How the GST Rate on Tyres Impact Tyre Price?

GST on Tyres

What is GST?

The GST (Goods and Services Tax) is a single indirect tax that came into effect on 1st July 2017. The tax was implemented following The Goods and Services Act that was passed in the parliament. The Act was passed on 29th March 2017. It was meant to be a single indirect tax that came as a replacement for a lot of Indirect Taxes in India that was levied on the supply of goods and services.

How is it different from other taxes?

GST is an indirect tax that is levied on good and services. it is different from other taxes in that it is comprehensive, multi-stage, destination-based tax. It is a tax that is levied at every stage of value addition. It is popularly also known as a single tax for the whole country.

What category of tax do the tyres fall into according to the GST?

Prior to the implementation of the GST, the tax was about 18.5%. After the implementation of the GST, the rate for rubber and rubber products has been fixed and notified. The GST council has divided the GST rate by dividing the products under 5 slabs. The rubber car tyres fall under the luxurious product category and the GST on car tyres is 28%

Are the Goods and Services Tax the same for all?

The GST of 28% holds good for rubber used to make new pneumatic tyres that are used in lorries, buses, motorcycles, motor cars etc. it also applies for retreaded or used ones. The Goods and Services Tax on tyres, as well as inner tubes  that are made of rubber other than those made with the kind of rubber used in bicycles or auto rickshaws and three-wheeled powered auto rickshaws, as well as the GST on tyres and tubes of tractors, used in the rear were reduced or revised to 18% from 11th June 2017.

How are the slabs fixed?

The slabs for products are fixed based on the HSN code. HSN  expands as the Harmonized System Nomenclature code. It is the coding system that has been developed by the World Customs Organization (WCO). It is used as the basis for customs tariffs in more than 200 countries and is used for commodity description and coding. The GST rate on car tyres is fixed on the basis of this coding system which categorizes it as a luxury item.

What will be the impact of GST on tyre prices?

The main aim of introducing the Goods and Services Tax is to reduce the cascading effect of taxes which actually turns out to be taxed on taxes. The taxes that were applicable prior to GST includes excise tax for import of rubber, followed by manufacturing of goods tax, or produced goods or services tax, followed by Central sales tax.

Add to it the VAT . on this amount you need to pay the Octroi or Entry tax. In effect, the total tax when added would be about 34%. In the case of GST, it would attract only a single tax of 28% which means a savings of 6%. The GST rate on the tyre for tractors is just 18%

Why is there a hike in prices in recent times?

You would notice that most of the companies are planning on small hikes in prices. If you are about to attribute it to GST on tyres.  it is not entirely right because it is clearly stated by the companies itself that the increased markup of price is due to the rising price of the inputs.

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