New Delhi, Jun 12 (KNN) The Society of Indian Automobile Manufacturers (SIAM), the leading automobile industry association in India, has formally requested the government to consider reducing the Goods and Services Tax (GST) rates levied on two-wheelers.

In a six-page letter addressed to Hanif Qureshi, Additional Secretary, Ministry of Heavy Industries, SIAM highlighted the critical role that affordable two-wheeler transportation plays in enhancing human productivity and economic growth.

The industry body suggested that the government cut the GST rate to 18 per cent from the current 28 per cent for two-wheelers with internal combustion engines.

It also proposed lowering the rate to 5 per cent from the existing 12 per cent for zero-carbon tailpipe emission models such as those powered by hydrogen.

Furthermore, SIAM sought a reduction in the GST rate on low-carbon emission technologies, such as flex fuel (ethanol-blended petrol) and Compressed Natural Gas (CNG), from the current 28 per cent to 18 per cent initially, and then to 12 per cent once the overall rate for two-wheelers is brought down to 18 per cent.

The association also advocated for the removal of the additional 3 per cent cess levied on higher cubic capacity motorcycles.

SIAM emphasised that India's current GST rate of 28 per cent (plus an additional 3 per cent cess for models above 350cc) on fossil fuel-powered two-wheelers is the highest among all major two-wheeler markets worldwide, ranging from 7 per cent in Thailand to 16 per cent in Mexico.

The industry body cited the high cost of developing new technologies like flex-fuel and CNG, stating that a GST reduction would address consumer adoption and affordability challenges for such models.

Additionally, a lower tax rate is deemed critical to offset the higher cost of ownership for flex-fuel vehicles.

While Indian manufacturers have showcased flex-fuel motorcycles, no two-wheeler market currently offers CNG-powered models.

Bajaj Auto is set to become the first to commercially launch a CNG two-wheeler later this month.

SIAM underscored the relatively low vehicle penetration rate of 197 per 1,000 people in India, despite the country having the world's largest two-wheeler market.

The association highlighted the opportunity for policy interventions to drive GDP growth in this segment.

The Indian two-wheeler industry has faced challenges, with sales yet to recover to pre-COVID-19 peak levels of fiscal 2019.

This has been exacerbated by regulations on safety, insurance, emissions, and higher road taxes that have led to a sharp increase in vehicle prices, particularly affecting the entry-level segment that constitutes 70 per cent of overall sales volume.

(KNN Bureau)