As Financial Year 2020-21 is nearing its end, India’s finance ministry is all set to announce the Union Budget for FY2023. Finance Minister, Nirmala Sitharaman will be announcing the budget to the parliament on February 1, 2022, and like all other industries, the auto sector is also eagerly waiting to see what is in store for them. From production linked incentives for EVs to implementation of FAME II and state EV policies to the introduction of vehicle scrappage policy, we saw several major developments in 2021. However, the industry feels that there is a need for some major reforms to help bring the auto sector as well as the economy back on a growth path. These include amendment of PLI scheme, more incentives on EVs, export concessions and more,
The Federation of Automobile Dealers Association (FADA), the apex body of Indian auto retailers, bifurcated its recommendation into two aspects – Demand Revival Appeal and Dealer Issues. FADA has requested the reintroduction of the Depreciation Scheme, thus increasing the depreciation rate for all types of vehicles, which could help revive growth. FADA has also requested the ministry to regulate and reduce GST rates on Two Wheelers to 18 per cent from the current 28 per cent GST + 2 per cent cess bracket. FADA says the current rates are ok for luxury/sin products but do not hold good for the two-Wheeler category.
With regards to the used vehicle industry, it has requested a uniform GST rate of 5 per cent on the margin for all used vehicles, from the current 12 per cent GST on vehicles under 4-metre, and 18 per cent for vehicles above 4-metre. FADA says it will help the industry to shift from unorganised segment to organised segment, helping in putting a brake on tax leakages. The government has reduced corporate tax to 25 per cent for private limited companies with turnover of up to ₹ 400 crores. FADA says, “The same benefit should also be extended to all LLP, Proprietary and Partnership firms as most traders within the auto dealership community fall in this category. This will help boost morale and sentiment of the traders.”
On the other hand, the Society Of Manufacturers Of Electric Vehicles (SMEV) said, “The central government has announced several supportive measures to promote E-mobility in the country. The industry has seen accelerated growth in the last few years. However, a lot needs to be done to make the country’s automobiles fully electric.” The apex body of EV makers said that the government could look at putting EVs in the priority lending sector to make EVs more affordable and include ‘Clean Air Campaign’ in Swatch Bharat, to raise massive awareness about electric mobility and influence customer attitudes. It also expects special allocations in the budget for R&D in battery manufacturing, and skill development along with export concessions for Made-in-India EVs.
With respect to the government’s PLI Scheme for Automobile and Auto Component, SMEV expects to see amendments in the scheme that will allow small and medium-sized EV players to participate, which is currently not possible owing to their size, turnover, and backgrounds. A level playing field will encourage more start-ups to use this opportunity, and thus expand the EV ecosystem in India. “A small budget could be allocated for a green point card for all EV owners, like the types of the mileage card of airline companies, which can be used at various establishments and occasions to access fast track services or acquire points for the rewards,” SMEV added.
Toyota Kirloskar Motor has similar expectations from the Union Budget. The company spokesperson said, “We believe that through its focus on Production Linked Incentive Scheme (PLI) for several key identified sectors, the Govt has sought to transform India’s economy by attracting huge investments in advance and future technologies, and for areas where India currently highly imports dependent. This initiative promises not only to make us self-reliant but also globally competitive. As the huge Govt allocation will be spread over the next five years, these schemes will give the desired boost without the sudden immediate burden on the exchequer. Moreover, as PLIs also focus on providing impetus to a greener future, these will further help to achieve Government’s objectives of rapid carbon reduction.”
On the other hand, sharing his expectations from the budget, Martin Schwenk, Managing Director & CEO, Mercedes-Benz India said, “The Union Budget should aim at long-term holistic growth for the auto industry prioritizing job creation, infrastructure development, the introduction of latest technologies and increased de-carbonization efforts. With stable policies and a clear roadmap for the sector, accelerated growth can be achieved transitioning the industry swiftly into the emerging e-mobility era, putting Indian auto industry on the global map. A relook into the existing taxation structure with a clear focus on the direct tax changes to boost consumption, export promotion, direct job creation and promotion of digitisation is highly desired.”
At the same time, Satyakam Arya, MD & CEO, Daimler India Commercial Vehicles said, “This year, the aspiration is to see a strategy that can give a renewed thrust and a much-needed impetus to the manufacturing sector to help continue the spirited performance, some sections of the industry have shown in 2021. PLI and RODTEP are great steps in the right direction and the aim going forward should be to simplify the schemes and focus on the benefits spreading across the industry, in addition to the bigger players. High fuel prices are affecting livelihood, there is a substantial rise in commodity prices and the general cost of living has risen noticeably. This needs a strategic solution rather than a tactical one.”
Uday Narang, Chairman and Founder, Omega Seiki Mobility said, “As a part of India’s growing EV industry, we hope that the Union Budget includes lowering of GST rates on raw materials, especially for the EV players. Support for R&D and indigenous technology development while lowering of GST on auto components should be on the top of FM’s agenda list.”
EV charging infrastructure provider, Magenta’s MD & CEO, Maxson Lewis said, “The fundamental key expectation that we have from Budget 2022 is that charging infrastructure in the country should be enabled at a faster rate. We hope the FAME scheme will increasingly encompass EV charging infrastructure a lot more than what we see in the preceding years. In terms of EV charging, we expect that the Budget will address the critical issue of addressing the electrification of EV charging via Open Access, as well as the associated taxation and wheeling costs.”
Multi-branded pre-owned premium car seller Luxury Ride’s MD and Co-Founder, Sumit Garg, said, “I am hoping that the forthcoming Union Budget 2022 continues to promote the digitization of automobile sector laws, which will lead to increased vehicle sales, and also promote the faster transfer of ownership. Paving the way forward, I am hoping that our government will support cheaper taxes by giving some relaxation on the GST rate on used cars.”
So, the expectations are quite high, and most of them hold strong merits. However, what all of these will be addressed in the upcoming budget is yet to be seen. So, keep watching these for all updates from the Union Budget 2022 announcment.