CHENNAI: The commercial vehicles industry is keenly watching the proposed GST tax slabs for pricing reasons. According to sources, the sector, which will migrate to BS4 next year, is expected to hike prices on account of the technology upgrade.
At 26% GST, the tax reduction will not entirely compensate for the increase in prices due to tech upgrade. Thus resulting in sector witnessing some price hikes and therefore resultant pre-buying before BS4 vehicles hit the market, say top CV marketers.
“The effective tax rate on trucks is between 30-32%. Since the GST slab will subsume local taxes like Octroi etc there should be a 4-6% tax benefit. But at 26% GST slab, the cost increase on account of migration to BS4 will not be entirely neutralized by the tax benefits and there will be some amount of price increase. Which in turn could mean pre-buying before the BS4 cut off comes into play,” said Vinod Aggarwal, CEO, Volvo Eicher Commercial Vehicles.
“This August and September have been rather bad,” said Aggarwal. Some segments continue to do well like infrastructure trucks like ‘tippers’ which have clocked 30% growth in the first half. But other segments like medium and heavy commercial vehicles as well as haulage segment multi axles have dropped year-on-year. “Part of the reason for the slowdown is the sluggishness in coal production,” he said. “The power companies are sitting on plenty of stocks so coal mining has been slow. That in turn has hit truck sales as well,” he added.