Analysis of Goods Services Tax (GST) Impact on Indian Automobile

Industry

* Basavanagouda

** Dr. Panduranga V

Abstract

Indian automobile industry is one of the fast-growing industries in the world. It contributes
significantly to global value chain. Growth of automobile industry is highly correlated with the
development of other sectors in the economy. India is the world’s largest producer of heavy
motor vehicles. The share of automobile sector in GDP is 7.1 percent and provides employment
opportunities to over 35 million people and its share in total exports is 4.3 percent (Invest India,
2020). Increasing population and growth in per capita income have provided stimulus for growth
of Indian automobile industry. The government of India envisioned to make India a
manufacturing hub of automobiles; it brought many initiatives to make India an attractive
destination for automotive companies. Among the initiatives taken by the government, the most
important one is replacing the multiple indirect tax system with Goods and Services Tax (GST).
GST is one of the biggest tax reforms in the history of Indian taxation. It impacted significantly
almost all sectors of the economy. GST has also significantly impacted automobile industry. An
attempt is made in this study to examine the impact of GST on production, sales, exports,
registrations, crude oil imports, and FDI inflows to automobile and petroleum, and natural gas
sectors. It is found that there are no significant differences in production, sales, FDI inflows to
automobile sector after implementation of GST. However, it is noticed that there is a significant
increase in the registrations and exports of automobiles after the GST implementation.

Keywords: Automobile Industry, Goods and Services Tax (GST), Petroleum & Natural gas,
Commercial and Passenger vehicles.

* Research Scholar, Department of Commerce, School of Business Studies, Central University

of Karnataka, India. E-mail. imbasavanagouda@cuk.ac.in

**Assistant professor, Department of Commerce, School of Business Studies, Central University

of Karnataka, India. E-mail. pandurangavp@cuk.ac.in, pandurangacuk@gmail.com

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 1. Introduction
Indian automobile industry is one of the most important drivers of economic growth. After the
economic reforms of 1991, its participation in global value chain has increased significantly (S,
Miglani, 2018). Automobile industry is the fourth-largest producer of light motor vehicles and
seventh largest in terms of production of commercial vehicles in 2019. Indian automobile
industry is expected to grow by Rs. 16.16 to 18.18 trillion by 2026 (IBEF, 2020). Indian
automobile industry produces more than 30 million vehicles, including commercial, passenger,
two-wheelers, three-wheelers, and other types of vehicles (CMIE, 2020). Share of automobile
industry in GDP is 7.1 %, and it provides employment opportunity to over 35 million people, its
share in global research and development accounts for 40%, and its share in total exports is 4.3%
(Invest India, 2020). As per recent data of department for promotion of industry and international
trade (DPIIT) automobile sector attracted FDI of Rs. 1,52,553 crores for the period between
2000 to 2020, which is 5% of India's total FDI inflows. Given the strong demand from middle
and higher-income households, growing youth population and greater access to credit provided
further stimulus to the growth of the automobile industry. The auto sector witnessed greater
number of mergers and acquisitions in the recent past, which has provided synergetic effect in
terms of technology and greater access to international sources of finance, which strengthened
production efficiency and innovations. The government’s vision to make India as an auto
manufacturing hub with the help of initiatives such as Make in India, Automotive Mission Plan
2026, and NEMMP plan of 2020 provided boost to auto manufacturing magnification in India.

Growing population and increased commercial activities necessitated movement of people,

commodities, and cargo from one place to another place and it led to improved connectivity in
terms of construction and development of roads in villages, suburban, and urban areas, and it
provided flip for the increased demand for two-wheelers, four wheelers, as well as other
vehicles. Tax is one of the important decisive factors in buying motor vehicles. The complexity
of tax law and cascading of taxes and surcharges in earlier tax regimes resulted in increased price
of vehicles in India. However, with the implementation of GST, many taxes are subsumed, and it
simplified the tax structure and paved the way for increased efficiency in supply chains across
India. Availability of Input tax credit (ITC) and reduced cascading of taxes led to reduced price
of vehicles. GST provided benefits to the automobile sector in eliminating tax arbitrage
opportunities between states and excluding government subsidies provided to e-vehicles from the
transaction value (R. Mohan, 2020). On the other hand, exclusion of petroleum from the preview
of GST impacted severely on the rise of petrol and diesel prices and will lead to a reduction in
the demand for the auto sector. Excise duty on petrol increased from Rs. 9.48 to Rs. 32.98 per
litre, and for diesel, increased from 3.56 per litre to 31.83 per litre during 2014 and 2021,
respectively (ET, 2020). The blockage of input tax credit and other factors have a significant
impact on the automobile industry. An attempt made in this study to examine the impact of GST
on automobile Industry.

