The Hindu Business Line : Auto industry seeks tax holiday, export sops

MR NANDAN M. NILEKANI, CEO & Managing Director, Infosys, flanked by Mr Venu Srinivasan (right), Chairman & Managing Director, TVS Motor Company, and Mr Alyque Padamsee, CEO, AP Advertising Pvt Ltd, at the SIAM AGM in the Capital on Thursday. -- Kamal Narang

New Delhi , Sept. 7

The Indian automotive industry has sought tax holidays for investments exceeding Rs 500 crore in line with the ones enjoyed by large infrastructure projects, even as the Government said it would revamp some of the existing export promotion schemes.

"In order to spur further growth, the industry has requested that the automotive industry may be brought under the purview of the existing incentive structure, which exist for other sectors of the economy," the industry said in the Draft Automotive Mission Plan (AMP) 2006-16 released by Society of Indian Automobile Manufacturers (SIAM) here.

Other incentives sought by the industry include tax deductions of 100 per cent of export profits, single-stage clearances for FDI proposals in automotive sector, deduction of 30 per cent of net income for 10 years for new industrial undertakings. The industry has also asked for concession on import duty on machinery for setting up of new plant or capacity expansion and deduction of 50 per cent on foreign exchange earnings of automotive companies.

Call for reforms

On the exports front, the industry has asked for reforms at an accelerated pace by bringing in full country-wide VAT and at the same time withdrawing all other Central and State taxes levies on manufacturing. The industry has also called for maintaining a three-tier tariff structure for raw materials, intermediate products and finished products and implementation of a comprehensive GST and reduction of tariffs on raw materials before further reduction in automotive tariffs.

The Government, in turn, has said it would consider revamping of export promotion schemes including DEPB, EOU and EPCG schemes. Currently, the EPCG scheme permits imports of capital goods at reduced Customs Duty of 5 per cent against export obligation. "With the gradual reduction of MFN rates of duty to a peak of 12.5 per cent, the duty exemption of 10 per cent points under export obligation lose attractiveness. This issue will be addressed," the Government said. It further said the proposal to extend product and market focus schemes to the automobile sector would be considered.

In order to facilitate expansion of the domestic market, the Government has said it would consider rationalisation and simplification of taxation and documentation for interstate and intercity movement of vehicles and goods. "An attempt would be made to encourage the introduction of GST at the earliest," it said in the AMP.

Additional workforce

The automotive industry is expected to require an additional 25 million workforce by 2016 in both manufacturing and downstream and upstream activities. On this, the industry has suggested that initiatives for human resource development would be needed. "Existing labour laws need to be rationalised and adequate infrastructure is required to ensure availability of trained manpower," the industry said. Implementing AMP 2006-16 would need an incremental investment of $ 35-40 billion over the next 10 years. "It is anticipated that the bulk of the investment will come from expansion of capacities by existing manufacturers operating in India and remaining from global multinational corporation seeking to make India their manufacturing base... Competition for attracting investments in India would come from countries such as China and Thailand," the AMP said.

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