Automobile dealers' association seeks GST cut on 2-wheelers from 28% to 18%

The Federation of Automobile Dealers Associations (FADA), the leading body of automobile retail in India, on Thursday submitted a critical representation to the Goods and Services Tax (GST) Council, urging an immediate reduction in the GST rate on two-wheelers from the current 28 per cent to 18 per cent.

This timely and decisive intervention is aimed at making two-wheelers more affordable, reviving demand and reinvigorating an industry that has seen a significant slump in sales over the past few years, according to a statement from FADA.

FADA President Manish Raj Singhania affirmed, "The two-wheeler industry is at a critical juncture, grappling with unprecedented challenges such as rising inflation, stringent emission norms, and the post-COVID-19 effects in Bharat of India."

He said this is the opportune moment for the GST Council to reduce the GST rate on two-wheelers, making them more accessible for the common man, thereby providing the much-needed boost to the industry, generating employment opportunities and fostering India's overall economic growth.

FADA's compelling appeal has been forwarded to Finance Minister Nirmala Sitharaman, chair of the GST Council, all GST Council members; the Ministry of Heavy Industries, which supervises the automobile sector and the Ministry of Road Transport and Highways. This action underscores the urgency and significance of the issue, it added.

FADA said over the past few years, the prices of various two-wheelers have risen significantly, impacting their affordability for consumers across India.

This surge in prices can be attributed to multiple factors, including the rising cost of raw materials, stricter emission norms and higher taxes and levies, FADA said, adding that for instance, the price of the popular -- Honda Activa -- has escalated from Rs 52,000 in 2016 to Rs 88,000 in 2023.

Similarly, the Bajaj Pulsar has witnessed a substantial increase from Rs 72,000 in 2016 to Rs 1,50,000 in 2023.

The Hero Splendor and TVS Jupiter have also experienced considerable price hikes over the same period, with their prices soaring from Rs 46,000 to Rs 74,801 and Rs 49,000 to Rs 88,498, respectively.

The continuous rise in two-wheeler prices has consequently led to a decline in sales, emphasising the pressing need for intervention and GST rate reduction to restore the industry's growth trajectory, according to the statement.

In 2016, two-wheelers accounted for 78 per cent of the total automobile sales in India. However, due to continuous price increases since 2020, this contribution has fallen to 72 per cent in FY23, underlining the impact of the steep price hike.

FADA believes that a reduction in the GST rate will address several critical issues facing the industry, including rural distress, the transition from BS-4 to BS-6 emission norms and the sharp increase in two-wheeler prices.

Lowering the GST rate will enhance the competitiveness of two-wheelers compared to other transportation modes, thereby increasing sales and revenue for the industry.

The association also said two-wheelers play a pivotal role in providing affordable mobility to a large segment of India's population, especially in rural areas where public transportation is sparse. FADA also asserted that two-wheelers, being essential for millions, should not be categorised as sin goods or luxury items for GST taxation purposes.

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