By Arsh Rampal
The Central Government is working on a new fool-proof and consumer-friendly policy for the automobile sector. The new policy is aimed at addressing issues raised by the industry, particularly tax issues. The draft of the new policy is likely to be released in the next two months.
Drafting a new Automobile policy, with changes in tax structures
The news of the drafting of a new policy was delivered by Anant Geete, Minister of Heavy Industries and Public Enterprises at the inauguration of the 14th Auto Expo. The minister stated that the inputs of stakeholders and industry bodies such as the Society of Indian Automobile Manufacturers (SIAM) and ACMA Automotive Component Manufacturers Association of India (ACMA) will be taken while drafting the new policy.
The industry had been demanding changes in the tax structure before the annual budget was delivered. The industry feels that the current policy will be a financial burden upon them. The policy will also tackle issues raised by the electric vehicles industry. The fate of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India (FAME India) policy and the adoption of BS-VI emission norms are likely to be discussed in the policy as well.
What are the tax problems in the automobile sector?
The automobile industry has said that the current tax regime under the Goods and Services Tax (GST) is not suitable for business. The industry has demanded a stabilisation of the tax rates in the country. There have been regular fluctuations under the GST in tax rates. The tax rates are not uniform as local taxes are levied at State level. There also exist several tax slabs in the automobile sector. The industry has demanded only two tax slabs for passenger vehicles. There is also a demand to reduce the tax on electric vehicles from 12% to 5%.
Pressing concerns expressed by the sector
Abhay Firodia, the President of SIAM has also raised issues regarding the shift to BS-VI emission norms. He has criticised the governments move to shift to BS-VI efficiency norms in the next four years. The move has been called premature, immature as it could significantly add to costs. There are currently no BS-VI engines in India and they need to be developed. This development needs to be done in a mature, patient, calculated and sober manner and not in a hurry. Countries are usually given ten years or more to move from one standard to another and a time period of four years is too less.
Other demands of the industry include extending custom duty concession to critical components of Electric Vehicles (EV). Exemption of six percent excise duty for EVs has also been suggested. The Research and Development benefit should also not be reduced for the industry which has been gradually decreasing. A suggestion to reduce personal income tax has also been given as it will boost revenue for the government.
Future outlook for Indian automobiles
The Governments new policy is aimed at boosting eco-friendly vehicles. The Minister acknowledged the hastiness of the move to move to BS-VI norms. The move, however, is to ensure that the country adopts more eco-friendly norms. The government thus is also aiming to extend the FAME initiative, the first phase of which is coming to an end in March.
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