1.
CONTENT
Chapter No. Topic Pg. No
Abstract i
1 Introduction 4
2 Objective of Study 5
3 Timeline of GST 6
4 Meaning, Origin and types of GST 7
4.1 Justification of GST 8
4.2 How GST is different from current VAT 8
5 Saline Features of the proposed GST bill 9
6 Present Indian indirect taxation structure and its
limitations
10
7 Central and state taxes to be subsumed under GST 10
8 How will GST work 11
9 Impact of GST on pricing of products as compared to
current scenario
12
10 Impact of GST on automobile market 13
10.1 Impact of GST on car price in India (2017 onwards) 14
10.2 Implication of GST on Indian car market 15
11 Impact of GST on Indian Economy 16
11.1 Benefits of proposed GST 16
11.2 Benefits of GST on Stake Holders 17
11.3 Negative aspects of proposed GST 17
11.4 Challenges in implication of GST 17
11.4.1 State reluctant to implement GST 17
11.4.2 Legislative challenge/ Federal character 18
11.4.3 Infrastructure 18
11.4.4 Rate of Tax 18
12 GST around the World 19
13 Negative implication of GST 20
14 GST review by different organizations 20
14.1 Impact of GST on automobile sector 20
14.2 Job work and GST 21
14.3 Credit on vendor tooling 22
14.4 Time of supply for payment of GST 22
14.5 Dealers Incentive schemes and impact of GST 22
14.6 Lack of clarity 22
14.7 ICRA duty structure for automobile OEM’s under 23
14.8 Impact of GST logistics 25
14.9 Consolidation of warehousing in favor of bigger trucks
but MCVs won’t get completely marginalize.
26
14.10 Sector Where MCV’s are predominantly used 26
15 Conclusion 27
Reference
Annexure

2.
Figure Table
Figure No. Topic Page No.
1
Difference between the total price before and after GST
implementation
11
2
Comparison of Hatchback, Sedan and SUV’s after GST
implication
15
3 GDP composition in March 2012 18
LIST OF TABLES
Table No. Topic Page No.
7.1 Tax collected by Central and State government 9
8.1 Working of GST 10
10.1 Existing scenario (Pre-GST) 12
10.2 Post GST Scenario 13
10.3 Implication of GST on Indian car market 14
12.1 GST around the world 18
14.1 ICRA duty structure for automobile OEM’s under current and
GST scheme
22
14.2 Growth estimate and likely drivers for year 2017 23

3.
ABSTRACT
GST stands for “Goods and Services Tax”, and is proposed to be a
comprehensive indirect tax levy on manufacture, sale and consumption of
goods as well as services at the national level. It will replace all indirect
taxes levied on goods and services by the Central Government and State
Governments. GST is the only indirect tax that directly affects all the
sections of our economy. India has been trying to implement the Goods
and Services Tax (GST)for last few years but due to political and state
governments autonomy issues the Federal government has been unable to
make it law.
Several countries has implemented this tax system followed by France,
the first country introduced the GST in 1954. In India the proposed GST
would be implemented from 1 April 2016. For this the Constitution (One
Hundred and Twenty Second Amendment) Bill, 2014 was Introduced in the
Lok Sabha. The Bill was passed by the Lok Sabha on 6 May 2015 and now
the bill has been approved by Rajya sabha and the President also. India is
a federal democratic and therefore the GST will be implemented parallel
by the Central and State governments as CGST and SGST respectively.
The present report focused on explaining the concepts of GST and its
evolution in India. Then it discussed the salient features of proposed GST
and how does it works. It highlights the benefits of the GST for Indian
economy. This report also shows the challenges to implement GST and
how it can be overcome.
KEYWORDS: GST (Goods and Services Tax), Indian Tax Scenario,
CGST, Input tax credit (ITC), GST, SGST, VAT