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 2. Theoretical Background
Indian automobile industry is one of the emerging industries in the world. It produces large
variety of vehicles such as two wheelers, three wheelers, tractors, cars, and other light and heavy
motor vehicles. Before independence, India was importing automobiles. Indigenous
manufacturing started after independence in India. Import tariffs earlier protected the automobile
sector, and it used to cater to the domestic demand of domestic consumers. Licensing and
quantitative restrictions were there before the introduction of new economic policy. The market
for automobiles was not large because of a low rate of economic growth and low per capita
income of the people; till the 1970s Hindustan motors and Premier motors had a greater share in
Indian automobile industry. However, there was the presence of other players as well, but the
rate of industry growth was slow phased till the 1980s (S. Miglani, 2019). The New economic
policy of 1991 opened up the opportunity for automobile sector. The local content requirement
policy of government led to more FDI inflow and paved the way for mergers, acquisitions, and
joint ventures in India. Growing population, higher mobility and increasing per capita income
helped to boost in demand for vehicles. The government initiatives such as Make in India, GST,
and other initiatives are expected to increase the demand for vehicles. Especially, the GST tax
reform is a game-changer for Indian economy because it plugged the loopholes in the earlier tax
system, avoided cascading of taxes, and provided eco system of ‘one nation, one tax and one
market’. It ultimately led to reduction in prices of vehicles so that it provides conducive
environment for ease of doing business in India. Presently, most of the automobiles are taxed at
the tax rate of 28% and also cess is applicable depending upon the engine capacity, size and
luxury cars.

3. Review of Literature
Goods and Services Tax (GST) implemented on 1st July 2017. It is a historical tax reform which
changed Indian indirect tax landscape. After implementation of GST there are many research
studies were conducted to theoretically as well as empirically analyse the impact of GST on
various sectors of the economy. However, because of lack of availability of data there are only
few studies empirically examined implications of GST on automobile industry some of them are
as follows. Anand nayar and Inderpal Singh (2017) highlighted the background of indirect
taxation system in India. Compared Indian GST system with world economies and discussed
about the advantages and challenges of implementing GST on various sectors of the economy.
Particularly, regarding impact of GST on automobile industry it is opined that GST will reduce
the prices of automobiles, which in turn reduces the on-road price of automobiles approximately
by 8%, it will lead to boost in sales and opens up opportunities for expansion in India. They
called for more analytical researches to assess the impact of GST on various sectors.
Pooja Jha and F.B. Singh (2017) discussed the pros and cons of having a uniform GST law to
Indian automobile Industry and compared the tax rates applicable to automobiles such as two
wheelers, small cars, sedans, three wheelers and commercial vehicles and found that under GST
most of the vehicles which are below 1500 cc will get cheaper and above 1500cc will become
costlier. Opined that GST will improve the efficiency of logistics by reducing the transit time and
cost. Suggested that policy changes like GST could have been notified before six months of
implementation so that industry could have better prepared.

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Charumathi S. et al., (2019) empirically examined the impact of GST on sales of TATA
motors. It is found that after GST implementation the sale of commercial, passenger, and exports
of vehicles have increased. There is huge demand for automobiles in India it possesses the threat
of entry of foreign automobile companies to reap the benefits of huge demand for automobiles
by Indian people. Therefore, the reforms like GST are very beneficial for auto companies to
boost their sales and growth of the company.
J B Togadiya and V Oza. (2020) conducted event study analysis to analyse the impact of GST
on share returns of the Indian auto companies. It made an assessment of reaction of share returns
of companies before and after announcement of GST rate for automobiles. It is found that there
is no statistically significant difference between share price returns of Maruti Suzuki, TATA
motors, Bajaj Auto Ltd, Mahindra Ltd. It noticed that in the short period Eicher motor Ltd.’s
share prices increased because of they passed on the benefits of reduced prices to consumers. It
is opined that GST will increase the revenues to most of the consuming states.
Achyut Telang and Souvik Roy (2016) discussed about how Hyundai is challenging to Indian
Maruti Suzuki in the dynamic automobile sector. Opined that the dynamics of auto sector are
challenging because of government policies such as changes in excise duty and customs and
implementation of GST. Asserts that government initiatives like ‘Make in India’ and GST will
give boost to automobile sales.
Nalla roopa and S. Aruna (2020) analysed the impact of GST on automobile industry. Noticed
that the tax rate applicable to various segments of automobiles reduced from pre-GST to post
GST therefore, it led to reduced prices for purchasers and there is a certainty in tax to be payable
by dealers and automobile manufacturers. Opined that GST will pave the way for development
of structure of automobile industry and promote GDP growth and financial development of the
nation.
M. Abraham (2018) conducted survey to assess the buying behaviour of automobile consumers
in Kottayam district. It is found that most of the consumers had a positive perception and
awareness towards decrease in prices of auto mobiles after implementation of GST. It is
suggested that more and more tax awareness campaign and training programs will lead to
effective implementation of GST.
4. Objectives of the Study
1. To examine the impact of GST on the production, sales, registrations, imports and
exports of automobiles.
2. Comparative analysis of growth of automobile industry and FDI inflows to
automobile and petroleum & natural gas sectors and crude oil imports before and
after GST implementation.

