On February 1, the Finance Minister will propose the Union Budget 2022-23 to Parliament.

GST rate cut on two-wheelers

FADA, the trade association for automobile dealers, has urged the government to lower the GST rate on two-wheelers to 18% in order to boost demand in the market.

The Federation of Automobile Dealers Association (FADA), which represents over 15,000 car dealers with a total of 26,500 dealerships, has stated that two-wheelers are not a luxury item, and hence the GST rate should be reduced.

“FADA begs that the Ministry of Finance regulate and cut GST rates on two-wheelers to 18 percent, so that our country can continue to dominate the world,” the industry group said on Monday.

On February 1, Finance Minister Nirmala Sitharaman will propose the Union Budget 2022-23 to Parliament.

It is worth noting that two-wheelers are utilised not as a luxury item but as a need for individuals in rural areas to travel long distances for their daily working demands, according to the report.

“As a result, the logic of 28% GST + 2% cess for luxury/sin products does not hold true for the two-wheeler category,” FADA observed.

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A fall in the GST rate will balance the price spike and assist stimulate demand, it noted, at a time when vehicle prices are increasing after a 3-4 month gap due to increases in input costs and numerous other variables.

“FADA expects that increased tax collections will result from increased demand and the ripple impact it will have on many dependent industries. It will be revenue positive in the mid- to long-term, as well as contribute to improved consumer mood and, as a result, the entire economy “According to the industry group.

It also requested a consistent 5% GST rate on the margin for all used automobiles in order to establish a win-win situation for the government, dealers, and vehicle owners.

“With the reduction in GST, the industry would be able to migrate from an unorganised to an organised segment, bringing in more business into the GST purview and putting a stop to tax leakages,” FADA said.

The government presently levies a 12 to 18 percent GST on used automobiles.

Vehicles with a length of less than 4,000 mm are taxed at 12%, while those with a length of more than 4,000 mm are taxed at 18%.

“The used automobile market is 1.4 times larger than the new car market, with 5-5.5 million cars sold year and a revenue of approximately Rs 1.75 trillion. Only 10-15% of the transaction is handled by authorised dealers “According to FADA.

The government has decreased corporation tax to 25% for private limited firms with a revenue of up to Rs 400 crore, according to the industry organisation.

“Because most traders in the auto dealership sector fall into this group, the same benefit should be extended to all LLP, Proprietary, and Partnership firms. This would assist enhance the spirit and sentiment of the 5 million individuals employed by the traders “According to FADA.

The organisation also asked the government to take significant initiatives to help the sector grow quicker. FADA also called on the government to reinstate the ‘Depreciation Scheme’ for fiscal year 2022-23.