GST Hike Sparks Concerns In India’s Pre-owned Car Market | World Business Watch | WION

Summary

India's recent tax hikes, including an increase in GST rates on used cars and caramel popcorn, have raised concerns among businesses and consumers. The GST on used cars, including electric vehicles, has been raised from 12% to 18%, potentially leading to higher prices for buyers. The tax on caramel popcorn in cinemas has also risen to 18%, expected to increase prices by about 12%. Despite the small revenue gain from these hikes, experts, including former CEA Krishnamurthy Subramanian and ex-Infosys CEO N. R. Narayana Murthy, have criticized the complex tax structure and its potential negative impact on both the market and consumers.

Takeaways

• 😀 The Indian GST Council has raised the GST rate on used cars, including electric vehicles, from 12% to 18%.
• 😀 The tax hike on used cars will affect businesses involved in buying and selling, potentially increasing prices for consumers.
• 😀 Individual buyers and sellers of used cars are not directly impacted by the tax increase, but businesses will feel the pressure.
• 😀 The increase in GST on caramel popcorn is set to raise prices for consumers, particularly in cinemas, where it constitutes around 10% of total popcorn sales.
• 😀 The GST rate on caramel popcorn has been increased to 18% due to its reclassification as a sugar confectionery.
• 😀 The tax hike on caramel popcorn is expected to lead to a price increase of approximately 12%, affecting cinema-goers.
• 😀 While the revenue gain from the caramel popcorn tax increase is minimal (0.013% of total GST collections), it could still impact consumer demand.
• 😀 Former CEA Krishnamurthy Subramanian and ex-Infosys CEO R. Seshasayee have criticized the complexity of the tax structure and its impact on consumers and businesses.
• 😀 The increase in the GST rate on caramel popcorn is a part of a broader shift in India's taxation policy, including changes to various food categories.
• 😀 The new tax changes reflect the government’s ongoing effort to adjust tax rates, which could have mixed effects on both businesses and consumers.

Q & A

What recent change has the GST Council made regarding used cars in India?

The GST Council has increased the GST rate on used cars, including electric vehicles, from 12% to 18%. This applies to businesses involved in buying and selling used cars.

How will the increase in GST on used cars impact businesses?

Businesses involved in buying and selling used cars will face higher tax burdens, which they may have to absorb or pass on to consumers. This could lead to higher prices for used cars.

Are individual buyers and sellers of used cars directly affected by the GST hike?

No, individual buyers and sellers are not directly impacted by the GST hike. However, businesses involved in the transaction may raise prices, indirectly affecting consumers.

What is the expected impact of the GST hike on the used car market in India?

The GST hike is expected to put pressure on the $32 billion used car market, potentially leading to higher prices and a slowdown in transactions, especially for businesses.

What is the reason behind the GST hike on caramel popcorn?

The GST hike on caramel popcorn is due to its reclassification as a sugar confectionery, which has a higher GST rate of 18%.

How will the GST increase on caramel popcorn affect cinema-goers?

Cinema-goers will likely face a price increase of around 12% for caramel popcorn, which constitutes about 10% of total popcorn sales in cinemas.

Why has the GST hike on caramel popcorn raised concerns among industry experts?

Experts have questioned the rationale behind the hike, arguing that the revenue gain is minimal (only 0.013% of total GST collections), and the complex tax structure may negatively impact both consumers and businesses.

What is the expected revenue impact from the higher tax on caramel popcorn?

The revenue gain from the increased tax on caramel popcorn is expected to be minimal, contributing only about 0.013% to total GST collections.

How does the increase in GST on caramel popcorn compare to the overall cinema revenue?

While food and beverage sales are important for cinema revenue, caramel popcorn constitutes a relatively small portion (about 10%) of total popcorn sales. The price hike could affect consumer demand for caramel popcorn, but it is unlikely to have a significant impact on overall cinema revenue.

What criticisms have been leveled against the GST Council's decisions on these tax hikes?

Critics, including former CEA Krishnamurthy Subramanian and former Infosys CEO Narayana Murthy, have questioned the complexity and rationale behind the tax hikes, arguing that they may confuse consumers and businesses and generate limited revenue.