The economy in the State has been rather indifferent for a while. This has had a sobering effect on the retail trade. From hoteliers to white goods dealers it has not been happy days. For dealers in automobiles, it has been a mixed bag. New models have been launched by the various players looking at the large market nationally. Now with the proposed introduction of GST, the business could be affected again depending on the category one is operating in.
Kiran Kamat of Sai Service one of the larger dealers in the State promotes Maruti which is the market leader. Mr Kamat said “There will be a 2% hike in the price of small cars. I don’t think it will make much of a difference because in the overall price it will be an increase of around Rs 4000 to Rs 5000 per car. Since most of our customers buy it on loan it will work out to Rs 100 increase in the EMI per month. I don’t foresee a drop in sales. Ganesh is coming in August and I expect good sales. Last year we sold around 589 cars and this year I want to go way above 600. The Maruti Brezza is a fantastic vehicle and it will drive sales.” Maruti has just two models in the larger segment and according to Kiran, prices might increase marginally but he felt numbers would increase there too. He cited the example of petrol hikes. He said “The day the hike is increased there will be some grumbling and then the next day everyone is in line buying petrol.”
Savio Araujo, marketing manager, Chowgule Industries said it was going to be a tough market given that the small car segment was very sensitive to any increase in price. He said “Our smallest car is priced at Rs 3.2 lakh and the expected 2% hike works out to Rs 7000-8000 which is not a small sum for the customers. The impact will be tough for them.” He said the GST would affect Goa because it never had taxes that were levied in other states like octroi which was levied in Mumbai.
Attempts to contact other dealers in the market of brands across various price points were not successful. A long-time observer of the industry said people looking to buy luxury cars or SUVs will have a reason to rejoice as GST might bring down the prices of such vehicles. Vehicles falling in this bracket are subjected to a heavy tax rate of around 55% in total. Post GST implementation, this rate will come down significantly to 43% (28% + 15%), resulting in a reduction of 12% in the tax rate. This means the next luxury car or SUV, one buys could soon become considerably cheaper.
A tax consultant who did not want to be named said the two taxes charged to the end consumer currently are excise and VAT, with an average combined rate of 26.50 to 44% which is higher than the expected rates of 18 and 28% under GST. Therefore, there will be less burden of tax on the end consumer under GST. Clarification, he said was also required regarding the state provided incentive based schemes and their transition. At the national scale, he said the implementation of GST would reduce the cost of manufacturing of cars due to the subsuming of different taxes levied currently. Under GST, the taxes would be charged on consumption state rather than the origin state, which would give a boost to the growth rate of the automobile industry. The market will now decide.
