The Government of India's decision to increase GST rates to 15 per cent on Complete Knocked Down (CKD) kits in the last annual budget came as a shock to the entire automotive industry. The announcement came right after the cyclical price revision last year. The hike in tax rates added to the cost pressure on carmakers which eventually were transferred to the car buyers in the next quarter in a bid to maintain the bottom-line margin. The increase in tax rates has been a concern even for the industry body and members of the Society Of Indian Automobile Manufacturers (SIAM). SIAM is in talks with the government to restore the GST rates to 10 per cent. Speaking to carandbike, Rajan Wadhera, President- SIAM and President- Automotive Division, Mahindra & Mahindra said, "Last year in the budget the taxes on CKD components have gone up, we are requesting the government to bring it down to the original level as it was last year."
The move could give a strong push to the passenger vehicles sales which otherwise have been cruising in the slow lane in the second and third quarter of Fiscal Year 2018-19 and the industry isn't expecting the performance to improve significantly even in the last quarter. Moreover, luxury carmakers like Mercedes-Benz, BMW, Audi, Volvo and Jaguar Land Rover who generally use a high level of export components in locally assembled models would be the major gainers from such a move.
Carmakers have again revised the price across their product range at the beginning of this year. If the taxes on CKD components are reduced to 10 per cent it would reduce the cost burden on carmakers and in-turn prices can be brought down to an extent if the carmakers choose to transfer the benefits to the customers.