The auto companies trying to recover from the aftermath of demonetization and BS-III norms are now mitigating the new GST which is deemed to be a threat to the overall industry landscape.
With yet another compliance requirement to be met by the industry as GST, the industry is provided with such provisions that enable them to take maximum 60% input tax credit on pre-GST inventory. So, with it, the companies will have to incur a loss of remaining 40% credit. Also, to do away with the hassles involved in pre-GST and post-GST costing and tax adjustments, the companies are offering huge discount to clear all the stocked up pre-GST inventory with them.
In line with it after integrating GST, Honda, the two-wheeler auto major company, is likely to reduce price on its largest-selling Activa and Unicorn together with other motorcycles and scooters by upto 3-5%. Other companies in the industry, including Hero, Yamaha, TVS Motors and Suzuki shall also follow suit.
Previously it was believed that the implementation of GST would mean an increase of around 1% on price of two-wheelers. Other companies which include Eicher Motors and Bajaj Motor have already incorporated GST rates with lower prices. Honda is however reported to slash rates from the beginning of July.
"While the price cut will differ from state to state and product to product we expect it to range between 3-5 percent on an average. Whatever benefit there is (arising from GST) we will pass it on to the customer", said YS Guleria, Senior Vice President, Sales and Marketing, Honda Motorcycle and Scooter India.
The bikes with engines over 350cc capacity shall have an additional burden of cess amounting to 3% other than the 28% GST rate. The impact shall be on premium motorcycle segment including Royal Enfield and some of the models of Bajaj-KTM.
Consumers are likely to cheer the implementation of GST with cheaper two-wheeler vehicles for them. The industry thus is likely to receive voluminous growth after suffering huge losses due to demonetization and switch to BS-IV norms from the earlier BS-III.