Tax Breaks on Bikes Needed in India

August 28, 2014 Taxation in India

NEW DELHI – Granting a new tax break on the sale of bicycles in India will help improve the economy, raise school attendance, boost accessibility health facilities, and help to rehabilitate the environment, especially in rural areas of the country.

India would enjoy a multitude of social and economic benefits by removing the 12 percent VAT charge on the sale of all bicycles costing less than INR 5 000 (approx. USD 82), according to information in a new report released by the independent Indian based think-tank The Energy and Resources Institute (TERI).

The experts of TERI concluded that dropping the tax would reduce the price of the cheapest tier of bikes in the country to between INR 2 500 (approx. USD 41) to INR 4 500 (approx. USD 74).

According to the results of research conducted by the TERI, such low cost bikes are usually purchased by low-income individuals, who are the most sensitive to fluctuations in prices, and such a significant drop in the cost of a bicycle may open greater opportunities for bike ownership among the country’s poorest citizens.

Increasing level of bike ownership in India will have wide reaching positive effects on the country, especially across rural and low-developed areas, as households with a bike will be able to access medical care, jobs, and educational facilities which were previously out of reach or located at an impractical distance.

It was specifically noted in the report that historical evidence shows that bicycle ownership will have a strong positive effect on the number of children attending school, both in early education, and during their teens, even all the way to tertiary education.

Removing the sales tax on bicycles will also help the country’s economy, as businesses in remote locations will have much greater access to resources and customers, while businesses and workers in cities will have quicker and more efficient methods of transport.

Further, a tax cut on bicycles will help clear congestion, decrease emission levels, and help address health issues such as diabetes and heart disease.

Photo By: Emmanuel DYAN