4.
1. INTRODUCTION
India as world’s one the biggest democratic country follows the federal
tax system for collection of various taxes. The centre and the states are
empowered to levy respective taxes as per the constitution of India. The
Value Added Tax (VAT) when introduced was considered to be a major
improvement over the pre-existing central excise duty at the national
level and the sales tax system at the state level. Now the Goods and
Services Tax (GST) will be further significant breakthrough towards a
comprehensive indirect tax reform in the country.
In 2000, the Vajpayee Government started discussion on GST by setting
up an empowered committee. But an announcement to GST for the first
time was made by Palaniappan Chidambaram, the Union Finance Minister,
during budget of 2007-08 that it would introduced from 1 April 2010 and
that the empowered committee of State Finance Ministers, on his request
would work with the Central Government to prepare a road map for
introduction of GST in India.
After this announcement, the Empowered Committee of State Finance
Ministers decided to set up a Joint Working Group on 10 May 2007, with
the Adviser to the Joint Working Group, after intensive internal
discussions as well as interaction with the experts and representatives of
Chambers of Commerce and Industry submitted its report to the
Empowered Committee on 19 November 2007.
Based on inputs from Government of India and states, the EC released its
First Discussion Paper on Goods and Services Tax in India on 10 November
2009 with the objective of generating a debate and obtaining inputs from
all stakeholders.
Mr. Pranab Babu, (Hon’ble Union Home Minister of Finance Pranab
Mukherjee) has made a remark in his Budget Speech of 2010 that an
efforts will be made to introduce GST in India from April 2011. This
deadline was subsequently extended to April 2012.
The Constitution (One Hundred and Twenty Second Amendment) Bill,
2014 was introduced in the Lok Sabha by Finance Minister Mr. Arun Jaitley
on 19 December 2014. The Bill was passed by the House on 6 May 2015,
receiving 352 votes for and 37 against.

5.
2. OBJECTIVE OF THE STUDY
 The study has been geared towards achieving the following
objectives:
1. To understand the concept of Goods and Service tax across
India in Automobile industries.
2. To examine the salient features of Goods and services tax
and
3. To know the Impact of GST on Indian Economy and
challenges in implementing GST in Automobile Sector.

6.
3. TIMELINE OF GST IN INDIA
2003
2005
2009
2011
2012
2013
2014
2016
 Kelkar Task Force suggested a GST
bill based on VAT principle
 Proposal to introduce GST bill by 01-April-
2010 was mooted in the Budget Speech for
the FY 2006-07
 Preparing a Road Map and Design for the
implementation of GST was assigned to the
EC
  EC released its first discussion paper on
GST
 A Joint Working Group consisting of
Officers from Central from central as State
was Constituted.
 Amendment of Constitution to enable
introduction of GST, a Constitution Bill was
introduced

 Committee of GST Design was
constituted
 Committee did a detailed discussion on GST
design and submitted its report to EC
 A draft GST Bill was sent to the EC after
approval of a new govt.
 The Cabinet approved the Introduction of
GST Bill
 Bill was introduced in Lok Sabha

 Bill passed by Rajya Sabha
 Approved by President of India

7.
4. MEANING, ORIGIN AND TYPES OF GST
The introduction of VAT was one of the major reforms in indirect taxes in
India at the state & Central level. If that was the major reforms in
indirect taxes then GST would be advancement over the current existing
system. Goods and Services Tax (GST) is a broad based and a single
comprehensive tax levied on goods and services consumed in country.
Goods and Services Tax (GST) is a comprehensive tax levy on
manufacture, sale and consumption of goods and services at the national
level. GST is similar to the VAT system which is a value added tax on
goods with an Input Tax Credit (ITC) mechanism but GST also includes
services. Thus GST would be applicable on supply of goods and services as
against the present concept of tax.
GST is a value added tax on goods and services that is paid by the final
consumer while the retailer will be taking credit of the tax he has paid
while buying goods for retailing. So in this all the services of retailer or
the chain behind him is taxed apart from the actual value of production
of that good.
This can be better understand with the help of an example, suppose that
there is a chain of manufacturer, wholesale dealer and the retailer and
the GST is 10%. Suppose the manufacturer purchases the inputs worth Rs.
100 for producing a good worth Rs. 140. He will pay net GST of Rs. 4 by
taking the tax credit of Rs. 10 paid on the inputs. Similarly the wholesaler
who buys this good and sells it for Rs. 150 will pay net GST of Rs. 1 and
the retailer who sells it for Rs. 170 will pay net GST of Rs. 2 by taking the
tax credit for his purchase which comes to be Rs. 15.
In the other words the GST is designed as a value-added tax, which means
starting from the manufacturer to the wholesaler and then retailer, each
person will pay tax only on the value addition done by him. So, suppose a
manufacturer purchases inputs worth Rs. 40 and then produces a good
worth Rs. 100, then with a 10 % GST rate, his tax liability will turn out to
be only Rs. 6 (10 % of 60). This is because he gets to set-off the tax paid
on the inputs against the tax he pays on the final goods produced.
An integrated scheme of taxation that does not discriminate between
goods and services and is part of the proposed tax reforms that centre on
evolving an efficient and harmonized consumption tax system in the

