Loss of credit on transition stock is a yr vintage, boom inside the operating capital requirement, impact on exchange reductions – vehicle dealers across India are coping with these demanding situations as they equip up for the July 1 rollout of the Goods and Service Tax regime.
On BloombergQuint’s special collection, GST Countdown, John Paul, president of the Federation of Automobile Dealers Association, Vinkesh Gulati, accomplice at United Automobiles, and Saurabh Kedia, director at Kedia Group, shared their issues and posed questions to Ritesh Kanodia, a partner at Dhruva Advisors.
Here are the edited excerpts:
What are several of the challenges that dealers are going through in Allahabad?
Venkatesh Gulati: The challenge is the stock of old stocks of spares, add-ons, or maybe motors, which can be more than a one-year vintage; unlike the electronics marketplace, you could give 50 percent off and clear the stock. Auto spares and add-ons can be over three years of antique, and all the auto sellers in Allahabad and India are wondering what to do approximately those shares. They see a direct one hundred percent excise obligation loss on that. Is that something dealers in Kolkata are also struggling with?
Saurabh Kedia: I think what has happened is the authorities have attempted to plan rules that allow you to convey those who are non-compliant into the mainstream. The automobile industry is come what may suffer the brunt of it. They are already a completely compliant business, so each of our shares is already declared, and we are inside the formal channel. But the stipulation of a couple of of-yr-old stock no longer allowed for input credit is hurting us very badly. There is a massive amount of cash clogged in that. The hit is in crores, and the general effect goes to be big. Is there a way for dealers to minimize this loss?
Ritesh Kanodia: The authorities have no longer given any rest on the one-year stock preserving period. The rule says that you will not get the credit when you have an inventory that is extra than a yr vintage. The most effective factor I am no longer privy to is the credit you tackle on a 60-40 percent basis. Will or not it is relevant even if you have an excise responsibility paying report on your hand?
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So, until the date, the exercise was that sellers were now not issued an excise paying document because they were no longer eligible to take any credit score and were certainly no longer concerned. What manufacturers or importers have commenced is they have got started paying them an excise-paying file.
Also, there may be a provision that will be delivered that’s your credit score switch filestore for an inventory that is multiple years old if the dealer has the duty-paying report is still unclear.
Did you get any consolation from manufacturers or vendors from whom you supply spare parts that, if at all, they can shoulder some ache on the transition inventory? Venkatesh Gulati: It’s spotless that they may not support us on the list. Also, from what I apprehend, this is older than 12 months at the stock so we won’t get any credit score. We might be losing numero.