Loss of credit on transition stock, this is a year’s vintage, boom inside the operating capital requirement, impact on exchange reductions – vehicle dealers across India are coping with these demanding situations as they gear up for the July 1 rollout of the Goods and Services Tax regime.
On BloombergQuint’s special collection, GST Countdown, John Paul, president of the Federation of Automobile Dealers Association, Vinkesh Gulati, associate at United Automobiles 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 a number 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 one year vintage. It’s now not just like the electronics marketplace in which you could give a 50 percent off and clear the stock. Auto spares and add-ons can be more than 3 years old, and all the auto sellers in Allahabad, but all over India, are wondering what to do approximately those shares? They see a direct one hundred percent excise tax 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, and the automobile industry is, come what may, suffering the brunt of it. They are already a completely compliant business, and due to that, 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.
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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 preservation period. The rule says, when you have an inventory that is older than a year, you will not get the credit. The most effective factor that I am no longer privy to is the credit you take on a 60-40 percentage basis. Will or not, it’s relevant even if you have an excise responsibility paying report on your hands?
So, until the date, the exercise was that sellers were now not issued an excise paying document due to the fact they had been no longer eligible to take any credit score, and they were certainly no longer concerned. What manufacturers or importers have commenced is, they have got commenced 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 not clear?
Did you get any consolation from manufacturers or vendors from whom you supply spare parts that, if at all, they will be able to shoulder some ache on the transition inventory?
