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Impact of GST in the Two-Wheeler Market

 

Impact of GST in the Two-Wheeler Market

When India made history at the stroke of midnight on 30thJune 2017 by rolling out the much-anticipated Goods and Services Tax (GST), it was the dawn of a new era.

India Inc., grappling with the multiple taxation system, welcomed GST with open arms. The two-wheeler segment, like others, was closely monitoring the developments, since GST was expected to have a radical impact on the rapidly-growing industry.

Notably, according to the Society of Indian Automobile Manufacturers (SIAM), India has toppled China to emerge as the world's largest two-wheeler market, with 17.7 million units sold last year. Easy availability of two-wheeler loans, rising income, growth in rural infrastructure, and the rising number of women commuters have filliped the growth of the industry.

 

GST Impact - Reduction in prices for the mass market segment

The revolutionary taxation system will result in same ex-showroom prices of two-wheelers across the country. With a flat 28% GST, the structure has been classified into two groups:

 
  • Two-wheelers with engine < 350 CC
  • Two-wheelers with engines > 350 CC
Engine Capacity Before GST After GST Difference
Below 350 CC 30% 28% -2%
Above 350 CC 30% 31% 1%
 

So, the picture is clear. Prices of two-wheelers whose engine capacity is less than 350 CC will be lower. Though prices of premium bikes will rise marginally, in states that had high octroi and VAT slabs, the on-road prices may come down. No wonder consumers as well as manufacturers are elated.

Roy Kurian, Senior Vice President, Sales & Marketing of Yamaha Motor India Sales commented, "It is quite likely that in the long run, the GST will accelerate market demand as growth rate is expected to be around 10% after the implementation."He added that, "Two-wheeler industry has come through several macro-economic reforms this year like the engine-standard upgrades and the transitory effect of demonetization which has affected the growth. What remains to be seen is how the implementation of GST will change the game.”

In a statement, Hero MotoCorp said, "The actual benefit varies from State to State, depending on the pre-and-post-GST rates. Some of the premium-segment models will see a reduction of up to Rs 4,000 in certain markets."

Pankaj Dubey, Country Head and MD of Polaris India Pvt Ltd, said, "It will have a positive impact, would simplify business operations and bring transparency to the taxation system. This move will attract both national and international businesses to invest more in India."

GST to Solve Challenges faced by SMEs manufacturing two-wheeler components

Two-wheeler component manufacturers have been traditionally at the receiving end of all the wrongs of the previous indirect taxation regime. The result - inflated prices on end consumers. Now, with the seamless movement of goods between states, these manufacturers can enjoy greater flexibility to optimize their supply chain and logistics costs.

A Win-Win Situation

GST helps everyone. With the demand for two-wheelers expected to pick up during the upcoming festive months, lenders have already started doing their homework for soon-to-be-applied two-wheeler loans. If you are looking to purchase a two-wheeler on loan, there is no better time than now.If you are searching for a reliable two-wheeler and loan, talk to Reliance Commercial Finance today.