Reduce VAT on bicycles: Assocham

In order to give a fillip to the bicycle Industry in Punjab, the Associated Chambers of Commerce and Industry of India (Assocham) has urged the state government to reduce the value-added tax (VAT) on bicycle components currently at 5.5 per cent.

On behalf of the bicycle manufacturers, the apex chamber has also urged the government to release VAT refund of bicycle manufacturers lying with the excise and taxation department of the state government that the money could be utilised by manufacturers to push production.

In Punjab, bicycle manufacturers are concentrated in Ludhiana in Punjab. The city accounts for 90 per cent of bicycle production in India. India is the world's second largest bicycle producer after China, accounting for about 10 per cent of global bicycle production and with an estimated market size worth $1.5 billion. Indian bicycle industry produces about 15 million finished bicycles annually.

According to manufacturers, the reduction in VAT will make their products more competitive which is facing stiff competition from China.

Besides, the chamber also stated import of bicycles and their components from China have risen by about 41 per cent during the past five years and it is imperative for India to review the free trade agreements and South Asia Free Trade Agreement to safeguard interests of the domestic bicycle industry, according to a just-concluded study on 'Future of indian bicycle industry,' conducted by the chamber.

The Chamber suggested that there is a need to increase the import duty on bicycles and its parts from prevailing 20 per cent to 30 per cent as by doing this the prices of bicycles made both in India and China would equate in the global market.

Besides, there is also the need to reduce the freight charged by the government on raw materials being imported from other states which further escalates the production costs of bicycles, further noted the ASSOCHAM study while highlighting the various problems being faced by the sector.

The Chamber also urged the government to reduce both the interest rates on loans which at 11.75 per cent for small and medium enterprises (SMEs) is too high to bear. In its study, ASSOCHAM has also suggested the Punjab government for keeping stable power tariff as the same is being raised quite frequently thereby adding to the cost of production of bicycles.