Higher GST on Inputs and Accessories of a Tractor
The Goods and Services Tax (GST) is possible to hit manufacturers of tractors and finally farmers who buy them. Now total tax on The inputs and accessories of a tractor is of 17.5% (central value added tax (Cenvat) of 12.5% plus state VAT of 5%). About 70% of the inputs that go into making a tractor bought locally and the rest from outside the state of manufacture/assembly. Excepting Cenvat, a 2% central sales tax is imposed upon inter-state purchases resulting in an effective tax of about 13.7%.
The effective tax would jump to 19.6% (tax for about 70% of the inputs), with inputs and accessories of tractors being brought in the 28% slab under GST. Tractors have been brought under the 12% tax slab in GST. This means that tractors would be taxed at 12% while the gearbox, hydraulic pumps, metal parts and forgings in the same would attract 28% levy.
Manufacturers can charge only 12% out of the effective tax of 19.6% for inputs, parts and accessories to the customer and claim the rest only as a refund from the government.
Officials said a manufacturer using material worth Rs 7 crore would have to wait for a refund of about Rs 40 lakh. "Our profit margins, which are only 8%-9%, will be completely wiped out."
This is a big blow to the tractor spare parts, attachments and implements manufacturers. This will ultimately affect farmers.As per the new list of GST, goods falling under 'HS Code- 8708' or 'parts and accessories of motor vehicles' are charged 28%.