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The Society of Indian Automobile Manufacturers (SIAM) on Tuesday wrote a letter to the government, requesting a reduction in the GST rates for two-wheelers.
It suggested that the government cut the rate to 18% from the current 28% for two-wheelers with internal combustion engines and to 5% from the existing 12% for zero-carbon tailpipe emission models such as those powered by hydrogen. It also sought a reduction in the GST rate on low-carbon emission technologies, such as flex fuel (like ethanol-blended petrol) and CNG, from the current 28% to 18% in the first stage, and then to 12% once the overall base rate for two-wheelers is brought down to 18%.
The industry body is also seeking removal of the additional cess of 3% levied on higher cubic capacity bikes.
India levies a GST rate of 28% (plus 3% cess on models that are above 350cc) on scooters and motorcycles that run on fossil fuels — the highest among all the two-wheeler markets of the world. The tax ranges from 7% in Thailand (the lowest) to 16% in Mexico (the second highest after India), SIAM wrote in the letter.
In the six-page letter addressed to Hanif Qureshi, an additional secretary in the Ministry of Heavy Industries, the industry body highlighted the linkage between human productivity with economic growth and the critical role the motorised two-wheeler transport plays in enhancing human productivity. ET has seen a copy of the letter dated June 11.
The cost of developing new technologies like flex fuel and CNG is high. Therefore, the GST reduction will help address cost and consumer adoption issues for such models, it wrote.
A reduction in tax rate is also critical to offset the higher cost of ownership of flex fuel vehicles, the industry body said.
While manufacturers in India have showcased bikes that can run on flex fuels, neither India nor any other two- wheeler markets of the world have a CNG-powered two-wheeler. Bajaj Auto will be the first to commercially launch such a model, later this month.
India’s two-wheeler market– the world’s largest — has been under pressure even before the Covid-19 struck. While sales have recovered to some extent, the industry has still to get back to the peak volume levels of fiscal 2019.
Regulations on safety, insurance and emissions and higher road tax have led to a sharp increase in two-wheeler prices, weighing in on sales particularly in the entry level of the market, which constitutes 70% of the overall sales volume.
Even though manufacturers in India are one of the most competitive, vehicle penetration — 197 per 1,000 — is one of the lowest in the world. The gap provides an opportunity for policy to drive GDP growth, SIAM wrote.
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