E-cycles attract 5% GST, ordinary cycles 12%

New Delhi: The Modi government has been defending the multi-tiered rates under GST, saying there cannot be one rate, as different segments of society have to be taxed differently. However, it has emerged that ordinary bicycles used mostly by the low-income group people attract 12 per cent GST while expensive electric bicycles are in the lowest slab of 5 per cent.

In reply to a question on the issue, Minister of State for Finance Anurag Thakur has said in Rajya Sabha during the winter session that as of now there was no proposal to shift ordinary bicycles to lower GST slab of 5 per cent.

A tax expert said that electric bicycles are anyway competing with scooters and hence there is a need to give better rates for electric bicycles. Further, the electric vehicles are very few in numbers and if the government wants to go green, certain tax benefits and incentives are required.

As per industry estimate, transportation accounts for about 24 per cent of India's carbon emissions remains a major source of air pollution. In the wake of this, the government has been promoting the use of electric vehicles.

"Comparing electric bicycles with ordinary bicycles is not right. On an average, normal bicycles would be doing 2-3 kilometres a day while electric bicycles run much more," the tax expert said on condition of anonymity as the issue is political.

He cited the example of solar products which are under the lower GST slab of 5 per cent, but it is not bought by the poor.

"If you argue on this line, the debate would go to a different tangent altogether," he added. Another expert said the higher GST rate for ordinary bicycles is an anomaly after two and a half years of GST roll-out. In addition to this, he pointed out that duty on raw

materials going into making finished products should be lower than the duty on finished products.