GST reduction necessary for two-wheeler segment recovery in India, says GlobalData

Following the news that India’s Finance Minister agreed to consider the revision of Goods and Service Tax (GST) on two-wheelers and indicated that the matter will be taken up with the GST Council;

Bakar Sadik Agwan, Senior Automotive Consultant at GlobalData, a leading research and consulting company, offers his view:

“In FY2020, two-wheeler sales volume declined by 17.8% year-on-year. Due to the impact of COVID-19 pandemic, cumulative sales volume during April and July in the current financial year is over 60% lower than the previous year. This warrants immediate demand revival measures from all stakeholders in the two-wheelers segment. The reduction of GST on two-wheelers from 28% to 18% on new two-wheelers will be beneficial in the short as well as long-term. It will help in bringing down the cost of vehicle acquisition, which is one of the prime reasons behind the de-growth in the volumes, as two-wheeler prices are on steep increase since 2017.

“While the July sales volume was 13% lower than 2019, it improved compared to previous month due to multiple reasons. Factors like social distancing and hygiene are prompting more and more people to consider personal mobility. Affordability is a concern among a large chunk of Indian population and they rely on cheaper public transportation modes. Pocket conscious buyers are now opting for two-wheelers and the sales of both new and used two-wheelers are growing.

“There is a strong demand in the rural and semi-urban areas owing to good monsoons and harvest season. Timely reduction in GST, especially before the approaching festive season, is expected to bring the two-wheelers within the reach of more potential buyers and result in a significant spike in sales.”

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