Punjab: Sanjeev Arora, MP (Rajya Sabha) from Ludhiana has raised the issue of reducing GST on bicycles from 12% to 5% with Finance Minister Nirmala Sitharaman. Mr Arora has written a letter to the Finance Minister in this regard. Arora said in his letter that the current structure of Goods and Services Tax (GST) is having a negative impact on the cycling industry. He advocated a uniform rate of 5% GST on all components, parts and services in the bicycle value chain. He said: Bicycles are not only an eco-friendly mode of transport but also a cost-effective solution to many urban and rural transportation challenges. The high GST rate of 12% on bicycles puts a significant financial burden on many people, especially those from the lower income groups, who benefit the most from the affordability and practicality of bicycles.
He said the current GST rate of 12% also poses many challenges for the bicycle industry. One of the major problems is that a large amount of capital is tied up in refunds and input tax credits (ITC). This complex and time-consuming process of ITC recovery puts significant pressure on the cash flows of manufacturers, suppliers and retailers and hinders the growth of the industry. Reducing the GST rate to 5 per cent could ease the economic burden to some extent, he said. He said the GST rate cut will reduce the amount of tax credits that businesses have to claim, thereby reducing the financial burden associated with delayed refunds and complex ITC processes. This increases liquidity and makes it easier to use funds for reinvestment and operational purposes.
He said a uniform GST rate of 5% will reduce the overall cost of bicycles. This makes cycling more accessible to a large section of the population and promotes the adoption of this sustainable and healthy mode of transport. Arora said a uniform GST rate across the supply chain will simplify tax administration and reduce transaction complexity for local manufacturers, suppliers and retailers. This clarity and predictability will create a more conducive environment for business growth and innovation. He further added that the reduction in GST rate will promote the use of bicycles, which is in line with the environmental goals of the government. The increased usage of bicycles will reduce CO2 emissions and traffic congestion.
He also added that reducing the GST rate to 5% will simplify the tax system, reduce compliance costs and improve cost efficiency. This benefits both businesses and consumers by simplifying transactions and reducing administrative burdens. Arora concluded by saying that he strongly believes that introducing a flat GST rate of 5% for the bicycle industry will address these financial and operational challenges while meeting the broader goals of sustainable development and economic growth. He directed the Finance Minister to consider this proposal in the next meeting of the GST Council and take necessary steps to implement this beneficial change.