8.
country. GST was originated in France in 1954 and today it has spread to
over 150 countries. The taxable event for the GST will be the supply of
goods and the supply of services. The current taxable events such as
manufacture, sale of goods and rendering of services will not be relevant
for GST. GST is of two types:
a) Single GST and
b) Dual GST.
Many countries have unified GST. However, in countries like Brazil and
Canada there is dual system wherein GST is levied both by the Central
Government and the State Governments. In India due to federal structure
there shall be dual GST system. This will comprise of:
a) Central GST (CGST) which is levied by centre.
b) State GST (SGST) which is levied by state.
c) Integrated GST (IGST) which is levied by central Government on
inter-state supply of Goods and Services.
4.1 JUSTIFICATION OF GST
Despite the success with the VAT, there is still certain shortcoming
in the structure of VAT both at the Central and at the State level.
GST has been designed to overcome from all shortcomings of VAT
because GST is not simply VAT plus service tax but an improvement
over the previous system of VAT and disjointed service tax.
4.2 HOW GST IS DIFFERENT FROM CURRENT VAT
The mechanics of applying VAT and GST are basically the same. But there
are following fundamental differences between them:
1. VAT is levied on goods; whereas GST on both goods and services as
it is evident from the name.
2. GST would have a uniform rate in all the state which VAT lacks as
each state levies its own rate of duty for each goods.
3. Input credit can be set-off only against the goods sold within the
state; whereas in case of GST not only you can set-off input credit
against goods sold within the country but also against the services.

9.
5. SALIENT FEATURES OF THE PROPOSED GST BILL
Followings are the salient features of GST Model:
1. The GST shall have two components: one levied by the Centre
(hereinafter referred to as Central GST), and the other levied by
the States (hereinafter referred to as State GST). Rates for Central
GST and State GST would be prescribed appropriately, reflecting
revenue considerations and acceptability.
2. The Central GST and the State GST are to be paid to the accounts of
the Centre and the States separately.
3. The Central GST and the State GST would be applicable to all
transactions of goods and services made for a consideration except
exempted goods and services, goods which are outside the purview
of GST.
4. Since the Central GST and the State GST are to be treated
separately; taxes paid against the Central GST shall be allowed to
be taken as input tax credit (ITC) for the Central GST and could be
utilized only against the payment of Central GST. The same
principle will be applicable for the State GST.
5. The administration of Central GST to the Centre and for State GST
to the States would be given.
6. To the extent feasible, uniform procedure for collection of both
central GST and the State GST would be prescribed in the
respective legislation for the Central GST and the State GST.
7. The tax payer would need to submit periodical returns, in common
format as far as possible to both the Central GST authority and to
the concerned State GST authorities.
8. Each tax payer would be allotted a PAN-Linked taxpayer
Identification number with a total of 13/15 digits. This would bring
the GST PAN-Linked system in line with the prevailing PAN-Based
system for Income Tax, facilitating exchange and taxpayer
compliance.

10.
6. PRESENT INDIAN INDIRECT TAXATION STRUCTURE &
ITS LIMITATIONS
Presently India has a dual tax system for taxation of Goods and Services.
The tax system is described by the Central Taxes and State Taxes, Which
may be further described as Excise Duty, Service Tax, VAT and Custom
Duty. India has VAT mechanism which was introduced in 2005 but this
system suffers from limitations. Due to non-availability of tax credit for
inter-state transactions of goods, consumer suffers double taxation
burden of VAT.
7. CENTRAL AND STATE TAXES TO BE SUBSUMED UNDER
GST
The following taxes currently levied and collected by the Centre
Government and the State Governments are to be subsumed with the
implementation of GST:
Central Taxes to be subsumed State Taxes to be subsumed
•Central Excise duty
•Additional duties on excise
•The Excise Duty levied under the
Medicinal and Toiletries
Preparation Act
•Service Tax Surcharges, and
Cesses
• VAT / Sales tax
• Entertainment tax (unless it is
levied by the local bodies)
• Luxury tax
• Taxes on lottery, betting and
gambling
State Cesses and Surcharges in so
far as they relate to supply of goods
and services
• Entry tax not in lieu of Octroi.
Table 7.1: Tax collected by Central and State Government

