Budget 2022: Reduce GST on two-wheelers and used cars, says FADA 

The Federation of Automobile Dealers Association (FADA), the top body representing automobile dealers and retailers across the country, has given its recommendations to help the automotive industry in the upcoming Union Budget.

“We urge the government if the concerns are accommodated in the upcoming budget this could reenergize the auto retail trade, which in turn will bring back the sector and the entire automobile industry back on track and the overall economic growth too,” the association state in its release.

The association divided its recommendations into two halves; one set of recommendations to boost the demand for vehicles and the other set to directly help dealers. Among its recommendations, the FADA has stated that the GST rate on two-wheelers in India be regulated and reduced to 18 percent as they are not luxury items.

Additionally, the group suggests that individual taxpayers be able to account for vehicle depreciation, a benefit that corporations already enjoy. The move to allow depreciation will allow for greater tax savings for individuals, thus further boosting demand. The group also advised the reintroduction of the depreciation scheme during FY 2022-23.

The GST rate on used cars was also recommended to be reduced to 5 percent from 12 and 18 percent, depending on the size of the car. As the used car market occupies a larger space than the primary sale of vehicles in the country it is important for the sector to be regularised, which a reduction in GST rate can help achieve.

The group has also urged the government to reduce corporate tax to LLP, proprietary and partnership firms in line with the reduction given to private limited companies with turnover of up to Rs 400 crore.

“This will help boost morale and sentiment of the traders which employ five million people, out of which 2.5 million employees are on direct employment,” FADA added.

While India is expected to become the third-largest automobile market by the year 2026, poor demand has been plaguing many top manufacturers as many Indians delayed purchasing vehicles due to the COVID-19 pandemic.