The President of the Federation of Automobile Dealers Associations (FADA) suggested that the Goods and Services Tax (GST) for automobiles should be reduced to at least 18 percent. This reduction is crucial as high GST rates are hindering the sales of small cars and entry-level two-wheelers. He emphasized that the high taxation particularly affects customers in rural and smaller cities.
He highlighted the importance of entry-level vehicles, stating that they are essential in areas with limited public transport like villages and rural regions. Advocating for an 18 percent GST, he pointed out that increasing vehicle prices are making it difficult for rural customers to afford vehicles, leading to a decline in sales of entry-level cars. He stressed the need to make vehicles affordable for everyone to ensure that rural customers are not left behind in the growth story.
The Managing Director of Bajaj Auto also recommended a relaxation in GST rates for commuter motorcycles, citing the impact of excessive regulation and high taxation on their prices. Currently, automobiles attract a GST rate of 28 percent.
The sales of entry-level cars or mini cars have witnessed a significant decline, as reported by the Society of Indian Automobile Manufacturers (SIAM), dropping by around 40 percent year-on-year to 1,52,262 units in the last financial year compared to 2,52,409 units in 2022-23. Maruti Suzuki India and Renault India are the only two manufacturers producing small cars currently.
In April, Maruti Suzuki’s domestic sales of mini cars decreased by 18 percent year-on-year to 11,519 units. There have been discussions about leveraging hybridization principles to enhance fuel economies in smaller cars at a more affordable cost, provided that GST rates are lowered.
The President also mentioned an upcoming customer experience index study by FADA and Frost & Sullivan, scheduled for release in September, focusing on customer satisfaction throughout the sales journey, after-sales service, and product quality in the passenger vehicle segment.
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