5. 0Data and Methodology

The study is analytical in nature. Understanding the impact of GST on the automobile industry
forms the crux of the study. It is based on secondary data collected from databases such as the
Center for Monitoring Indian Economy (CMIE), EPWRF databases. Various reports such as
IBEF, annual reports of automobile companies, DIPP reports, report of petroleum planning and
analysis cell and trade statistics of ministry of commerce and industry are referred. For data
analysis, various descriptive statistics like Mean, Standard deviation, Year-on-Year growth
(YoY), paired t-test, and correlation applied to arrive at findings of the study.

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 6. Data analysis and Interpretation

Table 1. Production, Sales and GST/VAT of automobiles of top 10 manufacturing countries

Production in 2019 Sales in 2019
Tax rate
Sl. No Countries Commercial Commercial
Cars % % Cars % % (%)
Vehicles Vehicles
1 China 2,13,60,193 41.19 43,60,472 22.34 21,444,180 47.59 43,24,497 20.25 1-56
2 USA 25,12,780 4.85 83,67,239 42.87 4,715,005 10.46 1,27,64,999 59.79 0-10
3 Japan 83,28,756 16.06 13,55,542 6.95 4,301,091 9.54 8,94,125 4.19 10
4 Germany 46,61,328 8.99 - - 3,607,258 8.00 4,09,801 1.92 19
5 India 36,23,335 6.99 8,92,682 4.57 2,962,052 6.57 8,54,839 4.00 28+ Cess
6 Mexico 13,82,714 2.67 26,04,080 13.34 761,720 1.69 5,97,951 2.80 16
7 South Korea 36,12,587 6.97 3,38,030 1.73 1,539,060 3.42 2,56,074 1.20 10
8 Brazil 24,48,490 4.72 4,96,498 2.54 2,262,069 5.02 5,25,781 2.46 17
9 Spain 22,48,109 4.34 5,74,336 2.94 1,258,260 2.79 2,43,000 1.14 21
10 France 16,75,198 3.23 5,27,262 2.70 2,214,279 4.91 4,79,698 2.25 20
% is percent to total of respective column
Source: Analysis of data collected

Glimpse of production and sales of cars and commercial vehicles by 10 manufacturing countries
is presented in Table 1. It also depicts the tax rates applicable on automobiles. It to be noticed
that china is levying the tax rate in the range of 1 to 56% depending on the engine capacity and
passenger capacity. In some states of USA tax on cars is exempted and some states are taxing up
to 10 percent. There is a standard rate on all other counties but the tax rates are less as compared
to Indian tax rates. In India GST is applicable at the rate of 28% plus cess. The implementation
of GST and coupled with other policy initiatives of governments and strong demand from
consumers led to increase in production, sale of automobiles. In the year 2019-20 the production,
sales decreased because lack of demand and slowdown in the economy.
29,092,734
29,022,548

30,909,486
30,890,201

26,356,187
26,306,017
25,342,450
25,329,383
24,112,465
24,016,068
23,358,047
23,297,717
21,533,806
21,500,165
20,692,608
20,647,611
20,382,026
20,299,674
17,892,409
17,801,337

4,760,569
4,624,649
4,041,236
3,643,494
3,573,346

3,479,169
3,110,584
2,937,905

2,898,907
2,319,956

2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20
Production Sales Exports

Chat 1. Production, Sales and Exports of automobiles in India (In Numbers)

Source: Automobile’s production, Sales and Export statistics by CMIE
Chart 1 shows the production and sale of automobiles in India for a period of 10 years it can be
noticed that the production, sales and exports increased continuously from 2010-11 to 2018-19.
The implementation of GST and coupled with other policy initiatives of governments and strong
demand from consumers led to increase in production, sale of automobiles. In the year 19-20 the
production, sales decreased because lack of demand and slowdown in the economy.

