GST Countdown: ‘Leasing Will Become An Emerging Opportunity’ 

So, we just started doing that. It wasn't too difficult because there is preparedness on the other side for doing the registration. I guess the final date will come in as the final date of implementation comes in. If I were to put it on a scale of 1 to 10, I would say, very close to 8.

So currently it's at 15 percent, which means if you go to 18 percent, there will be 20 percent increase in cost for consumers in business-to-consumers (B2C) transactions. So far as business-to-business is concerned, you will get a credit back, which means it's only a timing issue, there will be no impact. But 15 percent becomes 18 percent, to that extent there will be an increase. I guess consumers will understand. GST will lead to ease of transactions compared to today. And therefore, this little increase should get accommodated.

If you look at other countries, leasing is one very prominent product from financial perspective. The customers want to acquire assets but may not want to retain them for too long. And they will look for a very residual value at the end of their contractual period, what can that be, and if that can offset the EMI they pay. For some reasons, leasing isn't that prominent in our country because of inefficiency of tax, like lease tax etc. I think with GST coming in, all of that getting bundled into one, I think leasing could be one emerging opportunity.

I would think large commercial vehicles could come into this segment, construction equipments can come into this, personal segment vehicles could come into this because these are assets which the consumers are willing to looking at. Resale prices are very a important aspect and with a good support from original equipment makers if a residual value can really be arrived at, I think these segments should show a lot of interest.

First is we operate in all states which means there will be a transaction happening in every state. So our systems need to ensure that we are able to file our returns at the state level. To that extent, the technology undergoes a quick change. Second is, today the technology features are to designed to handle the current transaction tax rate. With GST coming in, we have to change the way transactions are computed and the way returns get filed. So, like everyone else we are also engaging with consultants who can advise us, what is the right kind of technology that one needs to use.

Currently we repossess the asset, we don't capitalise them and it's not owned by us. So, we are a pass-through way. So somebody delays repayment, surrenders the asset until it is sold to someone else, we put it in a trust and it is sold on behalf of the consumer to someone else at a price; the actual price has to be paid by the borrower. But there is a view by the tax department that there is a value-added tax applicable on this because it's a sale.

As far as the transition period is concerned, I would think we will have to put some transactions to experience to say where we are getting stuck and what are the challenges. I think the bigger administration issue is filing of returns at every state level. We will have to build teams around each state. We have to have local employees who understand this better. So there will be a very clear increase in administrative costs, but over a period of time, there will be benefits.