Finance Minister Nirmala Sitharaman in the 41st GST Council meeting favoured that two-wheelers segment could receive a reduction in GST rates, which has given hope to the manufacturers that this shall be helpful to boost the sales during this pandemic and slow-down in the entire automotive sector.
Finance Minister Nirmala Sitharaman suggested that two-wheelers are not luxury goods nor are they sin goods, and hence merit a GST rate revision.
The GST rate on two-wheelers, stands at 28 per cent currently, which has been a long-standing request from the manufacturers to be reduced. Last year, Hero MotoCorp had urged the government to consider a phase-wise reduction in GST on bikes up to 150 cc from 28 per cent to the 18 per cent slab.
Soon after Nirmala Sitharaman’s remark, about the reduction, two-wheeler manufacturers came out in support of the idea. Rajan Wadhera, President of the Society of Indian Automobile Manufacturers, said, “The automobile industry has been closely engaging with the Government of India on suggestions to boost demand and one major recommendation in this regard was the reduction in GST rates for the entire automobile sector to 18 per cent.”
Vinkesh Gulati, Vice President at Federation of Automobile Dealers Association (FADA) said, “Hope this time, the auto industry will be lucky,” reminding that the finance minister had made a similar promise back in 2019.
Sudarshan Venu, Joint Managing Director, TVS Motor Company, said, “We welcome the Finance Ministers consideration of a GST tax reduction for two-wheelers and determining that two-wheelers are an essential tool for personal mobility. Post the slowdown due to Covid-19, the lowering of GST rate at the earliest will be a welcome move as it will facilitate the much-needed revival in demand ahead of the festive season. Further, in the era of social distancing, customers are looking for affordable personal mobility options and this reduction, if implemented, will make these options more accessible to them. Lowering of GST rates will also help the entire ecosystem of manufacturers, auto ancillaries to dealers, supply chain partners and related vendors. We will await the next steps and hope this is done soon to give clarity to customers who are seeking to enter the market.”
The GST was officially introduced on 1st July 2017 in India. With GST applicable, the tax structure on motorcycles with engines under 350cc was relaxed down to 28 percent, which previously stood at 30 percent. However, two-wheelers with engines above 350cc are still taxed at a higher percentage of 31 percent.
AMRG & Associates Senior Partner Rajat Mohan said motorcycles, mopeds and cycles fitted with an auxiliary motor are taxed under the highest bracket under GST – 28 percent. “Two-wheeler which is a basic necessity for transportation of millions of medium-income group households in India is treated at par with sin goods like tobacco, cigars, revolvers, and pistols and luxury goods like racing cars, personal use aircraft, yachts, sports vessels, and rowing boats,” he said.