The Federation of Automobile Dealers Associations (FADA) has submitted a critical representation to the Goods and Services Tax (GST) Council, urging a reduction in the GST rate on two-wheelers from 28% to 18%. FADA emphasizes that this intervention is crucial to make two-wheelers more affordable and revive demand in an industry that has been facing declining sales.
According to FADA President Manish Raj Singhania, the two-wheeler industry is currently grappling with challenges such as rising inflation, stringent emission norms, and the post-COVID-19 effects. Singhania believes that reducing the GST rate on two-wheelers at this juncture would provide a much-needed boost to the industry, generate employment opportunities, and foster India’s overall economic growth.
FADA’s appeal has been forwarded to Finance Minister Nirmala Sitharaman, who chairs the GST Council, as well as all GST Council members, the Ministry of Heavy Industries, and the Ministry of Road Transport and Highways. FADA highlights the urgency and significance of the issue through this action.
FADA points out that the prices of two-wheelers have significantly increased over the past few years due to various factors, including the rising cost of raw materials, stricter emission norms, and higher taxes. For example, the price of the Honda Activa has risen from Rs 52,000 in 2016 to Rs 88,000 in 2023, while the Bajaj Pulsar has increased from Rs 72,000 to Rs 1,50,000 during the same period.
The continuous rise in prices has led to a decline in two-wheeler sales, highlighting the need for intervention and a reduction in the GST rate to restore growth in the industry. In 2016, two-wheelers accounted for 78% of total automobile sales in India, but this contribution has fallen to 72% in FY23 due to continuous price increases since 2020.
FADA believes that lowering the GST rate will address critical issues faced by the industry, including rural distress, the transition to BS-6 emission norms, and the sharp increase in two-wheeler prices. This reduction will enhance the competitiveness of two-wheelers, increase sales, and generate revenue for the industry. FADA also emphasizes the pivotal role played by two-wheelers in providing affordable mobility, especially in rural areas with limited public transportation options, and asserts that they should not be categorized as sin goods or luxury items for GST taxation purposes.