By Arsh Rampal
The automotive industry in India has expressed its concerns regarding the Goods & Services Tax (GST) which was rolled out in July last year. They have urged the Central Government to ensure that there is a stabilisation in its implementation in order to ensure that the industry can reap maximum benefits from the tax reform. The industry hopes that some steps are taken to meet their demands in the upcoming Union Budget.
What the industry demands
The first and foremost expectation that the automotive industry has is the stabilisation of the tax rates, as continuous fluctuations in tax rates are hampering business operations and profits. Currently, there are multiple rates levied on passenger vehicles and the industry wants the government to keep only two tax rates for passenger vehicles.
There are some other costs which are imposed on auto manufacturers which the industry hopes that the government will relax in order to boost business. Since the price of crude oil is going up, the industry expects the government to roll back the excise duty imposed on it.
It was also suggested that the customs duty concession should be extended to the critical components of Electric Vehicles (EV). The industry has demanded that the R&D benefit should not be decreased for the industry in order for it to flourish. The benefit provided to the automotive industry has been gradually decreasing.
Another suggestion made by the industry is that personal income tax should also be relaxed, as it will have a tangible effect on the revenue for the government. A decrease in income tax would lead to an increase in disposable income, thus allowing consumers to spend more, thereby generating more revenue for the government.
The EV segment also has some large expectations from the government. The NITI Aayog has been working on a comprehensive policy for EVs and focussing on EVs, specifically in the budget, will help India in the pursuance of its goal to promote e-vehicles.
Some companies in this sector have also said that EVs should be exempted from the six percent excise duty, along with the other taxes and cesses which are imposed on them. Measures to incentivise adoption such as increasing subsidy on batteries for EVs have also been suggested.
Why does it matter?
If these measures are implemented by the government at the behest of the Indian automotive industry, they will help in promoting growth in the sector and help generate more revenue for the government. There will be a more stable market with only two tax slabs and no fluctuating tax rates.
The automotive sector is expecting a growth of around six to eight percent if these measures are implemented. It will help in improving economic growth of the country and that will be done only when the budget incorporates economic reforms. Not only does the government need to focus on rolling out economic reforms, but it also needs to ensure their effective implementation.
The future outlook
The FAME India (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India) initiative is a policy introduced by the Indian government to incentivise the adoption of electric vehicles. The measures suggested by the EV industry, if implemented, would provide a huge boost to the FAME initiative.
There is an urgent need to switch to non-polluting vehicles in order to tackle the rising air pollution, which in turn is gradually destroying the atmosphere. The country needs to reduce its dependence on traditional fuels to power its vehicles.
It is extremely crucial that India focuses upon this sector not only for environmental reasons but also because it is expected to boom in the next five to ten years and will greatly help promote India’s growth in a clean and efficient manner.
However, how many of these suggestions will be incorporated into the budget by the Finance Ministry will only be known once the budget is presented.
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