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GST’s Impact On Tyre Buyers And Tyre Sellers

GST India - GOODS AND SERVICES TAX

In a historic event tonight, the Central Hall of the Parliament of India will see the Prime Minister, Narendra Modi inaugurate the most revolutionary reform in the Indian Taxation System. The reform called as the GST or Goods and Services Tax will be applicable from July – 01, 2017. This important event will be graced by the presence of the country’s major politicians as well as film stars and businessmen. The notable attendees will include Ratan Tata, Amitabh Bachchan among others.

The reform is being seen by many as a dynamic progress in the country’s economic history. Earlier yesterday, Reliance Group Chairman, Anil Ambani voiced his support for the GST. He said that this is not just a reform but an economic freedom for us. Former Prime Minister and economist, Manmohan Singh too put his trust in the reform by saying that it is a historic development and he is happy with this reform.

With uncertainty and anxiousness in the tyre industry, Tyremarket.com conducted a research to find out what really GST or Goods and Services Tax holds for the industry. The below mentioned are the highlights of the findings.

The Impact of GST on the Indian Tyre Industry

  • Overall, the reform is anticipated to be good for the tyre industry in the long run. GST will bring transparency and clarity to the tyre industry. It will help the tyre industry become organised and will also curb the malpractices such as the wrong categorization of goods, under-invoicing, wrong pricing, etc.
  • The import of tyres is likely to remain same as there will be no significant impact on the import industry.
  • Over the next 2 months, an increase of about 5-6% in the tyre rates is anticipated as the tyre sellers would try to liquidate their pre-GST tyre stock.
  • The demand for tyres will not be affected as a tyre is an essential commodity and a nominal hike would not deter people from buying tyres.
  • GST will result in an increase in the inter-state movement of goods and commodities, this will fuel the demand for tyres.

Demonetization vs. GST – Impact on the Tyre Industry

According to the industry players, like demonetization, GST would not slow down the market. During demonetization, the sales were dropped by as much as 25% due to the cash crunch. But the industry stabilised within 2-3 months. The biggest impact of demonetization was in the “card transactions”. Before demonetization, the digital transaction accounted for roughly 6% of the total sales, but it jumped to over 50% after demonetization. After GST, there will not be any significant impact on the sales. In fact, the tyre industry will me more organised than ever and the government will also get its share from the revenue as well. This is because dealers and distributors will have to comply with the new reforms that would bring them under the tax bracket.

GST From Tyre Buyers View

There will be an initial price hike for tyres, but the prices will settle down within 2 months. One important thing that needs mention here is that the price difference from dealer to dealer or tyre shop to tyre shop will stay. However, this price difference will not be more than 4-5%. This is due to a variety of reasons including the age of tyres, discounts offered, bulk purchasing, and stock clearance by the sellers.

GST From Tyre Sellers View

The Indian tyre industry is largely an unorganised industry with players ranging from small, medium to big size. Due to lack of knowledge, many sellers have not purchased tyres which means that there can be a drop of 20-25% in the inventory of the sellers. There will be no reduction or increase in the prices of tyres that they get from the manufacturer. Largely the prices will remain same. The good thing for sellers is that unlike demonetization, GST would not affect the tyre demand.

Disclaimer – This information is based on Tyremarkt.com‘s exclusive research and analysis done after interacting with various sellers and retailers in the tyre industry.

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