GST restructuring a huge reform, to boost competitiveness and improve India's economy: Maruti Suzuki Chairman

The Indian government has proposed to rationalise its Goods and Services Tax (GST). Prime Minister Narendra Modi, on August 15, announced that the government is working on the restructuring of GST, which is aimed at simplifying the tax structure. As part of that, the government is planning to lower the GST on small cars to 18 per cent from 28 per cent, which is expected to give the segment a huge boost. Maruti Suzuki Chairman RC Bhargava believes this restructuring will increase the competitiveness of Indian products, and the opening of trade borders will bring in the necessary competition, which will help expand the market and benefit customers. Bharagava has said the GST restructuring is a huge reform.

Speaking to PTI, Bharagave said the move by the government to restructure GST is an exceedingly important reform measure. "I think the government is doing an excellent thing with taking this up because it will have substantive improvements in the economy as a result," Bhargava said. When asked to comment on the impact on the automotive industry, he noted: "Until we see the final decisions of the GST Council on the GST system. It's better if we comment at that stage, rather than on assumptions."

The Indian government has proposed a two-tier GST structure with this restructuring. These tax tiers will be of five per cent and 18 per cent. Besides that, there will be a 40 per cent special rate on a select few items. This comes as a more simplified structure compared to the current regime, where GST is levied at five, 12, 18 and 28 per cent. While food and essential items are either at nil or five per cent, luxury and demerit goods are in a 28 per cent slab, with a cess on top of it.

GST reform: What it means for car buyers?

Currently, automobiles in India are taxed at 28 per cent, which is the highest GST slab. A compensation cess, ranging from one to 22 per cent, is levied on top of this rate, depending on the type of vehicle. This results in the total tax incidence on cars, depending on engine capacity and length, ranging from 29 per cent for small petrol cars to 50 per cent for SUVs. Electric vehicles are taxed at a five per cent rate.

Alongside the rising inflation, economic pressure, rising cost of maintenance, and heightening upfront costs, buying a car is often becoming a huge burden for consumers in India. This is eventually hurting the pace of growth for the industry. Especially the small cars that have traditionally been the driving force of the Indian passenger vehicle market, have witnessed a major slowdown over the last few years, as affordability has been impacted. With the lowered GST, the small cars are expected to see a major boost in demand and sales, which will eventually make these cars affordable for consumers, and boost the industry, resulting in improvement of the country's economy as well.

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