Growth Cheers!

Looking Forward to Happy Times Ahead

Dear friends,

Based on feedback I have gathered from my fellow dealers, I am happy to note that the growth momentum in vehicle sales was sustained during the month of May 2016.

The icing on the cake is that India’s GDP grew by a healthy 7.9% during Q4 2015-16, according to the advance estimates released by the Government. The GDP growth for the entire 2015-16 works out to 7.6%, which makes India the fastest growing economy amongst the major economies of the world with China’s economic growth slowing to 6.8%. Core sector, having 38% weight in Index of Industrial Production (IIP), grew by 8.5% in April 2016 – the fastest in the last 17 months, which gives further confidence that the Indian economy is at the take-off stage. Paradoxically, the industrial output de-grew by 0.8% in April 2016, though.

All said and done, it does not appear to be a smooth drive all the way. Petroleum prices are showing volatility again and are currently hovering at about $50/barrel. With Rupee also weakening against Dollar, the last two months have seen significant hike in fuel prices. Drought in the last two successive years has slowly started biting. Consumer prices, including food prices, are inching up, so are the commodity prices in general. With inflationary pressure building up, the expectations of further rate cut by the RBI had, more or less, been ruled out. No wonder, the apex bank in its bimonthly monetary policy announced on 7th June has kept the key rates unchanged. All hopes hinge on the good monsoon forecast by the Meteorological Department for this year. While the rural market has been gradually picking up of late, it is the good monsoon that will make it sustainable.

The Union Budget blues have given rise to two new levies, i.e. Krishi Kalyan Cess @ 0.5% on all taxable services and Tax Collection at Source (TCS) @ 1.0% from buyers of motor vehicles carrying price tag of more than Rs. 10 lakh, effective from 1st June 2016. The need for Krishi Kalyan Cess as a social measure to promote the welfare and wellbeing of rural people is understandable. However, TCS not only increases complexities in tax collection and compliances, it has also resulted in a lot of confusion.

While the Finance Minister in his Budget speech talked about TCS from buyers of luxury cars costing in excess of Rs. 10 lakh, the fine print of Budget documents, namely, Finance Act brings, within the ambit of TCS, buyers of all categories of motor vehicles where the sale consideration exceeds Rs. 10 lakh. TCS will also be applicable, where  the sale consideration paid in cash, even if less than Rs. 10 lakh, exceeds Rs. 2 lakh.

CBDT has, in its circular dated 8th June 2016 (published elsewhere in this issue) has clarified a number of points/queries arising out of this new levy and addressed some of the apprehensions of the automobile dealer fraternity. However, there are still few questions bugging the automobile dealers, which need to be clarified. People, especially in rural areas with agriculture income, by and large do not pay taxes. Most of these people do not have PAN either. The collection of tax at source from such people, who submit Form 60/61, is going to cause problems. Secondly, amended sub-section (1D) of Section 206C of the Income Tax Act is open to varied interpretations. 

We are in touch with various tax experts and the Government authorities to get a clear picture on various aspects of TCS so that members of the automobile dealer community do not fall foul of the law.

Meanwhile, please send your views or any query in the matter so that all the queries could be collated for the expert opinion and clarified together for the information of all automobile dealers.

With best wishes,

Yours sincerely,

K V S Prakash Rao

 

 

 

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