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'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 India,” said Manish Raj Singhania, President, FADA.
In view of this, the Federation of Automobile Dealers Associations (FADA), the leading body of automobile retail in India, has submitted a critical representation to the GST Council, urging an immediate reduction in the GST rate on two-wheelers from the current 28% to 18%.
A press release from FADA noted that the 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.
Singhania added that now is the opportune moment for the GST Council to reduce the GST rate on two-wheelers, making them more accessible for the commoner, thereby providing the much-needed boost to the industry, generating employment opportunities and fostering India's overall economic growth.
The release added that in 2016, two-wheelers accounted for 78% of the total automobile sales in India. However, due to continuous price increases since 2020, this contribution has fallen to 72% in FY23, underlining the impact of the steep price hike.
FADA believes that reducing the GST rate will address several critical issues facing the industry, including rural distress, the transition from BS4 to BS6 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.
FADA's compelling appeal has been forwarded to the Finance Minister, the 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 & Highways. This action underscores the urgency and significance of the issue.
Over the past few years, the prices of various two-wheelers have risen significantly, impacting their affordability for consumers across India. The price surge can be attributed to multiple factors, including the rising cost of raw materials, stricter emission norms and higher taxes and levies.
For instance, the price of the popular Honda Activa has escalated from INR 52,000 in 2016 to INR 88,000 in 2023, while the Bajaj Pulsar has witnessed a substantial increase from INR 72,000 in 2016 to INR 1,50,000 in 2023.
The dealer’s association noted that two-wheelers play a pivotal role in providing affordable mobility to a large segment of India's population, especially in rural areas with sparse public transportation.
FADA asserts that two-wheelers, being essential for millions, should not be categorised as sin goods or luxury items for GST taxation purposes, the release said.
Moreover, the reduction in GST on two-wheelers will also positively influence the environment, as they are more fuel-efficient and emit fewer pollutants than other transportation modes. This move will promote using two-wheelers and contribute to a cleaner environment.
FADA anticipates that the GST Council and the concerned ministries will seriously consider their appeal and take the necessary steps to reduce the GST rate on two-wheelers, the release added.
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