48 | AutoPartsAsia | NOVEMBER 2017ANALYSIS
I
ndia rolled out the Goods and
Services Tax (GST) in July 2017
to realise the goal of `One
Nation, One Tax, One Market’,
and to create a business-friendly
environment. GST replaced all forms
of indirect taxes including service
tax, central excise, value added tax
(VAT) and central sales tax.
In June, the month before GST
was to be implemented, India’s
passenger vehicles sales fell steeply
owing to the confusion over the new
tax system and unsold inventory.
According to the numbers released
by the Society of Indian Automobile
Manufacturers (SIAM), only 198,399
units of passenger vehicles were
dispatched in June 2017 compared to
223,454 units dispatched in the same
month a year ago, a decline of 11.21
percent. Sales by most of the vehicle
manufacturers declined in June,
despite the discounts they offered.However, the automotive market
proved its resilience in July as
wholesale in all the segments, except
three-wheelers, posted double digit
growth. Passenger vehicle segment
turned out to be the main driver with
a growth of 15.12 percent as factory
dispatches stood at 298,997 units
in July compared to 259,720 units
delivered to the retailers across
the country the same month last
year. Likewise, the two- wheeler
and commercial vehicle segments
recorded double digit growth in July.
Similarly, for the first quarter of the
current fiscal (April –June), passenger
vehicle sales grew four percent to
727,658 units compared to 697,154
units in the same period a year ago.
Most experts attributed the growth to
the stock replenishment after GST,
and BS-IV implementation. As the
transition was finalised, the financial
performance of Indian corporate
sector during the first quarter of the
current fiscal tripped, as many of the
consumer-oriented sectors faced
inventory de-stocking (by trade
channel) and offered discounts to
clear pre-GST inventories, according
to ICRA Research Services.According to the ICRA estimates,
the growth in aggregate revenues
of 448 companies slowed down to
5.3 percent during Q1 FY 2018 as
compared to the preceding quarter
(Q4 FY2017 – 8.3 percent) when
performance of corporate India had
started showings signs of recovery
from the demonetisation move.However, the impact of GST roll-out
was higher on margins as reflected
by almost 180bps contraction (on
Y-o-Y basis) to 15.3 percent, which
is among the lowest in past several
quarters.In ICRA’s view, lower primary sales
(ahead of GST roll-out) and discounts
offered by companies to clear pre-
GST inventory, played a key rolein depleting earnings, especially in
sectors like automobiles, consumer
durables and FMCG.The report further added, among the
key sectors, the automobile sector
witnessed deferment in sales as GST
rates across many of the segments;
especially in passenger vehicles (mid-
size plus vehicles) were expected tobring down vehicle prices. As a result,
OEMs resorted to lower production in
July and focused on clearing pre-GST
stock by offering higher discounts.Recent Development
Under the new tax regime, all
cars were taxed at a base rate of
28 percent and were levied an
additional cess based on factors likeCar Market Resilient
To GST Sore
APA Bureau