Motown unclear which route -cess past GST 2.0 takes

Carm makers and car retailers can be confronted with a potential loss on more than 600,000 unsold vehicles due to a lack of clarity about the treatment of compensation provision of 1-22% about vehicle categories under current goods and service tax (GST) regime.

Automakers and dealers said etc. that the GST Act must be amended to abolish Cess and a new mechanism that is submitted to anchor credits for losses made after the proposed indirect tax innovation. This, they said, can be done during a special session or winter session of parliament. The GST -Council must discuss changes in the levy in the coming days.

“At the moment there is no legal mechanism to restore the unused GST compensation,” said Saharsh Damani, Chief Executive Officer, Federation of Automobile Dealers’ Associations. “Unless these balances are explicitly transferred to usable credits under CGST or IGST, car dealers run the risk of losing substantial amounts to be locked in channel stock.” “Although a complete abolition of CESS would simplify compliance, every mechanism requires to repay existing credits or switch a legislative change,” said Damani.

Unused balance
“This can take time because the parliamentary approval needs,” said Damani of Fada. According to the dealer estimates, the shares of the passenger vehicle in the channel are currently more than 55 days or around 600,000 units. The industry sold 327,419 vehicles on average every month in April-July.

Damani said that the car industry assesses the number of vehicles in the network that putting on a high stop. This will help to estimate the potential exposure to working capital if no transitional facilities are provided. “It is absolutely necessary for the government to ensure a seamless migration of this balances to protect the viability of the dealer during the shift to GST 2.0,” he said. The GST Council, APEX decision-making body for the indirect tax, is planned to comply with 3-4 September, to discuss the proposal from the center to reduce the levy on small cars to 18%, of 28%. Larger cars and SUVs are likely to be confronted with the special rate of 40%, compared to 43-50% load, including GST and COSS, currently. GST 2.0 means that it will be moved to a TwoSlab structure of 5% and 18%, the stepping of the existing 12% and 28% plates and compensation disclosure and introducing a special rate of 40% for SIN goods and certain high-quality products such as luxury cars. In the meantime, regulated states of the opposition have expressed concern about the loss of income as a result of the latest GST reform.

Stakeholders of the car industry have attracted the government for suggestion that suggests measures, such as allowing the use of unused compensation balances, including those linked to transition stock and credit notes for loading output obligations -Igst, CGST, SGST. In the event that such an adjustment is not possible, the industry has urged the center to set up a mechanism for full reimbursement of unused compensation balances with defined timelines. It has also asked to recognize the center by adjustments to CESS resulting from sales returns and mail sales discounts through credit notes, and allowing such neutralization through adjustments or restitutions, said people in the knowledge.

In their representation at the center and the GST Council, managers said: “Since the current provisions do not allow the compensation of compensation-cess credit against GST obligations, this balances (in compensation on compensation on vehicles in stock or in transit would be blocked.

Without a suitable transition mechanism, the resulting financial impact on OEMs (original manufacturers of equipment) and dealers will be serious. “A copy of the representation was assessed by et. Senior officials said that a transitional mechanism will be worked out.

“We deliberately do not push shipments from larger vehicles (during this transition) because they attract a higher cess,” said Partho Banerjee, senior executive officer, Marketing and Sales, at Maruti Suzuki. “Dealers want to save small cars, on which the stop is lower with 1%.” At the largest car manufacturer in the country, while wholesaler shipments of utility vehicles such as Grand Vitara, XL6 and Invicto fell by 14% to 54,043 units in August, those of compact cars such as Baleno and Swift rose by 3% to 59,597 units.

Maruti Suzuki currently has shares of 48-50 days, said Banerjee. “With the last GST announcement that is approaching, we consciously decided to bring down the wholesale invoicing to minimize the shares supported by our dealers,” said Naliniërh Gollagunta, CEO, Automotive Division, M&M. “We are looking forward to the GST rationalization, what a question driver would be during the festive season.”