GST IMPACT ON USED VEHICLE AND EQUIPMENT INDUSTRY

Hailed as one of the most significant economic reforms since India's independence, the Goods and Services Tax (GST) is a potential game-changer for the economy. While the legislation is yet to sail through the choppy waters of centre-state relations, its wide-ranging implications for a host of sectors are already under the scrutiny of the media and the commentariat. Given the pivotal space the automobile sector occupies in the Indian industry universe, it's natural that the GST's impact on it will have reverberations across the economy as a whole. Seeing the media reports surfacing in the recent past, one can easily judge the GST to be one of the most phenomenal changes sharply impacting the Indian economy.

GST is another type of indirect tax such as VAT and others but one that endeavors to bring the much needed tax uniformity in a developing nation like India. When the GST bill becomes active, reportedly in April, 2017, it is going to put together all the direct as well as indirect taxes levied currently into one flat consolidated tax to be applied evenly across the nation. Its impact on India's automobile industry will certainly be evident for it will entirely change the industry's price scenario.

As per media reports, the implication of GST is to result in a considerable 10% reduction in the prices of small car segment while a mere 2% for that of the SUVs and other luxury cars. This is supposedly to be the outcome of a flat tax rate application of 18-20% for the cars under 4-meter and that of 40% for the ones over 4-meter. This is opposed to the current differential figures of 12.5% excise duty for small cars, 24% for mid cars, 27% for luxury cars and 30% for the SUVs. 

While GST brings home great news for the small car segment and the new car buyers alike resulting from a significant drop in prices, the used car market is bound to suffer the impact of this plausible rise in the sales of new car market. Buyers will then be supposedly more inclined in the purchase of new cars, thus, flooding the used car market with relatively much less demand for them. This surplus supply of used car is to put dealers in a difficult situation of offering much lower prices for the used cars, resulting in losses overall. Consequentially, the resale value of cars is expected to go down by a good 10-15% owing to a highly competitive environment due to the high sale of new cars and increased pushing in of the used cars in the market.

Thus, while the post-GST era will see a flourishing time for the purchase of both new and used cars, it isn't going to benefit the sellers of used cars in any way.

This imbalance in the car prices that will be created post the implementation of the GST will have a vital impact on the automotive industry as well as the equipment industry as a whole. Where the new car segment will abruptly witness higher demand which can in turn will positively effect the auto equipment market but can also drastically put immense pressure on the equipment dealers which may even result in diminished quality. Also, the same debate of an adverse impact on roads and traffic as at the time of launch of Tata's Nano still holds true with a great number of two-wheeler segment expectedly shifting course to small cars.

As for the automotive and all the other major sectors of the economy, any drastic change brings in its own share of benefits as well as challenges for one and all from time to time. No set of predictions and preparations can put away the necessary rigid and pivotal consequences it can create in the long run. And yet there are major concerns to the final activation of the GST bill and more on its appropriate and uniform implementation in the entire economy alike. While the GST may have certain poignant aspects, eventually it all boils down to the manner in which it is applied and accepted in the market by both dealers and buyers in their capacity for it to become more of success, good news for the market.
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