FADA bats for uniform GST rate of 5 % on the margin for used vehicles, cut in taxes on 2-wheelers

MUMBAI, Jan 17 (The CONNECT) – Describing auto dealers as the spokes in the nation’s wheel of growth, the Federation of Automobile Dealers Association (FADA) has appealed to Union Finance Minister Nirmala Seetharaman to accord “due recognition” to the sector.

The auto trading community in its truest sense is the employment generating mechanism for the country. It does not displace employees, on the contrary, provides employment in people’s their home locations, FADA pointed out.

The Automobile Sector, thus, is not only one of the big employment generators, but is also continuously skilling its workforce to keep them updated with the ever-changing technology, the apex body said and requested the government to take bold steps to boost the sector. Auto industry is a barometer of any country’s economic performance and FADA believes ‘If the Industry is doing good, the nation’s economy will also be doing good’.

In its Budget wish list, FADA presented the case for a uniform GST rate of 5 % on the margin for all used vehicles, to create a win-win situation for the Government, Dealers, and Vehicle Owners. With the reduction in GST, it will help the industry to shift from unorganized segment to organized segment thus bringing in more business under the ambit of GST helping in putting brake on tax leakages.

A reduction in GST rate will counter the price hike and help spur demand at a time when vehicle prices are increasing every three months due to continuous price hike in metals and various other factors, it said.

The rate of GST on used cars is currently 12% and 18%. The used car business occupies 1.4 times the size of new car market, accounting for 5-5.5 million cars per annum with a turnover of over Rs. 1.75 trillion. Authorized dealers account for only 10-15% of this trade, which is also the organised sector thus paying taxes, FADA explained.

The association batted for individuals accounting for depreciation as this will help in increasing the number of individuals filing their IT return. The Vehicles depreciates for both Corporate as well as employees in a similar fashion, and the salaried class should also get the same benefit.

FADA also requested the Finance Ministry to regulate and reduce GST rates on Two Wheelers to 18%. It is noteworthy that the two wheelers are used not as a luxury but as a necessity to travel distances by a cross section. Hence the ‘luxury’ rationale of 28% GST + 2% cess does not hold good for the two-wheeler category.

The government has reduced corporate tax to 25% for private limited companies with turnover of up to Rs.400 crores and similar benefit should also be extended to all LLP, Proprietary and Partnership firms as most traders within the auto dealership community fall in this category. This will help boost morale and sentiment of the traders which employ 5 Mn people, out of which 2.5 million employees are on direct employment, FADA said.