The automobile industry has approached the government to reduce the goods and service tax on passenger vehicles and two-wheelers from 28 percent to 18 percent to compensate the sector, which is expected to see a price hike in the range of 10-15 percent, with the introduction of new emissions and safety regulations.
The industry fears that with the increase in prices, the demand for their products would be impacted.
Currently, automobiles are taxed at GST rate of 28 percent with additional cess ranging from 1 percent to 15 percent, depending on the length, engine size and type.
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"We want the government to be sensitive to the fact that Bharat Stage-VI emission introduction (from Apri 1, 2020) and other safety regulations will add to the cost... it's likely to lead to slowdown in the demand," Society of Indian Automobile Manufacturers President Rajan Wadhera said.
If the demand falls, government's collection of taxes would also reduce, he said.
"Therefore, for a win-win situation, we are seeking a 18 percent GST in automobiles," Wadhera said.
A price hike of even 10 percent would impact the sales of two-wheeler segment, which currently witnesses offtake of over 22 million units annually, he said.
"In PVs (passenger vehicles) also, the prices are going to go up in the range of 10-15 percent due to technology and safety enhancements,” Wadhera said. “There also we need serious considerations by government so that it is a win-win situation for all."
Earlier this year, Maruti Suzuki India Ltd. Managing Director and Chief Executive Officer Kenichi Ayukawa had sought reduction in taxes on automobiles in order to create demand and develop the industry.
Major two-wheeler companies like TVS Motor Company Ltd., Hero MotoCorp Ltd. and Bajaj Auto Ltd. had also demanded a GST rate cut on two-wheelers.
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