11.
8. HOW WILL GST WORK
Let us understand the working of GST of a manufactured commodity from
point of view of a Manufacturer, wholesaler, retailer and final consumer:
Assuming GST rate @ 10%
Table 8.1: Working of GST
8.1 MANUFACTURER: Manufacturer makes a value addition of Rs. 30
on his purchase worth Rs. 100 of input of goods and services used
in manufacturing process. The manufacturer will then pay net
GST of Rs. 3 (13-10) after setting-off Rs. 10 as GST paid on his
inputs (i.e. Input Tax Credit) from gross GST of Rs. 13. The
manufacturer sells the goods to the wholesaler.
8.2 WHOLESALER: When the wholesaler sells the same goods after
making value addition of Rs. 20, he pays net GST of only Rs.
2(15-13), after setting-off of Input Tax Credit of Rs. 13 from the
gross GST of Rs. 15 to the manufacturer. The wholesaler sells the
goods to retailer.
8.3 RETAILER: When the retailer sells the same goods after value
addition of Rs. 10, he has to pay net GST of only Rs. 1 (16-15),
after setting-off Input Tax Credit of Rs. 15 from his gross GST of
Rs. 16 to the wholesaler. The retailer sells the goods to
consumer.
Thus the manufacturer, wholesaler and retailer have to pay only Rs. 6
(i.e. Rs. 3+ Rs. 2 +Rs. 1) as GST on the value addition along the entire
value chain from producer to the retailer after setting-off GST paid at
the earlier stages. So finally consumer has to pay 160+160*10% = 176 Rs.
For goods he bought or services he has hired/enjoyed.
STAGE OF
SUPPLY CHAIN
PURCHASE
VALUE OF
INPUT
VALUE
ADDITION
VALUE
OF
SUPPLY
RATE
OF
GST
GST
ON
INPUT
ITC
NET
GST =
GST on
OUTPUT
- ITC
MANUFACTURER 100 30 130 10 % 13 10 13-10=3
WHOLESALER 130 20 150 10 % 15 13 15-13=2
RETAILER 150 10 160 10 % 16 15 16-15=1

12.
9. IMPACT OF GST ON PRICING OF PRODUCTS AS
COMPARED TO CURRENT SCENARIO
There is a clear difference between the price of the product calculated
under VAT system and the price of the product calculated under the
proposed Goods and Services Tax (GST) system. Let us take an Example to
understand this clearly:
Fig 1: Difference between the total price before and after GST
In the above example, you can note that the tax paid on the sale within
the state can be claim against the tax paid on sale outside state in GST
system, which is not possible in the current tax system.
The credit of CGST cannot be taken against the SGST and the credit of
SGST cannot be taken against the CGST but both credits can be taken
against IGST.

13.
10. IMPACT OF GST ON INDIAN AUTOMOBILE MARKET
Passenger Car Buying is one sector where there is regime of high taxes.
For calculating Prices at Various levels:
 Excise Duty-(12% to 27%)
 Infrastructure Tax-(1% to 4%)
 VAT Duty-(12.5% to 14.5%)
 Octroi/Entry Tax-(4% to 6%)
• EXISTING SCENARIO (PRE-GST) Vs POST GST SCENARIO
EXISTING SCENARIO (PRE-GST)
 Excise Duty
12
24
27
• Small Cars under 4m
• Car with Length>4m
but Engine<1.5 Ltr
• Car with Engine >1.5
Ltr
 Infrastructure
1
2.5
4
• Petrol Car with <1.5 Ltr
• Diesel Cars
• High Capacity Cars
 VAT
 Entry
 RoadTax
12.5-14.5
4-5
3-24
• State to State
irrespective of Vehicle
Class
• Additional Entry Tax
• Based on Vehicle
Pricing
Table 10.1: Existing Scenario (Pre-GST)

14.
POST GST SCENARIO
COMPONENT RATE % CLASSIFICATION
GST
18-20
40
• Cars with Length < 4
Meter and Engine <
1.5 Litre
• All Other Cars with
Length > 4 Meter
ROAD TAX 3-24
•Based on Vehicle
Pricing
Table 10.2: Post GST Scenario
10.1 IMPACT OF GST ON CAR PRICES IN INDIA (2017
Onwards)
The Impact of GST on various Segments of Car:
 Small Cars (Sub 4m Segments)- Biggest Beneficiary. Likely to be
Economical to tune of 5%-10%.
 Mid Sedan, Mid- SUV Range (Engine<1.5 L)- Prices would likely
Increase by 2% to 3%.
 Luxury High End Cars (Engine >1.5 L)- Prices would almost be same
or may come marginally by 1% or so.

