GST: Here’s why auto dealers' body wants government to cut GST on entry-level two wheelers

Union Minister of Road Transport and Highways, Nitin Gadkari, met with a team from the Federation of Automobile Dealers Associations (FADA) on August 9 to discuss matters related to Goods and Services Tax (GST) on two-wheelers and other vehicles. FADA urged Gadkari to reduce the GST on entry-level two-wheelers from 28 to 18 per cent.

The entry-level two wheeler segment comprises vehicles with engine capacity ranging between 100cc and 125 cc. It accounts for more than 70 per cent of overall sales in the two-wheeler segment.

Why is FADA asking for a reduction in GST on entry-level two wheeler?

“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,” FADA President Manish Raj Singhania told news agency PTI. The body represents more than 26,500 automobile dealerships in the country.

Singhania said that a revision in GST would help revive the country’s automobile market, which had taken a hit due to the pandemic. FADA believes that a change in GST would alleviate the burdens on buyers, especially those in rural India. The move would result in optimal functioning of the automobile sector, and aid India’s goal of becoming a $47 trillion economy by 2047.

The automobile body in a press release issued in May stated that the share of two-wheelers in the total automobile sales fell from 78 per cent in 2016 to 72 per cent in FY2023 due to rising costs. According to the federation, two-wheelers should not be grouped as luxury items for GST purposes as they are an essential commodity for millions.

How reduced GST will help auto dealers

FADA stated that the lowering the GST rate will increase the competitiveness of entry-level two wheelers with regards to other transportation modes. It will increase revenue for the industry and also address the transition from BS-4 to BS-6 emission norms.

Over the past few years, the prices of two-wheelers has increased significantly, impacting their affordability across India and leading to a fall in sales. This rise in cost is attributed to several factors, including stricter emission norms, the high raw material prices and increased taxes.