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 Table 2. Growth of Automobile industry in India
After
Before GST
GST
Year
2012-
2010-11 2011-12 2013-14 2014-15 2015-16 2016-17 2017-18
13
220 200 255 188 182 182 238 210
Factories
(-) (-9%) (28%) (-26%) (-3%) (0%) (31%) (-12%)
128,135 152,731 148,497 176,510 187,346 185,779 206,946 207,213
Employees
(-) (19%) (-3%) (19%) (6%) (-1%) (11%) (0%)
91,470 111,191 110,273 120,786 135,282 135,837 147,204 147,586
Workers
(-) (22%) (-1%) (10%) (12%) (0%) (8%) (0%)
Fixed 421,159 482,561 578,828 708,802 703,050 775,543 980,804 907,831
capital* (-) (15%) (20%) (22%) (-1%) (10%) (26%) (-7%)
Invested 573,125 694,000 790,311 895,239 900,842 1,029,464 1,228,429 1,146,269
capital* (-) (21%) (14%) (13%) (1%) (14%) (19%) (-7%)
Working -252,570 -29,496 21,046 -143,846 -234,347 -61,406 90,156 125,384
capital* (-) (-88%) (-171%) (-783%) (63%) (-74%) (-247%) (39%)
2,140,47
Gross value 1,526,593 1,900,460 2,158,586 2,508,956 2,759,543 3,039,291 3,160,785
6
of output* (-) (24%) (1%) (16%) (10%) (10%) (4%)
(13%)
Net 129,461 105,025 207,454 157,915 332,606 374,125 354,769 276,252
income* (-) (-19%) (98%) (-24%) (111%) (12%) (-5%) (-22%)

70,434 33,784 121,207 62,507 229,528 248,965 161,121 125,403

Profit*
(-) (-52%) (259%) (-48%) (267%) (8%) (-35%) (-22%)
*Rupees in million Note: Figures in parentheses indicate Year on Year growth (YoY)
Source: Analysis based on the data of Annual survey of automobile industry by CMIE.

Table 2 shows the growth of automobile industry from 2010-2011 to 2017-18. It is found that
there is negative growth in number of factories, fixed capital, invested capital, net income, and
profitability. It can be noticed that there is no significant growth in employees and workers. In
the case of working capital and gross value of output, positive growth is found. The automobile
industry witnessed more fluctuations during the study period due to internal and external factors.
Major policy implications of government have also impacted the automobile industry's
performance. Especially, demonetization and implementation of Goods and Services Tax (GST),
impacted the automobile sector's growth. There is a negative growth in working capital in the
year 2016-17 which may be an effect of demonetization. During 2017-18 there is a surge in
working capital; this may be because of GST. The reason behind it is that the companies have to
have more working capital to comply with GST provisions and also decline in net income and
profit of automobile companies. Other indicators are also depicting the slow growth of
automobile industry.

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 Table 3. Production and Sale of automobiles (Values in Numbers)
Before GST After GST
Year Year
Production Sales Production Sales
2014-2015 23358047 23297717 2017-2018 29092734 29022548
2015-2016 24106068 24112465 2018-2019 30909486 30890201
2016-2017 25329383 29022548 2019-2020 26356187 26306017
Mean 24264499.33 25477576.67 Mean 28786135.67 28739588.67
S.D. 995171.7298 3096945.252 S.D. 2292080.899 2305154.057
Paired t-Test values for production Paired t-Test values for sales
N 3 N 3
Correlation ‘r’ -0.7018 Correlation ‘r’ -0.8530
Paired Sample t-test 2.5482 Paired Sample t-test 1.0856
P value of Paired Sample t-test 0.1256 P value of Paired Sample t-test 0.3910

Source: Analysis based on the data of Annual survey of automobile industry by CMIE
Note: Automobile include commercial vehicles, passenger vehicles, Two and three wheelers.

H1: H0: There is no significant difference in production and sale of automobiles before and after GST.

