kaushik hari

Concerns are being raised among leasing companies in India about the impact of a wide-ranging Goods and Services Tax (GST).

The tax changes are planned to come into force next month to create a common tax regime throughout the country, but there are growing worries about a negative impact in some markets.

Earlier this year, the White Clarke Group Asia Pacific Auto and Asset Finance Survey revealed that leasing companies face a period of uncertainty because of the changes.

Recent reports suggest that leasing companies in India are already seeing a spike in vehicle returns from drivers concerned that taxes on their current vehicles will leap from around 13% to 43% under the new regime because of double taxation.

The Times of India reports that drivers are handing back vehicles because of fears that they are effectively being taxed twice, once under the old system and again under the new one.

An industry grouping that includes leasing companies, finance providers and other vehicle providers is pressuring the government to make concessions before the new tax comes into force, although changes will be difficult with such a short timescale.

The industry estimates that nearly 100,000 car leases could be affected by double taxation as the regime changes and there are anecdotal reports of hundreds of drivers handing their vehicles back early to avoid the rise.

TranzLease Holdings India president Hari Kaushik told The Times of India that foreclosure requests had risen from a few per month to 100 in a single week.

The tax issues also affect other vehicles, ranging from lorries to tractors.