Rajiv Bajaj, the Managing Director of Bajaj Auto, has praised the government’s proposal to reduce the Goods and Services Tax (GST) on two-wheelers from 28% to 18% for models under 350 CC. He called the move “fabulous and fantastic” and believes it will help the industry recover from its current struggles. The two-wheeler industry has been facing difficulties in recovering to pre-COVID levels due to inflation outpacing income growth over the past five years.
However, Bajaj also urged policymakers to further rationalize rates and extend the benefit across all segments of the industry. He pointed out that the proposed 18% rate in India is still significantly higher than global norms, where tax rates on two-wheelers range between 8% and 14%. He also expressed concerns about the government’s decision to limit the reduction to vehicles under 350 CC, which he believes will create distortions and force manufacturers to realign their product portfolios and engine designs.
Bajaj argued that the restrictive tax structure could “dumb down” the Indian motorcycle market and limit consumer choice. He suggested that the 18% rate should be applicable to all two-wheelers, regardless of their CC, to simplify the tax structure and promote the “Make in India” initiative. He also believes that the new GST rates will boost demand during the upcoming festive season, as consumers are not canceling their purchases but rather waiting for lower prices.
The industry is awaiting official notification of the revised rates, which are expected to provide a boost to sales amid a slow recovery in consumer demand. There are already signs of a slowdown in the automobile industry, with customer enquiries remaining healthy but fresh bookings slowing down as buyers adopt a wait-and-watch approach. Bajaj is optimistic that the new policy will come into effect from October 1 and demand will bounce back strongly during the festive season. Overall, the proposed GST reduction is seen as a positive step for the industry, but there are still concerns about the complexity of the tax structure and the need for further rationalization.