FADA reiterates demand for GST reduction to 18% on entry level two wheelers

The Federation of Automobile Dealers Associations of India (FADA), the apex national body of the Indian Automobile Retail Industry, has once again requested that the government reduce the Goods and Services Tax (GST) on entry-level two-wheelers from 28% to 18%.

Speaking during the inaugural session of the 5th auto retail conclave on Thursday, FADA President, Manish Raj Singhania highlighted the challenges faced by the two-wheeler segment, which currently lags behind pre-COVID levels by 20%.

The representatives from FADA had earlier met the Minister of Road Transport and Highways (MoRTH), Nitin Gadkari, in August to brief him on the same. 

According to Singhania, while the overall fiscal year has witnessed a year-on-year growth of about  7% in vehicle sales, the two-wheeler market, which constitutes approximately 75% of total vehicle sales in the country, is yet to fully recover. Requesting the government, he added that reducing the GST on entry-level two-wheelers to 18% would provide a much-needed boost to the segment by making these vehicles more affordable for consumers. 

FADA, founded in 1964, represents over 15,000 automobile dealerships across India, encompassing the sale, service, and spares of two- and three-wheelers, passenger cars, commercial vehicles, and tractors. 

Near Term Outlook for Indian Automobile Industry

According to FADA's August 2023 updates, a variety of factors that vary across vehicle segments continue to shape the outlook, which is cautiously optimistic. The onset of the festive season, beginning with Onam, has uplifted market mood, improved liquidity, and eased earlier bottlenecks in the supply chain across all categories.

In the 2W market, while a broader range of models is now available, subdued rural demand due to insufficient rainfall could temper sales growth. For CVs, although bulk deals and the favourable timing of the construction season in September added to the optimism, the real sales momentum is anticipated to pick up during the Navratri and Deepawali festivals following the Shraadh period.

The PV market, meanwhile, offers a mixed bag: new product launches and better stock availability are positive signs, but high customer discount expectations and the impact of the Shraadh period may act as small speed breakers.

The lobby body noted that after a prolonged period of stagnation, rural demand is showing signs of a positive resurgence. However, this recovery remains tenuous, contingent on the performance of the final phase of the monsoon season. Lack of sufficient rainfall could precipitate a rise in inflation, adversely affecting consumer purchasing power and diminishing demand. This meteorological shortfall would not only jeopardise the yield of the ongoing kharif crops but also cast a shadow on the subsequent sowing season for rabi crops.

Such developments would be particularly inopportune, as they would coincide with the peak of India's festive season, notably Navratri and Deepawali, traditionally periods of heightened consumer activity