New GST Rules May Impact Auto Consumer Durables

After getting hit by the transition of new fuel technology — from Bharat Stage-III (BS-III) to BS-IV — the automobile sector in the country may be awaiting yet another shocker. The proposed taxation format under the upcoming goods and services tax (GST) is likely to fuel inflation, and increase the tax burden of secondhand car buyers and those opting for exchange offers. It may also increase the working capital of dealers of used vehicles. Earlier the tax used to be calculated on the discounted value of a product in the case of exchange schemes after the market value of the old vehicle was deducted in tax consultancy firms in Delhi. The proposed GST rules, issued by the government on Sunday, will consider the market value of the new vehicle while calculating the tax burden. Thus, consumers may end up paying more as the discounted amount would be taxed. Under the new GST rules, retailers and traders dealing in used vehicles will come under taxation. While under the existing rules, secondhand products are outside the purview of tax, sellers will have to pay taxes at the same rate as the new products in indirect taxation in India.

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