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Great expectations in store for the auto industry from this Budget

Great expectations in store for the auto industry from this Budget

Snapshot: With the Union Budget round the corner, the auto industry can expect some excellent benefits to come its way. Here are the top 10 Budget expectations.

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  • The Budget can provide the lifeline to the auto industry with some significant announcements
  • The auto industry could do with a drastic cut in the GST and other taxes
  • R&D can get a fantastic boost in this budget

The Budget always brings with it high expectations for the industry. It is no different this time, as the auto industry is recovering from a significant slump. The auto industry has high expectations from the Budget. Here are some of them.

1.Reduce custom duties on Li-ion batteries and GST on EVs

The electric vehicle revolution has well and indeed come to India. The movement can only go forward with almost all the major auto manufacturers introducing electric cars and two-wheelers. A reduction in the GST and concession in custom duties on Li-ion batteries would be the ideal gift to spur this revolution forward.

2.Used cards should become cheaper with a reduction in the GST
The used car market is a thriving one, as it occupies almost 1.4 times the new car market. However, the organised sector comprises only about 10% to 15% of the overall trade. Under such a scenario, there will not be any ITC claim because there is no payment of tax under forwarding charge or under RCM. Therefore, there can be a spurt in the value of the car. Dealers would welcome a uniform GST rate of 5% on the margin amount. It will benefit everyone.
 
3.A new MSME definition is on the cards
There is a tremendous clamour for including wholesale and retail trade as well as repairs of vehicles under the MSMED Act. Doing so will provide great relief to dealerships. Apart from being able to procure loans at low rates, this move can generate up to 25 lakh direct employment opportunities. The proposed MSME definition considers the annual turnover instead of the original investment in plant and machinery.
  • Microenterprise – annual turnover up to Rs 5 crores
  • Small enterprise – Annual turnover more than Rs 5 crores and up to Rs 75 crores
  • Medium enterprise – Annual turnover exceeding Rs 75 crores and up to Rs 250 crores
4.Incentivise the spending on Research and Development
The vibrant auto industry is the key to India achieving its target of becoming a USD 5 trillion economy by 2025. To enable the auto industry to continue contributing to the GDP, there is a need for research and development. There is a high demand from the auto industry to incentivise spending on R&D. It could encourage more investments towards R&D, thereby helping the government to realise its vision.
 
5.Reduction in GST from 28% to 18%
Today, a vehicle is more of a necessity rather than a luxury. A high GST of 28% proves a deterrent to the growth of the auto industry. There is a long-standing demand for a reduction in the GST rates. Compliance with BS6 norms can also push the prices further upwards. A reduction in the GST will not only make it affordable but also attractive to the new buyers, as well. The demand from the auto industry is a reduction in the GST rate from 28% to 18%.
 
6.Implementation of the Scrappage Policy
Old vehicles are the primary cause of environmental pollution. Hence, scrapping of old cars is the need of the hour. An incentive-based scrappage policy will encourage the phasing out of old vehicles faster. SIAM has already put forth its demand for announcing an incentive-based scrappage policy. It will not only spur the demand but also not put any further burden on the Government exchequer. Finally, one cannot discount its positive effect on the environment.
 
7.Need for a Technology Development & Acquisition Fund
In this age of technology, new vehicles should match up to international standards. Hence, it calls for a tremendous spurt in R&D. Vehicle norms are also undergoing a change with the shift towards BS6 emission standards from April. The Passenger Safety norms are also around the corner. Therefore, there is an immediate need for the setting up of a Technology Development & Acquisition Fund. One can foresee a significant announcement in this regard from the Finance Ministry in the Budget.
 
8.Overhauling of the GST refunds and repayment process
The one-nation-one-tax regime is a positive one but it does have its share of problems, as well. One of the significant concerns is the claiming of GST refunds and repayments, especially in the case of the pre-GST CENVAT credit regime. The concerted demand is for the quickening of the refund process so that the stuck-up funds get released sooner than usual.
 
9.Budgetary allocation for ICE Bus procurement
Electric buses will soon be the order of the day in almost all cities in the future. The Government has also incentivised the purchase of electric buses under FAME II. However, there is a significant issue when it comes to providing charging facilities. There is a need for an enhanced budgetary allocation for ICE bus procurement by the State Transport undertakings. It could prove to be a great move, as it can reduce the pollution levels considerably.
 
10.The proprietary and partnership firms too deserve a reduction in corporate tax
The Government had announced a windfall reduction in corporate tax for small Pvt Limited companies with annual turnover up to Rs 250 crores. The market demand is that a similar discount is offered to proprietary and partnership concerns, as well. It will help to boost the morale of traders. It can also encourage these concerns to employ more people, thereby resolving the unemployment issue to a great extent.
 
These are some of the demands of the auto industry. One expects the Finance Ministry to include these points when she announces the Budget for the financial year 2020-21.

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