SIAM Proposes GST Cuts: 12% for CNG and Flex Fuel Bikes, 18% for Others

The Society of Indian Automobile Manufacturers (SIAM) has expressed concerns about the current 28% GST levy on two-wheelers, highlighting that it is significantly higher than in other countries. SIAM has written to the Ministry of Heavy Industries, advocating for a lower GST structure, particularly for vehicles using compressed natural gas (CNG) and flex fuel. Manufacturers argue that clean fuel options should receive tax benefits similar to electric vehicles, which are taxed at just 5%.

Proposed GST Reductions

SIAM has proposed a three-tier GST structure for two-wheelers in their letter dated June 11:

• 18% GST: A reduction from the current 28% for all two-wheelers, with the removal of the 3% cess on models over 350cc.
• 12% GST: Specifically for two-wheelers using CNG and flex fuel, once the 18% rate is established.
• 5% GST: Continuation of the existing rate for electric two-wheelers, and a proposed reduction from 12% to 5% for hydrogen-powered vehicles.

Industry Impact and New Developments

Bajaj Auto is set to launch the world's first CNG motorcycle in July. The company anticipates that CNG's lower operating costs and cleaner emissions will drive its popularity. This move follows Bajaj's success with the electric Chetak scooter, which averages sales of over 15,000 units per month. A reduced GST rate would further enhance the appeal of their CNG motorcycle by lowering its price.

Industry and Economic Context

The demand for GST reduction stems from the steep price increases in two-wheelers due to regulatory changes and investments in technology and safety features. This has negatively impacted sales, especially in rural areas hit hard by the pandemic and inflation. SIAM argues that lower GST rates will stimulate demand and help the industry recover.

Global GST Comparison

SIAM's letter includes a comparison of GST rates on two-wheelers in various countries, with India having the highest rate at 28%. Other countries have much lower rates, such as:

• Mexico: 16%
• Philippines: 12%
• Indonesia: 11%
• Vietnam and Malaysia: 10%
• Brazil: 9.25%
• Thailand: 7%

Penetration Levels and Market Potential

Despite being the world's largest two-wheeler market, India's penetration level is low at 197 vehicles per thousand people. This is significantly lower than Vietnam (739/1000), Indonesia (536), Malaysia (477), and Thailand (371). SIAM emphasizes that reducing GST could boost two-wheeler ownership and market growth.

Carbike360 Says

SIAM's proposal aims to bridge the gap between the generous tax benefits for electric vehicles and the high GST rates for other two-wheelers. A reduction to 18% GST for all two-wheelers and 12% for CNG and flex fuel models could drive innovation and make clean fuel options more accessible. The GST Council's decision on this matter could significantly impact the industry's recovery and growth.