue of input tax credit norms, he said.
While automakers of small cars will have something to worry about, luxury auto makers hope to see positive results with the implementation of GST which puts a fixed slab of 28% even on large luxury vehicles and SUVs.
"Auto (sector) could be a slightly mixed bag as the impost will vary across categories". The GST Council has finalised seven sets of GST Rules and completed the fitment of most goods and services in various tax brackets in the last two days.
For example, hotels and restaurant would be taxed on the basis of their room tariff and turnover of business.More news: North Korea says U.S. has to roll back 'hostile policy' before talks
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The GST Council has put items like refrigerators and ACs in the maximum 28% category.
The tax department has also released the list of services for reverse charge, a levy which was introduced in Central GST law that has to be paid by the recipient of a taxable good or service in case the supplier is unregistered.
With the government focus on keeping tax on items of mass consumption low, this sector could be the clear victor.
With the change in GST, curd and milk will be exempted from taxation; however, sweets will be liable for a 5% tax. This could act as a dampener for OEMs proposing to invest in hybrid technology and adversely impact sale of such vehicles, unless a subsidy is separately given by the Government to offset such tax incidence.
Multiplex operators have expressed disappointment with the GST rate for cinemas, saying a lower rate would have made watching movies more affordable for all.
"The cost of relatively price-sensitive small cars may increase marginally post-GST, while original equipment manufacturers will pass on the lower taxes on bigger vehicles and sport utility vehicles to customers", domestic rating agency ICRA's Senior Group Vice-President Subrata Ray said. The rates - 5, 12, 18 and 28 per cent - are in line with those finalised for goods. Or download our app from the iOS or Android app stores today.