If GST is reduced by 10 percentage points to 18%, the potential reimbursement for two-wheeler makers on inventory existing in the market could add up to Rs 1,500 crore, Bajaj said. The sum could be higher for passenger vehicle makers. However, Goenka said that while this might have been a problem in the earlier tax regime, under GST, inventory will not be a constraint because dealers can set off the tax differential.
According to Suresh Rohira, partner at accounting firm Grant Thornton, a reduction in GST on the existing inventory will lead to excess GST credit on the books of dealers.
This article appeared in Economic Times on 09th Aug, 2019.