Union Budget 2022: Lower GST rates for demand revival, says FADA

The Federation of Automobile Dealers Association (FADA) has presented its wishlist for the Union Budget 2022 to Finance Minister Nirmala Sitharaman, including a cut in GST rates for vehicles, to revive the demand in the auto sector.
 
The apex body for automobile retail industry in India has highlighted the issues hurting the growth of automobile industry and auto dealerships at large to Sitharaman, it said in a release. Its recommendations are divided into two parts -- relating to demand revival and other with dealer issues.
 
It has sought reduction in GST rate for two-wheelers to 18 per cent and on used cars to 5 per cent.
 
"...FADA requests the Ministry to regulate and reduce GST rates on two wheelers to 18 per cent and continue to move our nation to global leadership. It is noteworthy that the 2W is used not as a luxury but as a necessity to travel distances by lower class and rural segment for their daily working needs. Hence the rationale of 28 per cent GST + 2 per cent cess which is for luxury/ sin products does not hold good for the two-wheeler category," it said.
 
FADA also said that 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. Meanwhile, authorised dealers account for only 10-15 per cent of this trade.
 
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"In case the used car is purchased from end consumer by the dealer, no ITC will be there to be claimed by the dealer since, neither the tax has been paid under forward charge nor under RCM. In such a situation there will be cascading to the extent of value addition by the dealer," it said and urged for a uniform GST rate of 5 per cent on the margin for all used vehicles.
 
"With the reduction in GST, it will help the industry to shift from unorganised segment to organised segment, thus, bringing in more business under the ambit of GST helping in putting brake on tax leakages," FADA added.
 
It also asked the Finance Ministry to introduce benefits of claiming depreciation on vehicles for individuals paying income tax. According to the Association, this will not only help in increasing the number of individuals filing I-T returns but also help in igniting automobile demand, especially two-wheelers, from individuals and will thus up the GST collection for the government.
 
FADA has also called for reintroduction of depreciation scheme for vehicles which was valid till March 31, 2020. It said the scheme should be extended till FY2022-23.
 
On dealer issues, FADA has called for reduction in tax rate for LLP (limited liability partnership), proprietary and partnership firms. "The government has reduced corporate tax to 25 per cent for private limited companies with turnover of up to Rs 400 crore. The same benefit should also be extended to all LLP, proprietary and partnership firms as most traders within the auto dealership community fall in this category," FADA said.

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