BHUBANESWAR: Vehicle buyers may be rejoicing over significant reduction in GST which will come into effect from September 22, but automobile dealers are a worried lot.
While the reduced GST has made vehicles more affordable and pushed the demand, dealers are caught in a bind as two-wheelers and four-wheelers lying in their inventories were purchased at higher tax rates and there is no certainty on the compensating the loss.
As per the new tax rates, small cars, motorcycles up to 350 cc and three-wheelers will now attract 18 per cent (pc) GST against 28 pc earlier and buses, trucks and ambulances will be taxed 18 pc.
Luxury vehicles will face a flat 40 pc rate. Since there is no clarity from the government on how the balance cess will be refunded or adjusted, dealers fear mounting losses. Sales of vehicles have almost dropped to nil since the announcement on new tax slabs.
“With GST 2.0 coming into force, buyers want the benefit of lower rates immediately. But we are unable to absorb the losses and offer any discount as the government has not yet clarified how we will get the refund of balance cess. If the resolution does not come up soon, each vehicle sold from old stock wiil be a direct hit to the dealer,” said Nilamani Sahoo, assistant sales manager at OSL Hyundai.
Another dealer from Cuttack said the government is pushing for affordable vehicles and increased sales, which is welcome. But unless the refund mechanism is clarified, dealers will be forced to bear losses that run into crores, which is unsustainable. Sources said, more than 5,000 four-wheelers are in inventories across the state.
The Federation of Automobile Dealers Associations (FADA) has already flagged the issue with the Finance ministry, seeking a clear mechanism for compensation. According to the federation, there would be an estimated cess loss of around `2,500 crore to the dealers in the country, if the government does not provide any immediate solution for the dealers to get the refund.
Managing director of Sai Ananta Automobiles Pvt Ltd Laxmi Narayan Mohanty said the onus of GST cut burden should be on manufacturers and not the dealers. But some manufacturers are trying to share the GST cut with dealers, he said.
“It is unfair to ask the dealers to bear the brunt. The manufacturers should immediately start giving the benefit of the GST reduction in view of the upcoming festive season. The government must clarify the confusion around the compensation cess as most of our stocks is bank-funded and blocked credits would compress liquidity,” said Mohanty, a senior member of FADA.