India’s automobile industry has requested the Ministry of Heavy Industries to consider reducing GST on low-carbon two-wheelers. Currently, there is a uniform GST rate of 28% for all two-wheelers.

Sources said an auto industry body has written to the heavy industries ministry requesting it to consider a 12-18 percent GST slab for flex-fuel and CNG two-wheelers. The petition is based on the argument that a lower GST rate will allow greater adoption of low-carbon two-wheelers and reduce overall vehicle emissions.

CNG is a popular fuel for buses, three-wheelers and passenger cars, and auto companies are in the process of developing and launching CNG two-wheelers. Flex-fuel vehicles are those that can run on high blends of up to 85% ethanol.

Industry sources told CNBC-TV18 that two-wheelers play an important role in increasing productivity in various sectors of the economy, including e-commerce and instant commerce. According to Euromonitor, India has 197 two-wheelers per 1,000 people, while Thailand has an adoption rate of 371 per 1,000 people, and Indonesia has 536 two-wheelers per 1,000 people.

The industry body has said that high GST rate, 15 years upfront road tax, 5 years upfront third party insurance cost has led to high cost of acquisition and low accessibility compared to other South Asian economies. While India has a 28% GST rate and 3% cess on two-wheelers above 350cc, countries like Thailand and Indonesia have rates of 7% and 11% respectively.

One of the long-standing demands of the auto sector is to reduce GST on all two-wheelers from 28% to 18% and remove cess on all vehicles above 350cc. Two-wheeler manufacturers have earlier appealed to the government to reduce GST on hydrogen two-wheelers from 12 percent to 5 percent in line with electric vehicles.

The industry body has now requested the ministry of heavy industry to consider reducing GST on flex fuel and CNG two-wheelers to 18 percent while the base rate for all two-wheelers is 28 percent and It should be reduced once to 12%. For two-wheelers, the basic rate becomes 18%. The industry has also requested removal of 3 percent cess on all categories of two-wheelers.

Manufacturers say that CNG and flex fuel vehicles require significant investment to design and manufacture and without a low GST rate, the product may not be priced attractively to a consumer.

The Ministry of Heavy Industries has not yet considered this request. It is also important to note that the Ministry of Heavy Industries can technically send a proposal to the Finance Ministry, but any decision on reduction in GST can only be taken by the GST Council.

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