Manufacturing companies, hemmed in multiple local and central levies, welcomed the passage of the Constitution Amendment bill in the Lok Sabha on Wednesday for rolling out a country-wide goods and services tax (GST), which will remove inter-state fiscal hurdles.
The government is planning to introduce GST from April 1, 2016, in a step that will make movements of goods across states seamless and faster.
Analysts often cite India’s complex indirect tax structure, which is mired in a web of levies such as excise duty, value added tax (VAT), octroi, entry tax and purchase tax among others, as a major factor holding back investments in one of the world’s-largest markets.
“The implementation of goods and services tax from the next financial year is a positive move from the government, which will encourage manufacturers to expand their production capacity and consequently expedite growth of the economy,” said Eberhard Kern, managing director and CEO, Mercedes Benz India.
“This would also have a direct impact on the luxury car market, which would benefit from positive market sentiment and a healthy business environment. The end consumer would benefit the most with its implementation,” he added.
Manufacturers expect at least a 3-4% reduction in overall taxes as GST will reduce embedded levies.
“Today, there is at least 3-4% loss of taxes in the whole chain from raw material to finished goods. So overall that 3-4% saving on taxation will happen, which will then reduce the end price for the consumer,” said Pawan Goenka, executive director and group president (farm and automotive sector) Mahindra and Mahindra.