Talking to Supriya Shrinate of ET Now, Hasmukh Adhia, Revenue Secretary, RC Bhargava, Chairman, Maruti and Pawan Goenka, MD, Mahindra & Mahindra discuss the repercussions of GST implementation on the auto industry.

Edited excerpts:

What is the impact of GST on automotive industry in general and hybrid cars in particular?

Hasmukh Adhia:
As far as the hybrid cars are concerned what we have done is to divide them into two parts; so when it comes to smaller hybrid cars on which we have put some cess. There is going to be a distinction between a normal small car which will attract a cess of 1% to 3% depending on petrol or diesel and other hybrid cars where there is only the GST slab of 28% to be paid. There is no cess on small hybrid cars.

As far as the bigger variety of hybrid cars are concerned on which there is a 15% cess being attracted now under the present, that cess will apply to both hybrid as well as non-hybrid big cars. As far as big cars are concerned, the council has decided to keep any distinction because these are all bigger cars and probably the council feels that the incidence of cess can be borne by those people.

RC Bhargava: It would mean bigger hybrid cars will get total of 43%, 28 plus 15 against today’s roughly 28-29%? It will go up by about 14%?

Hasmukh Adhia:
 I do not how do they calculate but yes a lot of shift was happening in case of hybrid cars which are actually more expensive than the normal big cars also, because there is an additional engine and additional provision to be made. That is why in that price bracket, probably the consumers could afford that additional cess.

That is a very important clarification that at least in the high end hybrid car bracket consumers will have to bear a higher tax.

Pawan Goenka:
First of all on behalf of the industry I must complement the GST Council for reaching a convergence. It would not be an easy thing with so many different lobby groups from industry as well as states working on it. it was a very difficult task to have been completed. My first request will be that the July 1st date as the government is saying consistently should be maintained now because now that the rates are announced, we will start working on managing everything around July 1st date. There should not be any slippage to that date.

I have a couple of questions; one was on the excise or the GST on the hybrid vehicle. My concern is more on the transition. Right now, on the GST rate because for the auto industry I think the council has done a very good job in ensuring that almost in all the different classification that we have except for large hybrids now the GST is equal to or maybe slightly lower than what we are paying today. But in the transition on the auto side and tractor side, I have some concern.

First take tractor. As of today, there is no excise duty on tractors and therefore we will not get any transitionary credit for the stock that is in our stockyards or with the dealers. That is a fairly big concern for the industry which has 65000 tractors in stock as on July 1.st Similarly for auto, we will have as many as 4 lakh passenger vehicles in stock. From the current rule that we have, we will only get 40% of the CGST as a credit which is a very small amount given that the excise duty on many of these vehicles will be as high as 32% and the 40% of the CGST comes to only 5.6%. I request some clarification and some consideration on these two.

Hasmukh Adhia:
There are nine rules which we had put in the draft regime. Out of this, seven are finalised by the GST Council. One of the two rules which is not finalised is the transition rules in which this 40% provision comes. The law committee has got a lot of representations from the industry. It is looking at it and will come up with the final recommendation on 3rd of June. You might expect some relief in that. Let us wait till then, we will take your point on record and we will see what best we can do.