Budget 2022: FADA seeks GST rate cut on two-wheelers to 18% to spur demand

New Delhi: Automobile dealers' body FADA has urged the government to reduce GST rates on two-wheelers to 18 per cent in order to generate demand in the segment.

The Federation of Automobile Dealers Association (FADA), which represents over 15,000 automobile dealers having 26,500 dealerships, noted that two-wheelers are not a luxury item and hence GST rates need to come down.

"FADA requests the Ministry of Finance to regulate and reduce GST rates on two-wheelers to 18 per cent and continue to move our nation to global leadership," the industry body stated on Monday.

Finance Minister Nirmala Sitharaman is scheduled to present the Union Budget 2022-23 in Parliament on February 1.

It is noteworthy that two-wheelers are used not as a luxury thing but as a necessity to travel distances, especially by people in rural areas, for their daily working needs, it added.

"Hence the rationale of 28 per cent GST + 2 per cent cess which is for luxury/sin products does not hold good for the two-wheeler category," FADA noted.

At a time when vehicle prices are increasing after a gap of 3-4 months due to rise in input costs and various other factors, a reduction in the GST rate will counter the price hike and help spur demand, it added.

"FADA believes that the growth in demand and the ripple effects it will have on many dependent sectors will increase the tax collections. In the mid to long-term it will actually be revenue positive and also help bring in positivity in the overall consumer sentiment and thereby the overall economy," the industry body stated.

It also sought a uniform GST rate of 5 per cent on the margin for all used vehicles, to create a win-win situation for the government, dealers, and vehicle owners.

"With the reduction in GST, it will help the industry to shift from unorganised segment to organised segment thus bringing in more business under the ambit of GST helping in putting brake on tax leakages,"

FADA noted.