"Two-Wheelers Merit A GST Rate Revision," Says FM Nirmala Sitharaman

The Goods and Services Tax (GST) on two-wheeler could see a reduction in a bid to boost demand for the auto industry, according to Finance Minister Nirmala Sitharaman. The central government minister was speaking during a virtual forum organised by the Confederation Indian Industries (CII) and conveyed that two-wheelers are "neither a luxury nor a sin good," and hence would merit a rate revision. The statement will be a positive step towards improving the sales sentiment for two-wheelers as manufacturers have been struggling with sliding volumes for nearly two years now.

Responding to a question about GST cuts for two-wheelers, Finance Minister, Nirmala Sitharaman said that it is a "good suggestion to cut GST on two-wheelers as this category is neither a luxury nor a sin good and hence merits a rate revision". Consequently, it will be taken up with the GST council, she added further.

Two-wheeler makers have been requesting a cut in GST rates due to boost demand

The two-wheeler industry has been under duress since the last quarter of 2018 due to the rising acquisition cost. Prices for two-wheelers increased because of IRDAI's mandatory five-year third-party insurance regulation, which was recently rolled back. In addition, the new safety regulations made mandatory saw manufacturers adding additional safety components like ABS and CBS on two-wheelers, further driving up the cost. With the BS6 norms kicking-in, scooters and motorcycles were subjected to a comprehensive redevelopment with new technologies added to make the vehicles emission-friendly. The overall cost of a two-wheeler has increased to nearly 18-20 per cent.

The COVID-19 pandemic and the subsequent lockdown has further impacted sales by a big margin. Currently, two-wheelers attract a 28 per cent GST, same as cars and SUVs. Two-wheeler manufacturers have been requesting the government for GST cuts as a short in the arm for sales down to 18 per cent. The revised GST structure will substantially reduce prices on the scooters and motorcycles and will help spike demand in the immediate months.