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Hero MotoCorp, Bajaj Auto back GST rate cut for motorcycles but differ on timing

Hero MotoCorp, Bajaj Auto back GST rate cut for motorcycles but differ on timing

New Delhi, January 3, 2019:  Chairman Pawan Munjal urged the government to lower the goods and services tax (GST) rate on motorcycles and scooters to 18% from the current 28%, contending that they are not luxury goods but provide basic mobility to the masses.

Bajaj Auto MD Rajiv Bajaj also backed a reduction but suggested that it should be tied to the introduction of new models, adding that rationalising GST rates is not the only means of keeping consumer demand steady among an overall increase in prices due to the implementation of safety and emission norms. Manufacturers should also look at technological solutions to address the cost-value equation, Bajaj said.

Munjal said, “Given that two-wheelers provide basic mobility to the masses, there is an urgent need to reduce the GST rate on two-wheelers from the 28% bracket of luxury goods to that of 18% for mass usage items”. His statement came ahead of the GST Council meeting scheduled for January 10.

Munjal said the implementation of new safety norms and the transition to BS VI emission standards will raise the cost of two-wheelers, putting pressure on “extremely cost-sensitive commuters” for whom the two-wheeler is a lifeline. The reduction in tax, he added, would not only provide much-needed relief to two-wheeler customers across the country but is also essential for ensuring growth in the domestic automobile industry.

“This will provide relief to millions of two-wheeler customers across the country, as well as the entire value chain dependent on the sector,” Munjal said. “It is absolutely imperative to ensure growth in the auto sector to create and sustain inclusive economic growth.” Bajaj said price wasn’t the only factor when it came to growth.

“It’s not really a counter view,” he told ET. “I’m only saying two things... Price is not the sole dimension of the problem, else the sports segment wouldn’t be growing at 25%... so perhaps the mid-commuter segment needs more application of imagination in terms of technology and quality.” Bajaj is the fourth largest two-wheeler maker after Hero, Honda Motorcycle & Scooter India and TVS Motor Co.

Any reduction in tax rates would be beneficial, said Bajaj, adding that timing it right would help.

“It will be a win-win solution to time any GST reduction with the safety or emission norms to mitigate the significant cost-up that’s inevitable,” Bajaj said. “Doing so separately would actually make things much worse for a while before making it hopefully better.”

Overall, Munjal said 2018 had been a challenging year. While continuing volatility in currency and commodities slowed growth, geopolitical and trade conflicts also affected sentiment across the world.
In the domestic market, Munjal said the increased cost of two-wheeler insurance ahead of the festive season and a liquidity crunch hit overall growth in the third quarter.

In calendar year 2018, Hero Moto-Corp sold 8 million bikes and scooters, registering a growth of 11% over 2017. Bajaj Auto grew sales by 29% to sell 3.2 million motorcycles between April and December 2018. Hero MotoCorp sold 6 million units in the nine months to December.