Table 3 shows the results of paired t-test and correlation and coefficient of the changes in
automobile production for pre and post-GST periods. It is found that there is a high degree of
negative correlation, i.e., -70%, between pre and post-GST automobile production. Similarly,
there is a high degree of negative correlation, i.e., -85%, that can be seen in the sale of
automobiles before and after the rollout of GST in India. It implies that there is no correlation
between the production and sales of automobiles before and after GST. It is interesting to note
that the mean values of production increased from 24264499 units to 28786135 units and sales
increased from 25477576 units to 28739588 units after GST implementation. However, Paired
sample t-test results indicate that there is no statistically significant difference between
production and sale of automobiles at the significance level of 5%. Thus, the null hypothesis is
accepted, and it can be concluded that after implementation of GST, there is no significant
difference in production and sales made during pre-and post-GST.

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 Table 4. Wholesale Price Index of commercial, passenger, two and three-wheeler vehicles

2011-12
Year 2013- 2015- 2016-
(Base 2012-13 2014-15 2017-18 2018-19 2019-20
14 16 17
Year)
Motor
vehicles, 100.1 99.1 102.6 101.1 101.7 114.5 122.7 100.2
100
trailers and (0%) (-1%) (4%) (-1%) (1%) (13%) (7%) (-18%)
semi-trailers
Passenger 95.9 111.6 119.8 119.1 117.2 111.1 110.9 111.8
100
Vehicles (-4%) (16%) (7%) (-1%) (-2%) (-5%) (0%) (1%)
Light medium
107.4 113.0 114.1 113.6 114.1 113.9 114.1 114.2
& heavy 100
(7%) (5%) (1%) (0%) (0%) (0%) (0%) (0%)
vehicles
105.9 108.1 109.7 111.0 111.6 115.0 116.5 120.0
Minibus/bus 100
(6%) (2%) (1%) (1%) (1%) (3%) (1%) (3%)
100.7 98.8 101.6 101.4 103.2 105.6 106.9 115.1
Motor cycles 100
(1%) (-2%) (3%) (0%) (2%) (2%) (1%) (8%)
101.3 97.1 98.0 97.2 97.3 99.6 101.4 103.9
Scooters 100
(1%) (-4%) (1%) (-1%) (0%) (2%) (2%) (2%)
Three 107.0 113.0 115.8 116.0 122.5 128.4 133.3 137.1
100
wheelers (7%) (6%) (2%) (0%) (6%) (5%) (4%) (3%)
Note: Figures in parentheses indicate Year on Year growth (YoY).
Source: Analysis based on the data of Whole Sale Price Index (WPI) by CMIE.

Table 4 shows growth of wholesale price index for a period of nine years (2011-12 to 2019-20)
with 2011-12 as base year. It is found that there are drastic changes in wholesale prices for light,
medium, and heavy vehicles, minibuses, motorcycles, scooters, and three-wheelers segments. It
is to be noticed that the WPI increased drastically during the year 2017-18 for motor vehicles,
trailers, and semi-trailers, indicating the increase in the prices of vehicles. Passenger vehicles
witnessed negative growth in wholesale prices from before GST implementation period to after
GST. It shows that motor vehicles' wholesale prices increased and passenger vehicle prices
reduced after GST implementation. Furthermore, similar trend continued in the year 2018-19;
there is no much change in the prices of automobiles in the year 2019-20 and there is a reduction
in the WPI index for motor vehicles which resulted in reduced prices and led to increase in
demand for motor vehicles. There are no much price fluctuations in various segments of
automobiles except for motor vehicles and passenger vehicles for before and after GST periods.

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 Table 5. Exports and Imports of vehicles (Rs. In Lakhs)
Before GST After GST
Year Year
Exports Imports Exports Imports
2014-2015 7856975.35 2708044.34 2017-2018 10023811.77 3165315.04
2015-2016 8852545.59 2972245.62 2018-2019 11122918.45 3767386.55
2016-2017 9404045.37 3264217.63 2019-2020 12653335.85 4303249.88
Mean 8704522 2981503 Mean 11266689 3745317
S.D. 784085.2 278202.2 S.D. 1320644 569288.3
Paired t-Test values for exports Paired t-Test values for Imports
N 3 N 3
Correlation ‘r’ 0.9667 Correlation ‘r’ 0.9980
Paired Sample t-test 7.429 Paired Sample t-test 4.528
P value of Paired Sample t-test 0.01763 P value of Paired Sample t-test 0.0454

Source: Analysis based on the data of exports and imports vehicles by Ministry of Commerce and Industry

H2: H0: There is no significant difference in export and import of vehicles before and after GST.

