FADA Proposes a Reduction in the GST Rate for Two-Wheelers in the Budget.

FADA, the automobile dealers’ association, has requested the government to the Reduction of GST Rates on two-wheelers to 18% to boost demand in the market. The Federation of Automotive Dealers Association (FADA) represents over 15,000 automobile dealers with a total of 26,500 dealerships. They stated that two-wheeler vehicles are not included in the luxurious item and the Reduction of GST Rates should be reduced.

Reduction on GST Rates on automobile dealers: What’s Finance Ministry Says?

FADA demands that the Ministry of Finance regulate and Reduction of GST Rates on two-wheelers to 18% to continue to advance our country to global leadership. On February 1, Finance Minister Nirmala Sitharaman will propose the Union Budget 2022-23 to Parliament. As a result, the logic of 28% GST + 2% for luxury/sin items does not apply to the two-wheeler category.

At a time when car prices are rising after a three- to four-month hiatus owing to increases in input costs. The other reasons are dropping in the GST rate will offset the price increase and assist boost demand. FADA expects increased demand and the resulting ripple effects on numerous dependent industries which will improve tax receipts. In the medium to long term, it will really be revenue positive. It will also assist of bringing the optimism to general consumer mood and hence the broader economy,” the industry organization claimed. It also wanted a Reduction of GST Rate of 5% on all used automobiles’ margins, to establish a win-win situation for the government, dealers, and vehicle owners.

Automobile Dealers vs GST Reduction

With the GST Rate Reduction, the industry will be able to transition from the unorganised to the organised segments. It will bring more companies inside the ambit of GST and putting a stop to tax leakages. The government presently levies GST on secondhand automobiles at rates starting from 12% to 18%. As a result, the used automobile industry is 1.4 times the size of the new car market, accounting for 5-5.5 million cars each year. It is generating around Rs. 1.75 trillion in revenue. The government has decreased corporation tax to 25% for private limited firms with a revenue of up to Rs. 400 crore.

This benefit should be extended to all LLP, Proprietary, Partnership businesses, car dealership merchants & all kinds of business sectors that come into this group. This would assist raise the mood and spirit of the 5 million dealers. The organization also asked the government to take aggressive actions to accelerate the sector’s growth.