Auto Sector Budget Preview

Reduction in Goods, Service Tax (GST) Rates: Topping the expectation list is the reduction in GST rates from 28% to 18% on vehicles. Apart from reducing the GST on vehicles, the auto inc is also requesting the government to reduce GST on auto parts from 28% to 18%.

Scrappage Policy: One of the key demands of auto inc is the implementation of scrappage policy as it will spur demand without putting any additional burden on the government exchequer. It will also help remove old vehicles which are causing major pollution problems. SIAM has urged the Finance Ministry to consider announcing an incentive-based scrappage policy.

Incentivising R&D Spend: To encourage domestic R&D and testing, it is important to provide exemption on import duty on auto component prototypes. Also retaining of a weighted tax deduction on R&D expenditure is critical.

MSME Definition: Include Wholesale and Retail Trade and Repair of Motor. Vehicles and Motorcycles in the MSMED Act. The subsidies and incentives received under the MSME division will provide much-needed relief to automobile Dealerships which provide 25 lakh direct employment to people near their homes without displacing them.

Reduce GST on EVs and custom duty on lithium-ion batteries: From the Electric Vehicles sector point of view, the previous budget announced was positive for the electric vehicle industry. Players in the electric vehicle space are expecting to see further reforms, incentives, and infrastructure that will drive EV consumption in India.

Technology Development & Acquisition Fund: To face headwinds of changing vehicle norms and to match international standards, a fund needs to be created for supporting R&D and indigenous technology development, especially in light of the technological disruptions in the automotive industry, is witnessing.

Reduction in GST Rates for Used Cars To 5%: The used car business occupies 1.4 times the size of the new car market, accounting for 5-5.5 million cars per annum with a turnover of over Rs. 1.75 Trillion. According to the Federation of Automobile Dealers Association (FADA), authorized dealers account for only 10-15% of this trade, which is also the organized sector thus paying taxes.

GST Refunds and Repayments process: Huge funds of the corporate sector are blocked in tax refunds such as GST refunds, or pre-GST CENVAT credit, or earlier sales tax regime.

Latin Manharlal Group