GST cut on two-wheelers: Two-wheeler manufacturers have been urging the government to lower the goods and services tax (GST) rate on motorcycles and scooters from the current 28 percent, arguing that it is not a luxury good. Taking cognizance of the industry’s demand, Finance minister Nirmala sitaraman has said that GST Council will consider this proposal to reduce tax on two-wheelers.

Addressing the Indian industry at a Confederation of Indian Industry (CII) virtual conference, FM said that most two-wheelers are neither the luxury nor demerit goods and hence can be considered for rate revision. “This will be taken up with the GST Council,” she said.

The remark came ahead of the 41st session of the Goods and Service Tax (GST) Council, slated for Thursday. There has been a demand from the automobile industry, including the largest two-wheeler maker Hero MotoCorp for reduction of the GST rate on bikes and scooters to 18% from the top slab of 28% meant for luxury goods, in order to spur demand.

Two-wheeler sales somewhat recovered in July following the easing of lockdown curbs, signaling improving rural demand on the back of a good rabi harvest. Sales stood at 12,94,49 units, up 32% from the June volumes but are still down by 12% from a year before.

However, the current juncture appears to be not conducive for further rate cuts, as GST revenues are way below the targets. As the finance ministry itself stated on Monday, as against the revenue-neutral rate (RNR) computed by the RNR Committee of 15.3%, the weighted GST rate at present is just 11.6%.

The GST council is set to meet on September 19 to discuss the rationalizing of rates for certain items. The two-wheeler industry is hoping that a cut in tax rate will boost demand ahead of the festival season. The industry is already under stress due to low demand amid coronavirus outbreak and a consequent lockdown.

During the interaction, FM Sitharaman also stressed that structural reforms are a key priority of the government as has been reflected in the slew of measures and policies announced since the COVID-19 outbreak. “Every policy which was introduced had a structural component. Consequently, the reforms are having a significant impact on the recovery process which we are currently witnessing,” she said.

Taking cognizance of the fact that many sectors such as tourism, hotels and hospitality, real estate and construction, and airlines have been disproportionately affected by the pandemic, the Finance Minister said that these are critical sectors with significant multiplier impact on the economy. In order to ease the pain of a few of these ailing sectors, the standard operating procedures (SoPs) for hotels, banquets, and related activities will be looked into, she assured. On the issue of strategic disinvestment, Sitharaman highlighted that there was a need to move fast on cabinet cleared disinvestment decisions.

On the issue of local manufacturing, Sitharaman said that Productivity Linked Incentives (PLIs) scheme has met with excellent response and has helped speed up the manufacturing of critical bulk drugs and APIs in 6 states.