GST revamp: Why auto industry wants new tax rates implemented sooner

The automobile industry has requested the Centre to prepone the implementation of the revamped Goods and Services Tax (GST) rates so that it coincides with the Navratri period on September 22.

This follows a sharp decline in fresh bookings over the past week as more buyers opt to wait, anticipating possible GST rate cuts on automobiles, as per a CNBC-TV18 report. 

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The revamped GST rates will be simplified into two slabs (from the existing four) of 5 per cent and 18 per cent. A 40 per cent sin and luxury rate would also apply to items like tobacco and high-end goods.

The Centre is also considering reducing GST on small cars and two-wheelers from 28 per cent to 18 per cent, while large cars (including SUVs) may move to the 40 per cent slab.

After a GST officers' meeting on September 2, the 56th meeting of the GST Council is expected to take place from September 3-4, with the revamped tax rates to be implemented by Vijayadashami (October 2).

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In that regard, the Federation of Automobile Dealers Association (FADA), an industry body representing automobile dealers, has written to the finance, commerce, and heavy industries ministries seeking expedited implementation of the proposed GST reforms, fearing a serious decline in sales during the festive period.

At present, cars are taxed at 28 per cent standard GST, excluding other cesses. There is wide speculation of a 10 percentage point reduction in the tax on small cars, subject to input tax credit and other factors.

The automobile industry has also sought the resolution of procedural issues, including those related to input tax credit, the report added.