Government is considering slashing the GST rates on two-wheelers, from the current 28 per cent down to 18 per cent
Finance Minister Nirmala Sitharaman has recently stated that the Government is considering a proposal to reduce GST rates on two-wheelers. The automotive industry is currently going through one of the worst sales slumps to ever hit the Indian market, and even though the companies are showing steady recovery, the process is quite slow.
The reduction in tax rates could be the helping hand needed for a stronger recovery of the two-wheeler industry. The Indian market is extremely price-sensitive, which is especially true for the entry-level commuter segment. A reduction in prices could potentially prompt an increase in sales.
The current GST rate on two-wheelers is 28 per cent, which is the highest tax slab. The new tax rate is proposed to be 18 per cent, which quite a significant drop. The result would be a price cut between Rs. 8,000 to Rs. 10,000 on motorcycles and scooters, at least at the budget end of the market. Manufacturers like Bajaj, TVS, and Hero MotoCorp even saw an increase in stock prices post the announcement.
Due to the new emission norms, increased insurance premiums, higher road taxes, etc, two-wheelers in India had seen a massive increase in prices lately. The reduction in GST rates could help offset these changes. Also, due to the pandemic outbreak, there have been plenty of pay cuts and lost jobs, which have discouraged people from buying new vehicles.
A similar tax cut was expected earlier this year by the auto sector, to compensate for the price hike in the BS6 era, but the Union Budget had no such incentive planned. Even now, there are no such plans for passenger cars, only on motorcycles and scooters, which are being categorised as ‘non-luxury goods’.
The proposal to reduce GST on two-wheelers is still under consideration though, and it will also have to be approved by state governments. Industry experts have been quick to point out that if the reduction in GST is followed by increased road taxes in different states, consumers wouldn’t be able to enjoy any benefits. That said, things do seem hopeful at the moment, and might probably see a price cut on all bikes and scooters soon.