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Union Budget 2018: Not many advantages for Auto Industry

Union Budget 2018: Not many advantages for Auto Industry

Snapshot: Reduction in corporate tax to 25% for SMEs with turnover of up to Rs. 250 crore is yet another welcome step as over 80% of the companies engaged in the auto component manufacturing are SMEs.

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With the country eyeing the Union Budget 2018, Auto industry was waiting and hoping for a positive change in the current GST framework. Finance Minister Arun Jaitley has presented the Union Budget 2017-18 in the Lok Sabha.

Congratulating the Union Finance Minister, Arun Jaitley, President ACMA, Nirmal Minda, said, “The Budget unveiled by Hon’ble Finance Minister is indeed inclusive and pro-manufacturing. The component sector is delighted that the duty on select items such as engine & transmission parts, brakes and parts thereof, suspension and parts thereof, gear boxes and parts thereof, airbags etc. have been enhanced from 7.5/10% to 15%. These items account for more than 50% of USD 43.5 billion domestic component industry’s turnover and over 30% of its USD 11 billion exports. The industry is extremely competitive in these areas and this measure will not only encourage investments but also encourage technology development in these areas.”

Further, reduction in corporate tax to 25% for SMEs with turnover of up to Rs. 250 crore is yet another welcome step as over 80% of the companies engaged in the auto component manufacturing are SMEs. This measure, as also enhanced budgetary allocation of Rs 3,794 crore for credit support, capital and interest subsidy will have a benign impact on the smaller enterprises. That apart, simplification of procedure for credit availability through online-system for SMEs is a very welcome step.

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Commenting on the Union Budget, Mr Sohinder Gill, Director- Corporate Affairs, Society of Manufacturers of Electric Vehicles, said, “As the EV Policy is not a part of the budget, we were not expecting any major announcement related to electric vehicles in today’s budget. However, we are happy to note that there are general announcements made today, which will support the cause. For example air pollution, higher excise duty for indigenization, increase in agriculture infrastructure spends as well as other announcements alike, which will directly and indirectly support the automobiles, especially two wheelers, hence giving a further boost to EVs. We all know that the new EV policy is in the advance phase of formulation and it will be a separate policy which will come after a few months. It is expected that the policy will be stable in the long term, which will shape up the future of the electric vehicles. The only thing we were expecting from the budget was rationalization of GST rate i.e. currently 12% for EVs and 28% for EV batteries. Also, we had requested that GST should be made at least either 0 or 5% for initial years. But we didn’t find any mention of the same. Perhaps it will be covered in the policy, later. Overall we are happy with the outcome of the budget.”

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Luxury car manufacturers were expecting the current GST rates come down. Currently, the GST tax rates for sedans stand at 48 percent and for SUVs in the premium segment at 50 percent, which are high. The companies urged the government to reduce these taxes to reasonable levels, include left out taxes such as road tax etc. within the GST regime and also ensure stabilization for longer term policies and tax regimes.

However, there was no proposition made by the government and moreover, there was no mention of EVs or the infrastructure development for EVs, where The Society of Manufacturers of Electric Vehicles (SMEV) had urged a cut of 5 per cent of the GST rate on all electric vehicles and electric vehicle subsystems. Further, Finance Minister, Arun Jaitley added, "There is substantial potential for domestic value addition in certain sectors, like food processing, electronics, auto components, footwear and furniture. To further incentivise the domestic value addition and Make in India in some such sectors, I propose to increase customs duty on certain items."

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