Table 5 shows the results of paired t-test and correlation coefficient for export and import of
vehicles before and after GST implementation. The correlation results indicated a highly positive
correlation, i.e., 99% in exports before and after GST. Similarly, there is also a strong positive
correlation in imports of vehicles, i.e., 99%. The correlation results indicated that there is a high
degree of a positive correlation between exports before and after GST. Average exports
increased from Rs. 8704522 lakh to Rs.11266689 lakh, and imports increased from Rs. 2981503
lakhs to Rs. 3745317 lakhs. The paired t-test results indicated that there is a statistically
significant relationship between exports and imports of vehicles before and after GST periods at
the significance level of 5%. Hence, the null hypothesis is rejected and concluded that there is a
significant relationship between exports before and after GST and imports pre- and post-GST.

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 Table 6. FDI inflow to Automobile and Petroleum and Natural Gas sectors
Before GST After GST
Year Petroleum and Year Petroleum and
Automobile Automobile
natural Gas natural Gas
2014-2015 15658.55 31.04 2017-2018 13460.78 156.1
2015-2016 17403.64 699.49 2018-2019 18309.37 940.23
2016-2017 10824.22 1197.05 2019-2020 19753.10 5962.56
Mean 14628.8 642.5267 Mean 17174.42 2352.963
S.D. 3408.442 585.0884 S.D. 3296.121 3150.493
Paired t-Test values for Automobile Paired t-Test values for Petroleum and gas
N 3 N 3
Correlation ‘r’ -0.4666 Correlation ‘r’ 0.8854
Paired Sample t-test 0.7679 Paired Sample t-test 1.1194
P value of Paired Sample t-test 0.5228 P value of Paired Sample t-test 0.3793
Source: Analysis based on the data of FDI inflows to various sectors of Indian economy by DIPP.

H3: H0: There is no significant difference in FDI inflow to automobiles and petroleum and natural gas
before and after GST.

Table 6 shows the results of paired t-test and correlation coefficient for FDI inflow to automobile
and petroleum, and natural gas sectors. It is found that there is a moderately negative correlation,
i.e., - 46%, between FDI inflow into the automobile sector before and after GST. It is also
noticed that there is a high degree of a positive correlation between FDI inflows into petroleum
and natural gas sectors. Results indicated a negative correlation for FDI inflow to automobiles
and a strong positive correlation for FDI inflow to petroleum and natural gas sectors. The
average FDI inflow increased from Rs.14628.8 to Rs.17174 crore for pre-and post-GST period,
and the average FDI inflow to petroleum and natural gas increased from Rs. 642 crores to Rs.
2352 crores for both periods. The paired t-test results indicated that there is no statistically
significant difference between FDI inflow to automobile and petroleum and natural gas at the
significance level of 5%. Hence, the null hypothesis is rejected, and it can be concluded that
there is no significant difference in FDI inflow to automobile and petroleum, and natural gas
sectors before and after implementation of GST.

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 Table 7. Importation of Crude oil in quantity and value
Before GST After GST
Year Quantity in Value in Year Quantity in Value in
(‘000) tones (Rs. Crore) (‘000) tones (Rs. Crore)
2014-2015 189435 687416 2017-2018 220433 566450
2015-2016 202850 416579 2018-2019 226498 783183
2016-2017 213932 470159 2019-2020 226955 717001
Mean 202072.3 224628.7 Mean 524718 688878
S.D. 12267 3640.732 S.D. 143424.8 111069.7
Paired t-Test values for quantity in tones Paired t-Test values for value in Rs. Crore
N 3 N 3
Correlation ‘r’ 0.9187 Correlation ‘r’ -0.9934
Paired Sample t-test 4.3231 Paired Sample t-test 1.1190
P value of Paired Sample t-test 0.0495 P value of Paired Sample t-test 0.3794

Source: Analysis based on the data of petroleum imports from petroleum planning & analysis cell

H4: H0: There is no significant difference in importation of crude oil both in quantity and value before
and after GST.

Table 7 shows the results of paired sample t-test and correlation coefficient for importation of crude oil
both in quantity and value in rupees for before and after implementation of GST periods. It is found that
there is a high degree of positive correlation, i.e., 91% between importation of crude oil in quantity for
pre-and post-implementation of GST. On the contrary, it is noticed that there is a high degree of negative
correlation, i.e., -99% between the importation of crude oil in rupee value for before and after
implementation of GST. The correlation results indicated positive relation in quantity of crude oil
imported and a negative correlation for value in rupees the crude oil imported for before and after GST
periods. The average crude oil in quantity increased from 202072 to 524718 (000) tones. On the other
hand, the value of crude oil imported increased from Rs.224628 crore to Rs. 688878. The paired sample t-
test results for crude oil imports in quantity indicated a statistically significant difference in crude oil
imports before and after GST. In the case of imports in rupee terms indicated that there is no statistically
significant relationship in crude oil imports in rupee crores before and after GST. Hence, the null
hypothesis is accepted for crude oil imports and concluded that there is a significant difference in crude
oil imports in quantity. The null hypothesis is rejected for crude oil imports in rupee terms; hence, there
is no significant difference in crude oil imports in rupee crores.

