Budget 2019

New taxes will dampen spirit: SIAM

Our Bureau Pune | Updated on January 20, 2018 Published on February 29, 2016

However, amendment to Motor Vehicles Act to open up the road transport sector is a welcome one

Society of Indian Autombile Manufacturers (SIAM) called the budget a mixed bag for the Indian automobile industry.

Vinod Dasari, President, Society of Indian Autombile Manufacturers (SIAM) says that the Union Budget aims to boost the rural economy and the biggest positive in the announcements made by Arun Jaitley, is the impetus given to the rural, agricultural and infrastructure segment. We believe that this will help boost the consumer sentiments of rural India, which had been subdued for more than a year and an uplifted consumer sentiment will give a much needed boost to the automobile industry.

The amendment to be made in Motor Vehicles Act to open up the road transport sector in the passenger segment is a welcome move. However, introduction of Service Tax on passenger transport will have a dampening effect.

The industry is happy to note that a grant of 200 crore have been made to the FAME scheme and NATRiP. Moreover, the validity period of exemption granted to specified goods for the use in the manufacture of electrically operated vehicles and hybrid vehicles is being extended without time limit. This will help improve the consumer sentiment around these vehicles and promote faster adoption.

SIAM welcomes clarification regarding mode of payment of NCCD from cenvat for past period. This is something that SIAM had been suggesting for quite some time. Basic custom duty on raw material used for manufacture of catalytic converters has been reduced from 7.5 per cent to 5 per cent. However, the basic customs duty on import of aluminium & aluminium products and zinc alloys has been increased which will impact the industry. The weighted tax deduction on R&D expense has been reduced from 200 per cent to 150 per cent from April 01, 2017 and it will further be reduced to 100 per cent from April 01, 2020. This will go against indigenous R&D in India. Moreover, reduction in tax benefit has been announced without any announcement about corresponding reduction in corporate tax rate.

SIAM was also expecting an announcement on fleet modernisation, however, no such announcement has been made, which is disappointing.

An additional 1 per cent tax to be collected at source on purchase of cars exceeding value of Rs 10 lakh will be a deterrent. Infrastructure cess of 1% on small petrol, LPG, CNG cars, 2.5% on small diesel cars of less than 1500 cc and 4% on other higher engine capacity vehicles and SUVs would be levied with immediate effect. We believe this would result in the rise of prices across categories of passenger vehicles and would hurt the industry. With the Government’s focus being rationalization and simplification of taxes, introduction of new taxes on vehicles will only dampen the spirit of the Auto sector.

Taxing luxury cars will deter growth: Roland Folger, Managing Director & CEO, Mercedes-Benz India

“Development of the agrarian sector emerged as the key priority in this year’s budget, which is positive for the Indian economy. The budget portrays a steady fiscal picture with considerable spending on infrastructure and rural development, which is laudable.

However, taxing the luxury cars will be deterrent for the growth of the industry. We expected some reforms in the duty structure, which could have infused growth in the sector and would have provided additional employment. The rationalization of the duty structure would have also created a level playing field for all brands.

Overall, we applaud the infrastructural spending and the focus on building more roads and highways, which will have a long-term positive effect on the auto industry. But in the short to mid-term, we missed an opportunity to drive growth in the sector, which could have further benefitted the long-term prospects of the auto industry.”

Published on February 29, 2016
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