Tyre companies and dealers are facing a penalty on account of confusion over the GST slab meant for tyre tubes. Tyres attract a GST of 28% whereas tyre tubes attract a GST of 18%. Tyre companies and dealers interpreted this to mean that GST on tyre tubes fitted into the tyre was to be calculated at 28% but tyre tubes by themselves would attract 18%. However, the tax authorities now say all tyre tubes should attract 18% GST and the 10% difference in taxes will need to be refunded with retrospective effect. This has caused enormous confusion in the industry with tyre companies and dealers waiting for clarification from the government.
President of a tyre major said, “The confusion arises from the fact that the tyre industry went by the view of its legal counsel and opted for the Composite Act according to which a complete kit with all the parts packed together attracts the higher tax slab. Accordingly, almost the entire tyre industry switched to charging 28% on tyre tubes packed together in the tyre which is 99% of the time.” Currently, according to him, the industry is seeking clarification from the government on this issue.
“The industry will continue to charge 28% till the government reverts with clarification. The problem, said another tyre marketer, is specific to truck and bus tyres and only those tyre makers with big exposure to this segment are affected. Truck and bus tyres comprise 65% of India’s Rs 60,000 crore tyre market. The trouble began when the government reduced tyre tube GST to 18% late last year. Tyre companies and dealers say that the penalty – on account of the misinterpretation of the issue – should also not be with retrospective effect since GST is a new tax animal and the clauses are also new. “There is no blanket rule about the Composite Act,” said the senior tyre marketer. Some segments opt for one or the other – case in point being inverters/ batteries and mobile phones/ batteries.
For tyre dealers this has created enormous confusion. S P Singh, convenor, All India Tyre Dealers’ Federation, said: “We introduced GST from July 1, 2017 but in between the rates have changed. In case of trucks, the kit comprises tyres, tubes and flaps and we pay 28% GST (14% CGST and 14% state GST). Later tubes were made 18%. The decision was taken that from January 14, tyres which come fitted with tube and flap will pay 28% GST for all three. This is for all makers and all dealers nationally.” Out of around 16,000 tyre dealers across India, 50% are truck and bus tyre dealers. “The trade is suffering from serious nervousness and does not know what to do. Mutual informal deliberations among tyre dealers are on and AITDF may meet Sushil Modi, chairman, empowered committee of state finance ministers on GST. It will also raise the issue with its apex body – the Confederation of All India Traders to help tyre dealers,” added Singh.