Reduce GST on entry-level two-wheelers, urges auto dealers' body

India's auto dealers' body Federation of Automobile Dealers Associations (FADA) has renewed its demand to reconsider Goods and Services Tax (GST) on entry-level two-wheelers. A delegation met Union Minister Nitin Gadkari on Wednesday, August 9, to seek reduction of the GST rate to boost sales. FADA submitted a letter to the Minister of Road Transport and Highways (MoRTH) which seeks the GST rate to be reduced to 18 per cent. Earlier, FADA had stated that motorcycles and scooters cannot be considered as sin good or luxury item to attract highest GST rate.

On Wednesday, a team of FADA officials met Nitin Gadkari to apprise him about the contribution of entry-level two-wheelers in overall sales in the category. Talking specifically about the segment which has models ranging between 100 cc and 125 cc, the auto dealers' body said it contributes more than 70 per cent of overall sales in the two-wheeler segment. However, Covid pandemic led to a steady decline in sales in the segment, which now requires a boost to get back to pre-Covid levels. Manish Raj Singhania, President at FADA, said “It is imperative to address the over 20 per cent decline we've observed since pre-Covid times."

To revive sales of two-wheelers, the auto dealers' body has sought reduction of GST rates, at least in the 100-125 cc segment. The segment currently attracts 28 per cent GST, which is equal to even the most expensive four-wheeler models sold in the country. Singhania said, “Reducing the GST from 28 per cent to 18 per cent for entry-level two-wheelers is more than just an economic strategy; it's about empowering the common man and boosting rural mobility." The auto dealers' body represents more than 15,000 dealers which have over 26,000 dealerships across the country.

FADA had earlier said that the growth in demand for two-wheelers will create a ripple effect that will affect many dependent sectors leading to an increased tax collection. "FADA believes that a GST revision would significantly alleviate the burden on potential buyers, especially in rural India, and catalyse the resurgence of this vital industry segment," Singhania added.

FADA had cited example how GST rates have affected pricing of two-wheelers and, in effect, impacted sales in the category. It said the price of the popular Honda Activa scooter has gone up from ₹52,000 in 2016 to ₹88,000 in 2023. Similarly, the Bajaj Pulsar has witnessed a substantial increase in price from ₹72,000 in 2016 to ₹1.5 lakh this year.

FADA also emphasised that the two-wheeler segment needs to be looked after to achieve India's target to become $47 trillion economy by 2047. Earlier, Gadkari himself had said that he aims to make India the world's largest automobile market by 2028. Currently, the size of the Indian auto industry is ₹7.5 lakh crore. It has so far created more than 4.5 crore jobs, and pays the maximum Goods and Services Tax (GST) to the central and state governments.