15.
10.2 Implication Of GST On Indian Car Market:
Segment Excise NCCD
+AutoCess
VAT Total CGST SGST Total Difference
Smaller
passenger
cars <
1200 cc
12.5
%
1.1 % 14 %
28.1
%
9 % 9 % 18 % 10.1 %
Mid-sized
>1200cc
and <
1500 cc
24 % 1.1 % 14 v
39.1
%
9 % 9 % 18 % 21.1 %
Luxury
passenger
cars >
1500 cc
27 % 1.1 % 14 %
42.1
%
20 % 20 % 40 % 2.1 %
SUV’s
>1500 cc
and > 4 m
and 170 mm
Ground
clearance
30 % 1.1 % 14 %
45.1
%
20 % 20 % 40 % 5.1 %
Table 10.3: Implication of GST on Indian car market
Fig. 2 Comparison of hatchback, Sedan and SUV after implication of GST

16.
11. IMPACT OF GST ON INDIAN ECONOMY
Like every coin has two sides; even GST will probably have its own
Positives and negative impacts.
11.1 BENEFITS OF PROPOSED GST;
1. The main reason to implement GST is to abolish the cascading
effect on tax. A product on which excise duty is paid can also be
liable to VAT. Suppose a product A is manufactured in a factory. As
soon as it releases from factory, excise duty has to be paid to
central government. When the product A is sold in same state then
VAT has to be paid to the State Government. Also no credit on
excise duty paid can be taken against output VAT. This is termed as
cascading effect since double taxes is levied on same product.
2. GST will lead to more transparent and neutral manner to raise
revenue.
3. Price reduction as credit of input tax is available against output tax.
4. Simplified and cost saving system as procedural cost reduces due to
uniform accounting for all types of taxes. Only three type of
account; CGST, SGST & IGST have to be maintained.
5. GST is structured to simplify the current indirect system. It is s long
term strategy leading to a higher output, more employment
opportunities and economy boom.
6. It is beneficial for both economy and corporations. The reduced tax
burden on companies will reduce production cost making exporters
more competitive.
7. GST will reduce transaction costs for taxpayers through simplified
tax compliance.
8. It will result in increased tax collections due to wider tax base and
better conformity.
9. Overall introduction of Goods and Services Tax (GST) will be
panacea for Indian economy. Studies show that this would instantly
spur economic growth. Introduction of GST would also make Indian
products competitive in the domestic and international markets.
From the consumer point of view, the biggest advantage would be
in terms of a reduction in the overall tax burden on goods, which is
currently estimated at 25%-30%. Last but not the least, this tax,
because of its transparent character, would be easier to administer.

17.
11.2 BENEFITS OF GST ON STAKEHOLDERS
11.2.1 Forthe Centre and the States: According to experts, by implementing
GST, India will gain $ 15 Billion a year. This is because it will promote
more exports, create more employment opportunities and boost growth.
11.2.2 For individuals and companies: In the GST system, taxes for both
Centre and State will be collected at one point of sale. Both will be
charge on manufacturing cost. Individuals will be benefited by this as
prices are likely to come down. Lower price mean more consumption,
more consumption means more production and thereby helping in the
growth of the companies
11.3 NEGATIVE ASPECTS OF PROPOSEDGST
There are following negative aspects of Goods and Services Tax
(GST):
• Majority of dealers are not covered with the central excise but
are only paying VAT in the state. Now all the VAT dealers will be
required to pay Central Goods and Services Tax (CGST).
• GST is referred as single taxation system in India but in reality it is
a dual tax in which both state and centre collects separate tax on
single transaction of sale & service.
However GST has some negative aspect but at the end it will boost
economy.
11.4 CHALLENGES IN IMPLEMENTATION OF GST
There are following challenges in implementing GST throughout the
country:
11.4.1 Statereluctantto implementGST: Under GST the taxes would be
levied on the basis of destination principle (i.e. taxed in state
where goods & services are sold /rendered) and state government is
fearful of losing money. Central government should come up with
revenue sharing model to solve state’s grievances.

