SIAM Requests Government To Reduce GST On Two-Wheelers To 12-18% 

The Society of Indian Automobile Manufacturers (SIAM) has requested the Government of India to reduce GST rates for two-wheelers. This reduction in GST isn’t a new request by two-wheeler brands as ever since GST was introduced this demand has been a common occurrence. However, this fresh request from SIAM comes with a twist as apart from the tax reduction to 18% (from the existing 28%) for two-wheelers, there’s a fresh demand of further reduction to 12% for flex fuels and compressed natural gas options. 

The argument brought forward by SIAM is that EV brands are levied just 5% GST which helps bring down the on-road cost of electric scooters and bikes. Owing to this huge disparity between ICE and EV two-wheelers, sales are affected. Two-wheeler sales haven’t recovered from the pre-COVID numbers of 21.8 million units, which was also the highest ever two-wheeler sales recorded in a single financial year. The sales figure in 2023 was 17.07 million units. Apart from the steep rise in GST, new policies such as mandatory ABS, insurance and stringent emission norms have driven costs of two-wheelers by almost 30 to 40%. This steep rise in cost has been the major reason for decline in two-wheeler sales, especially in the rural markets which still haven’t recovered fully post the COVID pandemic. 

The 18% GST reduction for two-wheelers up to 125 cc was suggested by major brands like Hero MotoCorp, TVS Motor, Bajaj Auto as almost 90% of sales falls under this segment and the argument was that 28% is what luxury goods are charged. But the fresh demand is a blanket 18% GST for all two-wheelers. The second demand of 12% GST for flex fuels looks a bit too ambitious as almost all two-wheeler brands barring select products from Bajaj and Honda are now E20 fuel compatible. The introduction of flex fuel was to reduce crude oil imports and while manufacturers did invest a significant amount to make their products adaptable to the new fuel, 12% GST on such vehicles looks unlikely. 

However, 12% GST on CNG vehicles seems to be a pitch by Bajaj Auto as it will be launching the world’s first production CNG bike next month in India. Acko Drive has written to the company for an answer, but there was no answer from the company. Incentive on CNG technology for two-wheelers seems to be a fair demand as it not only reduces oil imports, is more environment friendly and also heralds new innovation. The only challenge for CNG technology is availability as apart from select states in our country, CNG pump infrastructure is very weak. 

We think a reduction in GST at least for commuter two-wheelers under 125 cc makes a lot of sense as it helps push sales and boost the industry with new vigour. The loss of tax collection upfront can be easily countered with the big increase in volume of sales owing to the tax cut. Despite being the world’s largest two-wheeler market, penetration of two-wheelers across India is less than 20%. With such a vast population and untapped market, the business prospect for two-wheeler manufacturers is huge and if sales get doubled in the next few years, it can play a huge part in uplifting the Indian economy too. Acko Drive has got in touch with major Indian two-wheeler brands for a quote on this demand by SIAM and we shall update the article as and when we receive it.