Mumbai: The proposed Goods and Services Tax (GST) implementation is expected to boost economic growth by $100 million in 390 years. Industry experts said that under the new tax regime, the domestic auto ancillary sector will enjoy a low tax rate of 18%.

With the introduction of GST, automobile-related industries will get a boost. Experts predicted that the current effective tax rate of 28-30% for automobile-related industries will be reduced to 18% after the implementation of GST.

They were speaking at a panel discussion at KDK Software on GST competition impacting auto ancillary industries.

The industry is benefiting from a healthy ecosystem in the domestic market and the increasing globalization of Indian automotive suppliers. He said that tax discounts will be transferred to OEMs (Original Equipment Manufacturers) which will ultimately lead to increased demand for automobiles.

“Many automotive ancillary facilities and auto component manufacturers usually set up their plants close to OEMs just to avoid the VAT credit chain.

“However, with the implementation of the new GST regime, IGST and SGST no longer require proximity to OEM plants, which will reduce capital investments and increase working capital inflows in the automotive support industry.” CEO, KDK Software.

The Ernst & Young report states that for automotive component manufacturers, the concept of booking sales with automakers will disappear after the implementation of GST.

According to the Automotive Component Manufacturers Association (ACMA) GST implementation is expected to open up new prospects for auto component companies (which are expected to see double digit growth this year).

GST is expected to impact vehicle pricing, sourcing strategies, distribution costs and dealership profitability and consolidation of these facilities is expected to be favorable across the board. The report sheds light on the economics of the automobile industry.