GST Council Meeting: No Revision On GST Rate For Two-Wheelers

The 41st GST or Good and Services Tax Council Meeting was held today, chaired by Finance Minister N Sitharaman and there was no discussion on GST rates being revised for any goods or commodities. This translates into the fact that the GST rate for two-wheelers continues to be at 28 per cent. This could come as deflating news for two-wheeler manufacturers who were hoping for a GST rate reduction in order to spur demand. Earlier, N Sitharaman had said that two-wheelers are neither luxury nor sin goods. Therefore, they merit a revision in GST rates.

Also Read: Two-Wheelers Merit A GST Rate Revision: N Sitharaman

When asked about two-wheeler GST rates by another journalist, post the GST Council Meet, Ms. Sitharaman replied, "Since two-wheelers don't come under sin goods, they may go in for consideration with the GST Council."

A reduction in GST rates for two-wheelers could have helped the industry by spurring demand as the festive season arrives. But that would have meant the government reducing its revenue at a time when the GST collection has fallen short of Rs. 2.35 lakh crore, against the projected amount of Rs. 3 lakh crore. Plus, with the corona pandemic playing out, the Indian economy is set to contract for the first time in almost four decades, which is a bigger worry for the government right now.

(The two-wheeler sales in India have been sub-par since end of 2018)

Sales in the two-wheeler industry have been sub-par since the last quarter of 2018. With IRDA's mandatory 5-year third party insurance regulation, the Bharat Stage 6 transition and the additional safety norms that require two-wheelers to have CBS or ABS, have resulted in an increase of nearly 18-20 per cent on two-wheeler prices. Adding to all of these was the Coronavirus pandemic, which resulted in sales being driven in to the ground.

(SIAM had requested the government to cap GST on BS6 vehicles at 18 per cent in a bid to promote positive buying sentiment and help boost sales for OEMs)

The unprecedented coronavirus crisis has taken a toll on almost every sector and the auto industry is perhaps one of the worst hit. With both production and sales coming to a halt in April 2020, the very first month of FY2021, auto sales in Q1 FY2021 slumped 75.49 per cent selling 14,91,216 units as compared to 60,84,478 units in the same period last year. The Society of Indian Automobile Manufacturers (SIAM) the Indian auto sector regulatory body has projected a de-growth outlook of anywhere between 25 per cent and 45 per cent for FY2021 as it doesn't see the situation recovering anytime soon.