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Failure to cut GST now will be counter-productive for the two-wheeler industry: Honda

The industry was hoping the GST Council’s August 27 meeting would announce a cut after Finance Minister Nirmala Sitharaman’s statement on August 25 that such a move was merited. However, the Council did not lower the rate and two-wheeler makers now fear buyers may postpone purchases till a GST cut is announced

September 01, 2020 / 09:58 AM IST

Honda Motorcycle and Scooter India (HMSI) fears that the momentum gained by the two-wheeler market at the end of June could be derailed if there is any delay in cutting Goods and Services Tax (GST) rates.

“It was definitely appreciated when the Finance Minister recognised that the two-wheeler (industry) merits a reconsideration of GST to a lower bracket. However, the intention will get credibility only with quick action, otherwise it may be counter-productive for the industry,” said YS Guleria, Director, Sales and Marketing, HMSI, in a chat with Moneycontrol.

The two-wheeler industry was pinning its hopes on the August 27 GST Council meeting, hoping for a decision on lowering GST on two-wheelers following Finance Minister Nirmala Sitharaman’s statement on August 25 that such a move was merited.

Speaking during a webinar organised by the Confederation of Indian Industry (CII), the Finance Minister had said: “Two-wheelers are neither a luxury nor a sin good and hence merit a rate revision.”

Long wait continues

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Two-wheeler companies were hoping for a reduction to 18 percent from 28 percent, which they have been lobbying for since the past 18 months.

A back-of-the-envelope calculation suggests a reduction in the range of Rs 5,000 to 12,000 for two-wheelers priced up to Rs 1,30,000. More expensive two-wheelers will see a bigger reduction.

With no cut announced, the two-wheeler makers fear buyers may be inclined to wait and benefit from a GST cut instead of committing to a purchase right away.

“In the past also, we have observed that anxiety among buyers leads to a delay in decision making… If GST is revised to 18 percent from 28 percent, the ex-showroom price of the Activa will roughly come down by Rs 5,500. And for our recent launch, Hornet, it will be something like Rs 11,000. Now, that is big money from the customer point of view,” said Guleria.

Sales pick up momentum

Two-wheeler makers say retail two-wheeler sales (purchases by customers) in August were better than in July (actual numbers are awaited). In July retail sales at 8.74 lakh were better than the 7.9 lakh recorded in June, which was better than the 1.59 lakh recorded in May, as per data shared by the Federation of Automobile Dealers Associations.

Wholesale dispatches by companies in July stood at 1.28 million units, better than June’s 1.01 million units, as per the Society of Indian Automobile Manufacturers. This indicates an upward momentum in demand, which the industry is keen to sustain.

“Without creating further confusion it (the GST cut) should really be implemented. If there is an intention, it should be immediately converted into action. Right now the industry is getting back into momentum. We do not want the momentum to slow down,” added Guleria.
Swaraj Baggonkar
first published: Sep 1, 2020 09:58 am

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