Exclusive | Not looking for any GST rate reduction on two-wheelers: Pawan Goenka, Mahindra

He said that the current rate of GST on two-wheelers is at par with the earlier tax rate of excise and VAT, and does not require changes.

Although country’s top two-wheeler manufacturers have sought a reduction in goods and services tax (GST) on two-wheelers to keep demand insulated from risk of price hikes, Pawan Goenka, Managing Director, Mahindra & Mahindra, does not concur with their views.

Speaking to Moneycontrol, he argued that the current rate of GST on two-wheelers is at par with the earlier tax rate of excise and VAT, and does not require changes.

“I am not looking for any GST reduction or any other incentives or sops for the auto industry. Keep in mind that 28 percent (GST on two-wheelers) is nothing but VAT plus excise. So, why are we suddenly saying that we should have lower GST (on two-wheelers). The country needs to have revenue. It is easy for us to say let’s have a lower GST,” said Goenka.

Apart from sports utility vehicles, electric cars and heavy trucks, Mumbai-based Mahindra & Mahindra is also present in the two-wheeler space. After several years of fruitless operations, the company got its footing right after the launch of the Jawa range of retro-looking medium capacity motorcycles.

Pawan Munjal, Chairman and Managing Director, Hero Motocorp, Venu Srinivasan, chairman, TVS Motor Company and Rajiv Bajaj, Managing Director, Bajaj Auto, have pitched for a lower GST of 18 percent on two-wheelers. Honda too has supported the plea.

Their argument is based on the fact that the 28 percent GST slab is for ‘luxury and sin goods’ (as defined by the government) and two-wheelers cannot be defined as luxury items especially in the hinterlands where a motorcycle acts as the only form of motorised transport connecting villages.

As per a revised formula instead of having a blanket reduction in GST on all two-wheelers the consortium of two-wheeler makers have proposed for a reduction only for a particular segment defined by the engine size.

“The view of the industry is that GST on two-wheelers of certain size should reduced to 18 percent and the balance can stay in 28 percent. It is because the 100cc bikes, which are budget bikes, are classified under the luxury and sin goods segment of 28 percent,” YS Guleria, Senior Vice President, Sales and Marketing at Honda Motorcycle and Scooter India had told Moneycontrol.

However, the industry has not reached a consensus on what should be the cut-off size for engines to qualify for the lower GST rate. Models having engines as small as 100cc and going up to 1800cc are sold in the Indian market in the price band of Rs 30,000 to Rs 28 lakh (ex-showroom).

Companies like Hero Motocorp, the industry leader in two-wheelers, will benefit the most if GST is reduced only on smaller bikes as a majority of its volumes comes from this segment but companies like Eicher Motors, which controls Royal Enfield will be at a disadvantage as all its bikes are more than 350cc.

First Published on Feb 11, 2019 01:25 pm