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 Table 8. Sales of Commercial, Passenger, Two-wheeler vehicles (Values in Numbers)
Before GST After GST
Year Commercial Passenger Year Commercial Passenger
Two wheelers Two wheelers
Vehicles Vehicles Vehicles Vehicles
2014-15 1403774 6445154 36866054 2017-18 1907562 8073894 46030240
2015-16 1577656 6884522 37877454 2018-19 2214488 8107162 48921376
2016-17 1644706 7612618 39860030 2019-20 1556802 6901772 41875710
Mean 1542045 6980765 38201179 Mean 1892951 7694276 45609109
S.D. 124350.9 589652.5 1523014 S.D. 329086.4 686530.1 3541661
Paired t-Test values for Sales of Paired t-Test values for sales of Paired t-Test values for Sales of
commercial vehicles Passenger Vehicles Two wheelers
N 3
N 3 N 3
Correlation ‘r’ -0.7255
Correlation ‘r’ -0.3064 Correlation ‘r’ -0.9187
Paired Sample t-test 2.693
Paired Sample t-test 1.5754 Paired Sample t-test 0.9885
P-value of Paired Sample t-test
P-value of Paired Sample t-test 0.2558 P-value of Paired Sample t-test 0.4270
0.1146
Source: Analysis based on the data of Annual survey of automobile industry by CMIE

H5: H0: There is no significant difference in sales of commercial, passenger, two-wheeler vehicles before
and after GST.

Table 8 shows the results of paired t-test and correlation coefficient for changes in the sale of
commercial vehicles, passenger vehicles, two-wheelers. It is found that there is a moderate
negative correlation, i.e., -30% is found between the sale of commercial vehicles, and there is a
highly negative correlation, i.e., -91% is found between sale of passenger vehicles. Also, there is
a moderately negative correlation found in two-wheelers sales for the pre-and post-
implementation of GST periods. It implies that there is a negative correlation between sale of
commercial, passenger, two-wheelers for before and after implementation of GST. Commercial
vehicles' average sales increased from 1542045 units to 1892951 units, and sale of passenger
vehicles increased from 6980765 units to 7694276 units. Similarly, there is an increase in sale of
two-wheelers from 38201179 units to 4609109 units. The paired t-test results indicated no
significant difference at the significance level of 5% in the sale of commercial, passenger, and
two-wheeler vehicles before and after the GST implementation period. Hence, Null hypothesis is
accepted and concluded that there is no significant difference in sale of vehicles before and after
GST.

Electronic copy available at: https://ssrn.com/abstract=3851580

 Table 9. Registration of transport and non-transportation vehicles
Before GST After GST
Year Non- Year
Transport Transport Non-transport
transport
2014-2015 1209047 15670674 2017-2018 1620164 19028100
2015-2016 1342551 16268690 2018-2019 1917892 19878988
2016-2017 1467251 17310195 2019-2020 1907612 19929266
Mean 1339616 16416520 Mean 1815223 19612118
S.D. 129127 829697.2 S.D. 169003.9 506398.8
Paired t-Test values for transportation vehicles Paired t-Test values for Non-transportation
N 3 N 3
Correlation ‘r’ 0.8606 Correlation ‘r’ 0.8087
Paired Sample t-test 9.4036 Paired Sample t-test 10.7464
P value of Paired Sample t-test 0.0111 P value of Paired Sample t-test 0.00854
Source: Analysis based on the data of registration of automobiles by CMIE

H6: H0: There is no significant difference registration of transport and non-transport vehicles before and
after GST.

Table 9 shows the results of paired t-test and correlation coefficient for changes in registration of
transport and non-transport vehicles for before and after GST implementation periods. It is found
that there is a high degree of positive correlation, i.e., 86%, between registration of transport
vehicles for before and after implementation of GST. Similarly, a high degree of positive
correlation is found, i.e., 80% between non-transport vehicles' registration for pre-and post-GST.
It implies that there is a positive correlation between the registration of transport and non-
transport vehicles before and after GST period. The average registrations of transport vehicles
increased from 1339616 units to 1815223 units, and the mean registrations of non-transport
vehicles increased from 16,416,520 units to 19,612,118 units before and after GST
implementation. The paired t-test indicated a statistically significant difference in the
registrations of transport and non-transport vehicles before and after GST implementation at the
significance level of 5%. Hence, the null hypothesis is rejected. It can be concluded that there is
no statistically significant difference in the registrations of transport and non-transport vehicles
before and after GST implementation.

