Economy

Lower GST, incentive-based scrappage policy tops the auto sector’s wish list

Nandana James Mumbai | Updated on January 28, 2020 Published on January 28, 2020

Lower interest rate on bank loans for electric vehicles, hike depreciation rate for two-wheelers key to boost the industry

A reduction in the Goods and Services Tax (GST) rate to 18 per cent on vehicles, introduction of an incentive-based scrappage policy, and measures to boost consumer sentiments top the expectations of the automobile industry — which is grappling with one of the worst slowdowns in decades — from the upcoming Budget.

“At the Society of Indian Automobile Manufacturers (SIAM), we have urged the Finance Ministry to consider announcing an incentive-based scrappage policy and also Budget allocation for internal combustion engine (ICE) bus procurement by State transport undertakings. Increased cost of BS-6 (vehicles) may affect demand, hence, we have also requested the government to reduce GST rates for BS-6 vehicles effective April 1 from 28 to 18 per cent,” said Rajan Wadhera, President, SIAM, and President, Automotive Sector, Mahindra & Mahindra Ltd.

A permanent increase in the depreciation rate on passenger vehicles and two-wheelers to 25 per cent, abolishing the 5 per cent Customs duty on lithium ion battery cells, the withdrawal of the proposed hike in the vehicle registration fee, and the provision of income tax benefit on the interest of vehicle loan on the purchase of green vehicles (such as fuel cell, plug-in hybrid electric vehicles, CNG, LPG, ethanol, methanol) are some of the other pre-Budget recommendations put forward by the SIAM.

A company spokesperson from Maruti Suzuki, the country’s largest carmaker, said:

“We welcome any government steps that will help boost consumerism, revive consumer sentiments and assist in the overall growth of industry and economy.”

A dynamic Budget providing more disposable income in the hands of the consumers or any incentive to boost urban-rural demand will be very helpful, said Rajesh Goel, SVP and Director, Marketing and Sales, Honda Cars India.

“With regard to the auto sector specifically, financial outlay to support scrappage can help continuous demand generation for the auto industry and also address safety and emission issues from old vehicles,” said Goel.

Asked about his expectations from the Budget on the sidelines of an event, Mayank Pareek, President – Passenger Vehicles Business Unit (PVBU), Tata Motors, said: “Whatever is good for India is good — whatever will help India come back to a growth path will be good for us (automobile industry),” Stability of policies and a GST correction will also aid the industry, he added.

Meanwhile, Naveen Soni, Senior Vice-President, Sales & Service, Toyota Kirloskar Motor, said that the Budget may strike a balance between fiscal discipline and addressing the current economic slowdown.

“We would like the Budget to spur demand without putting any additional burden on the government exchequer; one way to achieve this is by realising the scrappage policy for which a draft has been shared by the government. The auto industry is willing to share its portion towards realising such scrappage policy, which will eventually have a more sustainable impact on the environment,” said Soni.

Another thrust area would be to extend the income tax benefits currently available to buyers of electric vehicles to other vehicles as well, said Soni. The depreciation benefit currently available to companies and professionals can be extended to personal customers too, he added.

As for the luxury car segment, Balbir Singh Dhillon, Head of Audi India, said that the company would urge the government or the GST Council to reduce GST and import duties, as well as rationalise the vehicle registration cost on luxury cars across the country. Easy lending by banks and NBFCs will help expand the market and boost the industry, added Dhillon.

While the government has placed a “definitive emphasis” on electric vehicles, setting up of a charging infrastructure is also important, said Dhillon.

Encouraging adoption of plug-in hybrid vehicles through lower GST, import duties and registration taxes will also encourage customers to take the first step towards PHEVs and eventually move towards electric mobility in India, he added.

Published on January 28, 2020
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