GST Effect: Marginal Impact Expected On Two-Wheeler Industry

The new Goods and Service Tax, or GST prices announced by many two-wheeler manufacturers aren't really going to impact sales and overall revenues, according to experts. In a competitive market, most two-wheeler manufacturers have already started announcing price cuts on their models after GST. India Yamaha was one of the first manufacturers to announce detailed and model-wise prices. Others like TVS Motor Company has also announced price cuts, as well as Hero MotoCorp, which has announced that GST benefits will be passed on to consumers, but most manufacturers are yet to announce detailed price revisions across their models.

"In general, prices of two-wheelers are expected to come down marginally, but this will have no real impact on the industry as a whole. Even now, there's no absolute clarity on what the real impact of GST will be. Yes, sales in June may be affected, because OEMs will look to clear out existing stock and inventory at the dealerships. Besides, customers will be postponing purchase decisions, to see what effect GST will finally have on prices. But overall, it's more of a temporary market sentiment than any real impact on sales," said Abdul Majeed, Partner, Price Waterhouse.

Scooter prices will see marginal reduction across different manufacturers and their models

Scooters and motorcycles with engine capacity of less than 350 cc will see overall tax incidence come down marginally, from the 30 per cent in the pre-GST times to around 28 per cent right now. Motorcycles with engine capacity of over 350 cc will incur an additional 3 per cent cess, over and above the 28 per cent GST, but even that is a marginal 1 per cent change.

Many two-wheeler manufacturers are still trying to figure out what will be the actual benefits on prices which can be passed on to customers. Observers say the real impact of GST on the two-wheeler industry cannot be gauged in the short term, in the next month or two. Under GST, raw material costs will go up, so eventually, the actual impact on prices can only be ascertained over a period of 6-8 months. Prices may see a correction once again when there is more clarity on how GST actually impacts the whole production and distribution cycle.