The word GST (Good and Service Tax) has been evolving in the minds of all since its declaration. It has been becoming shocking news, especially for those hearing it the first time. But in reality, is it really outrageous? I don’t think so. Only name (tax) imposing a burden on them and they are not dragging themselves inside the real truth.
No doubt, GST will be imposed by the government on every material manufactured in India from 1st July. But it doesn’t mean this time tax will be again imposing a burden on you. It is actually declining the cascading effect of tax means to say that tax will decline the multi stage tax.
In other words, the impact of GST is liked a win-lose situation means good for some and bad for others. There are some sectors who are entirely opposing this new tax regime while others are welcoming. As of now, the Good and Service Tax bill is being visible as a revolutionary tax trade globally. But many industries and manufacturers are showing their very own dissatisfaction in this new tax regime and the businessmen community of automobile components manufacturers from different regions is not in any respect satisfied with the selection. Let’s see how:
Impact of GST on Auto component manufacturers:
While imposing some tax on any good, we always think negative impact. The same situation has been standing in the minds of auto component manufacturers.
If we talk about the Asia’s largest auto components market in Kashmiri, Delhi, the dealers have shown excessive intense because of the burden of GST bills. Actually, they are protesting in opposition to the higher implication of GST charge in the region and have revealed their discontent by tying the black bandage on their hands. These manufacturers are not at all glad and are against the 28% GST quotes set on auto components and accessories.
The association main leaders Vinay Narang and Vishnu Bhargava said that earlier they are paying auto parts component cost 12.5% and tractor parts 5% VAT but now they are compelled to pay GST at a rate of 28%. So they are demanding to reduce the tax rate of 28% to 18%. To resolve this horrible burden in their minds, the Asian market dealers had sent a letter to the finance minister of Delhi i.e. Arun Jaitley to take an action soonest to decline the tax rate to 18%.
But the real sound is that GST is anticipated to bring about a declination within the cost of doing commercial enterprise via eliminating the cascading effect of Central and State taxes, mainly for automotive manufacturers. Under Good and Service Tax, the importer-vendors as well as domestic resellers need to be able to declare credit of GST paid on all commercial enterprise procurements of goods and services, in preference to the contemporary scenario, where they cannot declare a credit for the duties/ taxes paid on capital assets and input services availed. The manufacturers can also be able to claim.
In other words, this new tax regime will permit the manufacturers to claim the credit of GST paid by them while purchasing the raw material which is not in other cases such as VAT and Excise duty. For Example, while purchasing raw material, they had paid 10% as VAT (Value added tax) on a purchase of Rs.10000 i.e. Rs.1000. Then the total cost will be Rs.11000 and after adding more material say Rs.5000 then the cost will become 16000 and while sending to wholesalers, again VAT and Excise duty will be levied assume 15% i.e. Rs.2400 (5% on 16000). Now the total tax paid will be Rs.3400 (1000+2400). Then the components will send to a retailer to buyer and tax will levy, again and again, ultimately increasing the overall cost or also called as cascading effect of a tax.
But in a case of GST, once the tax of 10% paid by the dealer, he will not assume to charge a tax of 15% (10%+5%). Only 5% will be charged from wholesalers. So we can say that even in this stage total tax is declined from 15% to 5% so only Rs.1800 tax paid till the wholesaler stage instead of Rs.3400.
As already revealed, there is ideal information for the manufacturers as they could be able to claim the GST paid on items purchased whereas currently, they’re ineligible to assert the excise duty and VAT paid. Excise paid on the stock purchased can be covered by means of IGST under the GST law. Advance acquired for the supply of products can also be taxed beneath GST. GST might help the producers in buying auto components at an inexpensive price because of a stepped forward supply chain mechanism beneath GST.
As consistent with the GST provisions, each taxpayer can avail the input tax credit. However, with the intention to avail the credit of tax paid, first he has to pay the taxes to avail the credit score on all the one’s purchases within the subsequent month.
But the impact of GST is good for unregistered auto component manufacturers. Let’s see what government charge for them:
Impact of GST for unregistered auto component manufacturers
GST is drawing close with strict tax compliance and could call for each taxpayer to follow the recommendations as a consequence. There are a few persistent questions regarding the anonymity of unregistered manufacturers within the GST. Some of the queries are engraved here to well known the overall questions concerning the transaction with the unregistered manufacturers.
RCM provisions known as reverse charge mechanism that’s utilized for the tax price made with the aid of the recipient on the buying of any good. RCM also explains that tax is paid with the aid of the other party and that is implied in the case of unregistered dealer additionally. The opposite fee already takes its place in provider tax provision and has been included within the GST also making vital for all the manufacturers to pay taxes based on opposite fee.
In other words, the RCM can appreciably growth the range of taxpayer base in India at the same time as it also stated that purchases crafted from unregistered manufacturers can show costly for the registered dealer. This might be attracting opposite expenses in case if any dealers make transactions with an unregistered manufacturer.
The final GST (Goods and Service Tax) rates were announced for the exclusive kind of automobiles. As expected the automobiles are kept beneath the 28% bracket and a listing of cess to be levied on a distinctive type of automobile has also been declared via the Indian government.
The exact impact of GST will be summed up only after it launched. Although, the auto component manufacturers are ready to pay tax on the merchandise they will purchase but at some good rate and not under 28% tag. And also the process of calculating the GST will not contain complications. It should be simple so that even uneducated employees can able to get the exact figure of tax required to pay.
Hopefully, some good news is waiting for auto component manufacturers, especially for the small scale and not registered dealers as they are a backbone of the nation so not willing to pay the tax @ 28% than 18%.