How profitable is the car leasing business post GST?

In India, vehicle leasing business has been an instant hit ever since its inception in 2005. The vehicle leasing market in the country is estimated to be worth of around Rs 1500 crore. Here in India, the core business of leasing companies involves leasing to corporations who provide vehicle to heir employee. Also, the booming cab sector forms a major part of their portfolio. The advent of GST brought relief to cab aggregators as Uber and Ola and they decided to pass the 1 per cent benefit of lower taxation. Both Ola and Uber passed on the price difference to its consumers. The electric car business has also become profitable. EESL will be procuring 10,000 electric cars from M&M and Tata Motors for leasing to government offices.  

Leasing has usually been an expensive option, post GST, taking a car on lease just got pricier. The leasing companies faced a major crisis in case of the existing vehicles given on lease as the tax paid on acquisition was comparatively much less than the tax charged on the lease rentals. The GST was expected to consolidate the vehicle leasing market in the country and add boost the roaring Vehicle leasing sector, instead, the cumulative effective rate of 43per cent, which comprises of 28 per cent GST and 15 per cent Compensation Cess has left the industry worried and in a state of shock.  The steep climb from the 13.5 per cent-14.5 per cent VAT rate prevalent in the old structure of taxation has added burden to those who have already leased their cars.