18.
11.4.2 Legislative challenge/ Federal character: India is a federal
democratic country where both Centre and State Government
Exists. Any change in the taxation powers of federal or state
government requires amendments of Indian Constitution by two
third majorities of its members present and it is also to be ratified
by more than 50% state legislative assemblies. Centre Government
has already amended “The Constitution (One Hundred and Twenty
Second Amendment) Bill, 2014” in Lok Sabha. Now it has to be
approved by Rajya Sabha. Central Government should take all
opposite parties into confidence and get this Bill passed by Rajya
Sabha. Moreover State governments should be convinced to adopt
GST bill in their respective states.
11.4.3 Infrastructure: IT infrastructure is a key component for success
of GST. Without a well-designed and well-functioning IT system, the
benefits of GST will remain elusive. In case of VAT also Centre had
broad IT infrastructure, but it was a major issue with the states.
Therefore both Centre and State needs to develop a High standard
IT infrastructure to get the fruits of Goods and Services Tax.
11.4.4 Rate of Tax: The major challenge in implementing GST is to
determine the rate of tax. GST rate should be such rate which
generates at least the same revenue to the state and Centre as
generated in current tax structure. Till now there has been no
official announcement regarding GST rates in India but Finance
Minister said that GST Rate should be around 18%.
Fig. 3: GDP composition in March, 2012

19.
12. GOODS AND SERVICES TAX (GST) AROUND THE WORLD
France was the first country to introduced GST in 1954. Till now more
than 150 countries have adopted Goods and Services Tax successfully.
Following table shows the country adopting GST with the rate of GST.
COUNTRY
YEAR OF
IMPLEMENTATION
CURRENT RATE IN %
AUSTRALIA 2000 10
FRANCE 1954 19.6
BELGIUM 1971 21
NEW ZEALAND 1989 15
SWEDAN 1969 25
GERMANY 1968 19
DENMARK 1967 25
SINGAPORE 1993 7
THAILAND 1992 7
INDONESIA 1984 10
Table 12.1: GST around the World
27 % rate of GST has been proposed in India. But Mr. Arun Jaitley
(Finance Minister) in Lok Sabha said that 27% will be too high the actual
figure will decided by GST council and it should around 18%.

20.
13. NEGATIVE IMPLICATIONS OF GST
1. VAT and Service tax on some products may be higher than the
current levels.
2. Most of the developed economies use a single GST and not a dual
GST. Hence, it will still be a very complicated billing and
reconciliation IT machinery.
3. Doesn't include petroleum and alcohol products. Heavy loss to
the exchequer.
4. It requires strong IT (Information Technology) infrastructure at
grass-root levels. India essentially lacks this. This factor is going
to be the bottleneck, if not addressed well in advance.
5. Very high rates 16% compared to current 12.5 % VAT.

21.
14. GST REVIEW BY DIFFERENT ORGANIZATIONS
• REVIEW BY PWC & ICRA-IMPACT OF GST ON AUTOMOBILE SECTOR
The automobile industry has its own complexity such as longer
investment cycle, development of vendors / part makers, substantial
outsourced processes, unique market approach, etc.
14.1 IMPACTOF GST ON AUTOMOBILE SECTOR:
VALUATION: The Model GST law continues with the concept of
‘transaction value’ which is a welcome measure. The transaction value
shall be adopted where the supplier and buyer are not related, and price
is the sole consideration for sale.
Some of the significant valuation points arising out of the draft law are
as follows:
1. Likely Re-Birth of FIAT Principles
2. Inclusion of Subsidy.
3. Discount in Invoice and normal trade practice
4. Post Supply Demands
5. Sale through Marketing Companies
14.2 JOB WORK AND GST:
The Model GST law treats ‘job work’ as a service and seeks to
maintain the existing excise procedures for job work transactions,
i.e. non-taxability of job work transaction and providing credits to
the principal for supplies to job worker, 180 days condition for
bringing back goods after job work, etc.

