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GST: 10 caution points for auto industry & automobile dealers


Goods and Services Tax (GST) is now just a few hours away from being a reality, and then a maximum of the present indirect taxes on goods and offerings shall grow to be the records-making GST certainly ancient. The release rite at Parliament House will rewrite a brand new future, this time an economic one. GST, although it is being claimed as certainly one of the most important tax reforms ever, it’s also being seen as one of the maximum tough times for the automobile sector. Here are an try and flag sure regions of concern for the auto industry and vehicle sellers that are indeed gray, each in coloration and information and interpretation.

1. Closing Stock of Vehicles / Spare Parts

GST regulation gives each ultimate share of finished items and inputs to be transferred to the GST regime with full tax advantages. For no-fault, assessee’s shares older than three hundred and sixty-five days will result in economic loss to dealers as one hundred% tax benefit might be allowed simplest in cases in which situations (which aren’t smooth) are fulfilled. Assessee’s stocks older than 365 days will result in financial loss to sellers as 100% tax advantage will be allowed simplest in cases in which conditions (which aren’t smooth) are fulfilled.

2. Carrying ahead of unclaimed Credit

Depending upon the tax fee on input and spare components in GST regime, i.E., 18% and above or under 18%, input tax credit score could be allowed handiest to the extent of 60% or 40%, respectively ensuing in the residual loss to vehicle sellers. This is inevitable as in a maximum of instances, responsibility-paying documents aren’t to be had. Consequently, taxpayers will need to pay greater or sellers’ ebook losses.

3. Demo Cars / Vehicles

Demo motors are used for advertising and education as a regular commercial enterprise exercise that is currently no longer considered capital goods. There are two divergent views at the equal given the precise credit score denial to motor motors in input tax credit provisions.3.

4. Discounts on Vehicles

Giving discounts to consumers of cars via sellers in extraordinary forms may be very commonplace. It may be through a bill or otherwise. Dealers also get discounts from the manufacturers of vehicles like amount or exchange cut-price/incentive. Their tax treatment and documentation might be crucial to avoid interpretational disputes with the Department.5. Dealing in pre-owned Vehicles

Today, there isn’t a tax or a lower tax on pre-owned or 2d-hand automobiles. In GST, a tax would be payable on all such deals at full price or on the differential value where input credit score has now not been taken. The trouble is -fold, valuation difficulty, and a fee of tax that is likely to be the same as in the case of the new vehicle. Chess will also be relevant, which is not yet clean.

5. Composite Contracts of Sale and Service

Vehicles are normally a problem to restore and renovation to contain the delivery of consumables and spare elements. Rates of each item in addition to services might be specific, i.E., 28 or 18%. The hassle of treating a transaction as a combined or composite supply is a technical problem wherein interpretation can be divergent and lead to disputes.

6. Heavy Taxes on pre-owned Vehicles

Dealing with 2nd-hand items (pre-owned vehicles) is a widespread part of the dealer’s business. There is no concessional price of tax prescribed, trying to the truth that such goods could have already suffered tax at the time of the first buy.

7. Advance Booking of Vehicles

Vehicles reserving via paying to enhance money have been taxed in the past; however, in the GST regime, develop bookings will be taxed whilst such strengthen is paid, adversely impacting working capital. This should bring about the popularity of lower advances if you want to affect producers’ working capital adversely.

8. Free Services / Warranties

auto industry

Free services on behalf of other sellers or producers, extended warranties, reimbursement of costs as natural dealers are contentious troubles that might also lead to now not -compliance, disputes, and litigation.

9. Marketing Strategies and Freebies

At present, automobile sellers provide incentives to ability buyers inside the shape of unfastened coverage, unfastened accessories, gas coupon, extended warranty, etc. This may also be taxable in the GST regime. Valuation rules do not allow such practices except nicely documented, and as such, the tax could be attracted. If not, sellers won’t get an input tax credit on these sports as those could suggest exempt elements.

All these guidelines cross on to expose that it will not be a clean experience in GST for car sellers; however, it can be complete of bumps due to potholes on the journey to GST. Let’s desire that the existing tax government, as they are, will quickly come out with the right clarifications.

Automobile Business Plan – Four Steps to Success

Like other enterprise plans, the contents of a vehicle dealership marketing strategy cover four primary steps closer to achievement. These steps are “possibility”, “ability”, “sports”, and “results”.


The industry, patron, and aggressive analysis of your marketing strategy show the possibility. This must perceive that clients for your neighborhood marketplace need a dealer of the type you have chosen because competition is not completely serving their needs or because their demographics are converting (extra populace, richer, poorer, extra households, and so forth.) The opportunity may also be that a sure combination of services with your dealership’s aid should enhance what competition is presently doing. The standard industry state of affairs needs to look beforehand to how the car sales marketplace will be doing six months, 12 months, or greater within the future when the dealership will honestly be open.


The revel in of the control crew, your license as a car supplier, and the monetary resources the partners can bring to the table cover the ability of the entrepreneur to jump in this possibility. Funders reading the marketing strategy anticipate that there may also be an element of coins missing from the entrepreneur’s capacity in the meantime. Otherwise, they would no longer be studying the plan in the first region.


Marketing and operations plans cover the activities the employer will engage in to usher in automobile customers (and automobile dealers if you are a used automobile provider) and run the enterprise as efficaciously as possible. As a small vehicle supplier, recall how you could make up for this lack of scale and the price savings for supplier chains through creativity and tough paintings.


Finally, the projections of enterprise success and the monetary section of the plan show the consequences you and investors must anticipate. If results take into account the entire expenses of the methods you’ve described and include adequate reimbursement for a team of workers and key team players, readers may be less in all likelihood to impeach elements on the price facet. If your sales projections are based totally on reasonable, researched assumptions approximately the car shopping for conduct of your neighborhood marketplace, then readers will be more likely to accept this facet of the projections as nicely.


Geneva A. Crawford
Twitter nerd. Coffee junkie. Prone to fits of apathy. Professional beer geek. Spent several years buying and selling magma in Miami, FL. Spent a year lecturing about psoriasis in Las Vegas, NV. Managed a small team writing about circus clowns in Las Vegas, NV. Garnered an industry award while writing about lint in the financial sector. Spoke at an international conference about getting my feet wet with dust in Libya. Spoke at an international conference about researching rocking horses in Bethesda, MD.