GST Impact On Heavy Construction Equipment Industry

  • 2019/04/02 12:20:46
GST Impact On Heavy Construction Equipment Industry

Ohh! Finally, 40 Years back long decision finally going to Implement India. Might be when you read it get Implemented but you might not know the exact Impact on you or to your Construction Equipment Industry.

Heavy Equipment Industry includes

Construction Equipment – Backhoe Loader, Excavator, Concrete Mixer, Road Equipment, Paver, Concrete Pump, Crusher – (18 % GST)

Agriculture Equipment – Agriculture, Horticultural or Forestry Machinery for Soil machinery for soil preparation or cultivation lawn or Sports ground.  –  (12 % GST)

Off-Road Equipment – Mining Tipper, Dumper  – (28 % GST)

On Road Equipment – Truck, Commercial Vehicle, low bed trailer, Semi bed trailer, trailer – (28 % GST)

Lifting Equipment – Crane, Forklift, Self Loading & Unloading Equipment, lifts, escalators, Conveyors – (18 % GST)

Till now all Heavy Equipment has different rate & taxes in different -2 states so it creates very confusion in the earthmoving and construction equipment (ECE) tax rate but we don’t know the current impact of GST on us. You can’t uniformly predict or decide that individually you are getting the benefit or not by this GST implementation.

Let’s take an example: –


Particulars
Value & Tax under GST
Value & Tax Current (Non – GST)
Value to Manufacturer 


Cost of Production
1,00,000
1,00,000
10 % Profit Margin
10,000
10,000
12 % Excise Duty
13,200
-
Total Cost of Production
1,23,200
1,10,000
Additional VAT – 12.5%
15,400-
Addition of 14% SGST
-15,400
Addition of 14% CSGST
-15,400
Invoice Value to Manufacturer
1,38,600 (@2 % Invoice – 1,25,664)
1,40,800


Particulars
Value & Tax under GST
Value & Tax Current (Non – GST)
Value to Dealer or Distributor


Cost of Production
1,38,600
1,40,000
10 % Profit Margin
13,860
14,000
Total Value
1,52,460
1,54,000
Additional VAT – 12.5%
3,654 (CENVAT As get Credit  Actual costing)
-
Addition of 14% SGST
-6,160     (GST Credit from Manufacturer)
Addition of 14% CSGST
-6,160     (GST Credit from Manufacturer)
Invoice Value to Buyer
1,56,114
1,66,320


Changes –

  •     As observed in the example, there have been changes noted in the type of tax amount imposed.
  •     Customers who get the equipment at 2% (C- Form) they are going to get equipment on very high Price Equipment.
  •     Customer who takes the equipment at full tax again they have to higher tax compare to earlier.
  •     There will be an increase in the price of the manufacturer because of rates & procurements cost.

Therefore, as observed there will be an increase in prices for the manufacturer. However, Changes in rates will depend on the Product & services.

  • Note – its examples only for the Construction Equipment Industry but many industries are getting the benefit of price reduction also.
  • Conclusion:

Above table give you some idea how much Heavy Construction Equipment Industry going to impact us. So it clear that construction Industry has to face the 10 % higher costing of Equipment as compared to current tax. So currently industry paying 18% tax for the product now they have to pay the 28%.

Around 50 % equipment belongs to the 28 % category and due to this anticipated price hike industry which surges after the 2015 year now may again drop. Exports were not possible because in heavy equipment industry most of the original equipment is 100% subsidiary of Multinational Firms.    

Now GST can impact Prime Minister Programmes like Swatch Bharat Programme, every day 40 KM road construction target, Metro Project, Road Project, Railway Sector too.

The Earth Moving and Construction Equipment (ECE) segment, which are returning to the growth. Might be due to Goods & Services Tax introduction its growth will dip.



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