22.
14.3 CREDIT ON VENDOR TOOLING:
Under the Model GST law, the definition of ‘capital goods’ covers
only those goods which are used at the place of business of supply
of goods. Thus, only goods which are used in the place of business
of OEM seem to be eligible for GST credit in the OEM’s hands.
14.4 TIME OF SUPPLY FOR PAYMENT OF GST:
The Model GST law specifies that the time of supply of goods shall
be at the earliest of
• Date of removal of goods
• Date of which goods are made available to recipient
• Date of invoice
• Date of receipt of payment with respect to the supply
Date of receipt of goods as shown in the books of accounts by
recipient.
14.5 DEALER INCENTIVE SCHEMES AND IMPACT OF GST:
The Model GST law does not provide as to whether these incentives
or discounts are subject to GST. Further, since the original supply
would have already suffered GST and the buyer would have taken
the input tax credit, the issue of whether these incentives/
discounts would impact the price and credits, or will these be kept
out of GST (in the VAT chain), needs to be addressed.
14.6 LACK OF CLARITY:
The Government has indicated its intention to subsume all central
and State cesses into GST. However, on a reading of the Model GST
law and the constitutional amendment bill, it is not clear as to
whether the cesses levied under different legislations (for specified

23.
purposes) will be subsumed into GST or would continue under the
GST scenario.
14.7 ICRA DUTY STRUCTURE FOR AUTOMOBILE
OEM’s UNDER CURRENT AND GST REGIME
Segment Excise
duty
NCCD VAT CST Effective
TAX
Likely GST
Two wheelers 12.5
%
1 %
12.5
%
2 % 30.4 % 17-19 %
Small cars (
length < 4m)
12.5
%
1 %
12.5
%
2 % 30.4 % 17-19 %
Sedans(length
> 4m with
engine < 1500
cc )
24 % 1 %
12.5
%
2 % 43.7 % Higher
Sedans(length
> 4m with
engine > 1500
cc )
27 % 1 %
12.5
%
2 % 47.2 % Higher
SUV’s
30 % 1 %
12.5
%
2 % 50.7 % Higher
Three
wheelers
12.5
%
1 %
12.5
%
2 % 30.4 % 17-19 %
Commercial
vehicles
12.5
%
1 %
12.5
%
2 % 30.4 % 17-19 %
Table 14.1: ICRA duty structure for automobile OEM’s under current and GST scheme

24.
Segment FY 2015 FY 2016 FY 2017 Growth Drivers
Commercial
vehicles
2.8 % 11.5 % 12-13 %
• Pic-up in infra and
mining sector to
support recovery in
tippers.
• Pre buying owing to
implementation of BS-
IV(by April-17)
Passenger
vehicles
3.9 % 7.2 %
8.5 –
9.5 %
• Favorable impact of
Seventh pay
commission
• Expectation of
recovery in rural
demand
Two
Wheelers
7.9 % 3.0 % 4 – 6 %
• Expectation of better
demand from rural
areas
Tractors 13% 10.5 % 7 – 8 %
• Subsidy program in
states like AP.
Telengana and MP
Table 14.2: Growth Estimates & Likely Drivers FY 2017

25.
14.8 IMPACT OF GST ON LOGISTICS:
Improving competitiveness of Road logistics positive for CV demand
1. The other major benefit of GST is expected to be easing out of
various bottlenecks and complexities involved in transportation of
goods using road logistics from one state to another. Since CST will
be subsumed in GST, companies will no longer be required to have
depots/warehouses at multiple locations and also do away with C&F
agents.
2. In the automobile industry, while OEMs dispatch vehicles directly
from their factories to dealers; in their spare parts business, the
sales are routed through depots and C&F agents. With the
implementation of GST, companies will be able to consolidate their
warehousing infrastructure and benefit from lower costs incurred in
supply chain.
3. As time spent at various check posts will reduce (with uniform
transaction based taxation regime), the operating efficiency of road
logistics sector is also expected to improve. This would mean better
turnaround time for trucks (i.e. higher asset sweating) and possibly
lower demand for new CVs. Additionally, as industries will switch
towards consolidating their warehousing infrastructure, the demand
is expected to shift in favor of bigger trucks.
4. In ICRA's view, easing of bottlenecks in road logistics would not be
materially negative for CV demand over the longer-term as - lower
logistics costs will help road sector to compete more effectively
with the railways and secondly, efficiencies of road logistic sector
are also contingent on the improvement roads & highways sectors,
which at present limits ability of trucks to cover a maximum of 350-
400 km per day in contrast to 700-800 km in developed nations.
However, this trend is gradually changing with up gradation of
national & state highways and deployment of more powerful trucks.

