The auto dealership body, FADA, has urged the government to cut GST rates on two-wheelers to 18 percent to drive demand in the segment.
The Federation of Automobile Dealers Association (FADA), which represents more than 15,000 car dealerships with 26,500 dealers, noted that two-wheelers are not a luxury item and therefore VAT rates should be lowered.
“FADA is calling on the Treasury Department to regulate and lower GST rates on two-wheelers to 18 percent and continue to lead our country toward global leadership,” the trade association said Monday.
Finance Minister Nirmala Sitharaman will present the EU budget 2022-23 in parliament on February 1.
It is noteworthy that two-wheelers are not used as a luxury thing, but as a necessity to cover distances, especially by rural people, for their daily work needs, it added.
“Hence, the rationale of a 28 percent VAT discount of 2 percent for luxury/sin products does not hold true for the two-wheeler category,” noted FADA.
At a time when auto prices are rising after a 3-4 month hiatus due to rising input costs and several other factors, a cut in the GST rate will curb the price rise and help boost demand, it added.
“FADA believes that the growth in demand and the ripple effects it will have on many dependent sectors will increase tax collections. In fact, in the medium to long term, it will have a positive effect on revenues and also help drive positivity in the economy.” general consumer confidence and with it the overall economy,” according to the trade association.
It also aimed for a uniform GST rate of 5 percent on 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 move from a disorganized segment to an organized segment, bringing more business into the scope of GST, helping to curb tax leaks,” noted FADA.
The government currently charges GST on used cars at a rate of 12 and 18 percent.
The cars under 4,000 mm pay 12 percent VAT and the vehicles above 4,000 mm are taxed at 18 percent.
“The used car trade is 1.4 times the size of the new car market, accounting for 5-5.5 million cars a year with sales exceeding Rs 1.75 trillion. Authorized dealers account for just 10 -15 percent of this trade,” FADA stated.
The trade association noted that the government has reduced the corporate tax rate to 25 percent for private limited companies with turnover of up to Rs 400 crore.
“The same benefit should also apply to all LLP, Proprietary and Partnership businesses as most merchants within the auto dealer community fall into this category. This will affect the morale and sentiment of the merchants, who employ 5 million people. boost,” said FADA.
To help the sector grow faster, the association is calling on the government to take bold measures, she added. FADA also urged the government to reintroduce the “depreciation schedule” for FY 2022-23.
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