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 confusion in the industry with tyre companies and dealers waiting for clarification from the government.
President of a tyre major said 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.
The problem 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.
Tyre companies and dealers say that the penalty should not be with retrospective effect on account of the misinterpretation of the issue since GST is a new tax animal.
S P Singh, convenor, All India Tyre Dealer’s Federation stated that 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.