26.
14.9 Consolidationofwarehousing in favor of bigger trucks but MCVs won’t
get completelymarginalize.
1. The other general consensus is that the demand will shift in favor of
bigger trucks and medium-segment like 9-16t will get marginalized.
The share bigger trucks has gradually been increasing in India on
back of their superior cost economic and improving highway
infrastructure.
2. In ICRA's view, while the implementation of GST will further support
demand for bigger trucks but the shift would be gradual. This is
because many applications and industries find MCVs more viable vis-
à-vis bigger trucks. Some of the notable sectors where MCVs are
predominantly used include.
14.10 Sectors where MCVs are predominantly used:
1. Perishable goods like Diary products, Fruits & Vegetables, Foods
grains etc.
2. Auto Components (Typically Ancillaries set-up their units either in
the OEM’s vendor park or in the near-by areas, allowing OEMs to
optimize their working capital requirements (i.e. Just in Time
Concept).
3. Courier & Re-location Services
4. Building/Construction Material (16T vehicles are also used as tippers
in Construction sector)

27.
15. CONCLUSION
The automobile industry is looking forward to introduction of GST.
However, there are quite a few concerns in the draft Model GST law,
including some of the key aspects highlighted above, which need to be
addressed. Restrictions and conditions on eligibility to tax credits on
assets used for business is also a major area of concern, and the credit
mechanism should be more liberal. Proper GST administration and dispute
resolution (more importantly on inter-state transactions) is very critical.
The industry is also expecting the procedural changes to be notified in
advance, and may require a lead time of at least six months before
introduction of GST.
The taxation of goods and services in India has been characterized as a
cascading and distortionary tax on production resulting in mis-allocation
of resources and lower productivity and economic growth. It also inhibits
voluntary compliance. It is well recognized that this problem can be
effectively addressed by shifting the tax burden from production and
trade to final consumption. A well designed destination-based value
added tax on all goods and services is the most elegant method of
eliminating distortions and taxing consumption. Under this structure, all
different stages of production and distribution can be interpreted as a
mere tax pass-through, and the tax essentially ‘sticks’ on final
consumption within the taxing jurisdiction.
A ‘flawless’ GST in the context of the federal structure which would
optimize efficiency, equity and effectiveness. The ‘flawless’ GST is
designed as a consumption type destination VAT based on invoice-credit
method.

28.
REFERENCE
 http://www.finmart.com/blog/gst-india-goods-service-tax/
 https://www.pwc.in/assets/pdfs/services/tax/indirect_news_alert
/2016/decoding_the_draft_model_gst_law-
key_features_of_the_draft_model_gst_law.pdf
 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1682260
 http://gst.customs.gov.my/en/Pages/default.aspx
 http://finmin.nic.in/GST/Empowered%20Committee%20of%20SFM%2
0%20First%20Discussion%20paper.pdf
 http://pib.nic.in/newsite/PrintRelease.aspx?relid=148240
 http://www.ey.com/IN/en/Services/EY-goods-and-services-tax-gst
 https://autoportal.com/articles/impact-of-gst-on-indian-car-
market-6224.html
 http://economictimes.indiatimes.com/industry/cons-
products/fmcg/gst-impact-cars-fmcg-items-to-get-cheaper-services-
dearer/articleshow/53583188.cms
 http://auto.economictimes.indiatimes.com/news/policy/benefits-
challenges-for-auto-sector-in-gst-bill/53541153
 http://www.mycarhelpline.com/index.php?option=com_latestnews
&view=detail&n_id=1419&Itemid=10
 http://www.firstpost.com/auto/impact-of-gst-on-indian-auto-
industry-2935702.html
 http://overdrive.in/news/impact-of-gst-on-indian-auto-industry/
 http://www.autocarindia.com/auto-news/impact-of-gst-on-auto-
industry-402707.aspx
 https://www.quora.com/What-will-be-the-impact-of-GST-on-
Indian-Car-market
 https://www.pwc.in/assets/pdfs/services/tax/indirect_news_alert
/2016/decoding_the_model_gst_law_impact_on_automobile_sector.
pdf
 https://www.quora.com/Is-GST-going-to-be-a-boon-or-bane-for-
India
 https://www.quora.com/What-are-the-good-sides-and-the-bad-
sides-of-GST-goods-and-services-tax

29.
ANNEXURE
 Fig. 1 Difference between the total price before and after GST
implementation
Source:http://papers.ssrn.com/sol3/papers.cfm?abstract_id=26869
79
 Fig. 2 Comparison of Hatchback, SUV’s and Sedan after GST
implication
Source: https://autoportal.com/articles/impact-of-gst-on-indian-
car-market-6224.html
 Fig. 3 GDP composition in March 2012
Source:http://papers.ssrn.com/sol3/papers.cfm?abstract_id=26869
79