Honda in favour of two GST slabs for two-wheelers

Even as the chorus on reduction in Goods and Services Tax (GST) on two-wheelers grows, the industry is now in favour of having twin slabs instead of one.

According to the country's second largest two-wheeler maker Honda Motorcycle and Scooter India (HMSI), two-wheeler companies have supported a plea to reduce GST on some two-wheelers with engines of a certain size.

Speaking to Moneycontrol, YS Guleria, Senior Vice President, Sales and Marketing at HMSI said, “This is not just Honda’s view but the view of the industry that GST on two-wheelers of certain size should reduced to 18 percent and the balance can stay in 28 percent. Because the 100cc bikes which are budget bikes are classified under the luxury and sin goods segment of 28 percent."

Guleria was talking on the sideline of launching the CB300R motorcycle.

Some entrepreneurs such as Pawan Munjal, Chairman of Hero MotorCorp, Venu Srinivasan, Chairman, TVS Motor Company, Rajiv Bajaj, Managing Director, Bajaj Auto have called for a reduction in GST on two-wheelers. Manufacturers argue that two-wheelers are ‘a necessity for everyday life and not luxury items’.

This differentiation in GST on two-wheelers proposed by the industry will divide the two-wheeler industry. Some companies like Hero MotoCorp, the country’s largest two-wheeler maker, derive a majority of sales from the 100-110cc motorcycle segment. Honda too majorly depends on the budget scooter segment.

But, some other specialised brands such as Royal Enfield (an Eicher Motors brand) operate only in the 350cc an above segment, which is considered the premium segment. If GST on 100cc bike segment is cut then the gap between the budget and premium bikes will widen causing the latter a cost disadvantage.

The two-wheeler segment reported the second consecutive monthly drop in volumes in January as per data shared by the Society of Indian Automobile Manufacturers. Sales of bike and scooters was down 5 percent last month to 1.59 million units as compared to 1.64 million units sold in the same month last year.

A reduction in GST on two-wheelers will help negate the twin impact on costs that is expected in April this year and in 2020. Manufacturers fear that the new safety norms and upgradation to the next emission standard of BS-VI will result in more than 10 percent rise in costs in all two-wheelers. This will result in substantial reduction in demand for two-wheelers.