Electronic copy available at: https://ssrn.com/abstract=3851580

 Table 10. Registration of Commercial, Passenger, Two-wheeler vehicles (Values in Numbers)
Before GST After GST
Year Commercial Passenger Two Year Commercial Passenger
Two wheelers
Vehicles Vehicles wheelers Vehicles Vehicles
2014-15 589,815 2,321,464 12,989,313 2017-18 724,272 2,779,788 15,952,310
2015-16 635,918 2,421,660 13,625,325 2018-19 863,134 2,772,758 16,794,204
2016-17 656,978 2,586,731 14,542,296 2019-20 840,418 2,745,885 16,838,011

Mean 627,570 Mean

2,443,285 13,718,978 809,275 2,766,144 16,528,175
S.D. 34350.83 133949.2 780715.83 S.D. 74485.53 17893.17 499194.49
Paired t-Test values for registration of Paired t-Test values for registration Paired t-Test values for registration
commercial vehicles of passenger vehicles of two wheelers
N 3 N 3
N 3
Correlation ‘r’ -0.9828 Correlation ‘r’ 0.8343
Correlation ‘r’ 0.8939
Paired Sample t-test 3.6894 Paired Sample t-test 10.6598
Paired Sample t-test 6.7822
P-value of Paired Sample t-test P-value of Paired Sample t-test
P-value of Paired Sample t-test 0.0210
0.066 0.00868
Source: Analysis based on data of vehicle registrations by CMIE

H7: H0: There is no significant difference in registrations of commercial, passenger, and two wheelers
before and after GST implementation.

Table 10 shows the paired t-test and co-relation coefficient results for changes in registrations of
commercial, passenger, and two-wheeler vehicles for before and after GST implementation
periods. It is found that there is a high degree of positive correlation is found, i.e., 89%, between
registration of commercial vehicles and there is a high degree of positive correlation, i.e., 83% is
found in the registration of two-wheelers, it also found a high degree of negative correlation, i.e.,
-98% found in registrations of passenger vehicles. It implies that there is a high degree of
positive correlation in registrations of passengers and two-wheelers. Whereas in case of
passenger vehicles there is a high degree of negative correlation is found. The average
registrations of commercial vehicles increased from 627570 units to 809275 units, and there is an
increase in registrations of passenger vehicles from 2443285 units to 2766144 units. Similarly,
there is a surge in average registrations from 131718978 units to 16528175 units. The paired t-
test indicated a statistically significant difference in registrations of commercial, passenger, and
two-wheeler vehicles before and after GST. Hence, the null hypothesis is rejected, and it can be
concluded that there is a significant difference in commercial passenger vehicle registrations.

Electronic copy available at: https://ssrn.com/abstract=3851580

 7. Conclusion
Automobile industry plays a vital role in economic the development. Growth of automobile
industry is integrated with the development of other sectors. Implementation of Goods and
Services Tax (GST) is a major policy shift towards bringing the Indian economy to the
development path. GST has significant impact on almost all sectors of the economy. This study
examines the impact of GST on automobile industry. It is found from the analysis that tax rate on
vehicles is more in India compared top ten vehicle producing countries, except China. It is
noticed that growth in automobile industry is not satisfactory, and auto companies' profitability
declined. Results also indicated no significant difference in production, sales of commercial,
passenger, two-wheeler vehicles. FDI inflows to automobile sector, and petroleum and natural
gas also indicated no significant difference before and after GST. There is a significant
difference in quantity of crude oil imported and no difference in terms of rupee value. However,
it is interesting to note that there is a significant increase in registrations of passenger,
commercial, two-wheelers, transport, and non-transport vehicles. It indicated that there is an
increase in the registration of vehicles after the implementation of GST. In 2019-20 the
automobile industry faced decreased demand, and there is a decline in the sales; it is because of
economic slowdown and other factors. In GST regime, most automobiles are taxed at the highest
rate of 28% and with cess depending on engine capacity of vehicles. In order to revive the
demand for automobiles, there is a need to reduce GST rate bring petroleum under GST purview.
It will be beneficial for automobile companies, and indirectly it will benefit all the sectors of the
economy.

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Electronic copy available at: https://ssrn.com/abstract=3851580