The “under-invoicing” of bicycles by some unscrupulous dealers in Ludhiana has hit the market of organized players and is also leading to GST evasion, cycle makers have claimed. Organized bicycles manufacturers on Monday said it has become difficult to hold onto their existing market because of the “rampant illegal practice of under-invoicing” taking place in Ludhiana the country’s major manufacturing hub of cycles and cycle parts.
An ordinary bicycle, priced at Rs 2,500 a unit, is being invoiced at Rs 900 a bicycle by some illegal dealers, leading to the evasion of the GST, they said while citing an example. Twelve per cent GST is charged on a bicycle. “By under-invoicing, some illegal dealers are evading GST of Rs 192 on one unit of bicycle as against payable tax of Rs 300 (GST on Rs 2,500),” said a Ludhiana-based owner of a prominent brand of bicycle who wished not to be named. “Since their overhead and other expenses are far less than branded cycle manufactures, unscrupulous dealers managed to sell ordinary bicycle at Rs 2,200 to Rs 2,250 a unit on under-invoicing and which means they were pocketing a profit of around Rs 400 per unit,” he further said.
“Fly-by-night bicycle dealers through ‘under billing’ throughout the bicycle value chain with hand-in-glove with some scrap-based steel suppliers and some front-end dealers have been evading GST in the entire value chain on a recurring basis,” he further claimed adding that they had become a potential threat to the survival of the tax-compliant bicycle players. Besides causing a huge loss to the government exchequer, this unfair trade practice is also disrupting the structured manufacturing, fair competition, and ending-up with supplying sub-standard products to the end consumers, another Ludhiana-based bicycle maker rued.
Bicycle makers further pointed out that bicycle is one of the most vulnerable products for GST evasion on account of the fact that 80 percent of the 20 million-plus units sold annually are priced below Rs 5,000 with low-profit margins. They further expressed fear if this illegal trend was not checked timely, Ludhiana-based bicycle manufacturing hub would turn into a trading hub. Significantly, last month, the GST authorities in Ludhiana had even conducted raids at several dealers allegedly involved in tax evasion by indulging into under-billing of bicycles, they said. Ludhiana, a major industrial hub, caters to the country’s over 90 percent bicycle and bicycle parts demand.