Shares of automobiles companies were trading higher by up to 4% on the National Stock Exchange (NSE) in an otherwise subdued market after the Rajya Sabha passed the Goods and Services Tax (GST) Constitutional Amendment Bill.
Tata Motors (up 4% at Rs 496), Hero MotoCorp (2% at Rs 3,293), Bajaj Auto (2% at Rs 2,766), Ashok Leyland (1% at Rs 86.70), Maruti Suzuki India (1% at Rs 4,922) were up in the range of 1%-4% on the National Stock Exchange (NSE).
At 10:29 am, the Nifty Auto index was up nearly 2% as compared to 0.23% rise in the benchmark Nifty 50 index.
Motherson Sumi Systems, Amara Raja Batteries, MRF, Exide Industries and Apollo Tyres are others from the Nifty Auto index up between 1% and 5%.
GST will have a significant positive impact on the automotive sector, according to Rajeev Singh, Partner and Head, Automobile Sector, KPMG in India.
Today all passenger vehicles’ are taxed in four slabs of excise duty – 12%, 24%, 27% and 30% depending on the length of vehicle, engine displacement and ground clearance. Apart from excise duty, there is value added tax (VAT) ranging from 12.5% to 14.5% and central sales tax (CST) of 2% (for vehicles sold outside the manufacturing state).
Post GST, all these taxes are going to be subsumed into a single tax and all passenger vehicles are likely to fall in only two slabs - 18%/20% and 40%. This will definitely result in reduction of cost of cars for the end consumer. It is also good news for all OEM’s as the demand new vehicles will go up due higher affordability, said Rajeev Singh.