Budget 2019: Reduction in goods and services tax top priority for automakers; here's why

While Budget 2019 is a week away, the automobile sector has held its hopes high on Bharatiya Janata Party's last budget before General Elections 2019.

Reduction in Corporate Tax irrespective of turnover also remains one of the key demands. (Image: PTI)

Budget 2019: While Budget 2019 is a week away, the automobile sector has held its hopes high on Bharatiya Janata Party's last budget before General Elections 2019. The Indian Automobile industry is the fourth largest in the world. In the past year, the Automobile sector has, on one hand reported growth ranging from 25% to 32% for three-wheelers and commercial vehicles; whereas, on the other hand, the sales of two-wheelers have reported growth at 11% while the progress for passenger vehicles raked abysmally low at 5% in the first half of 2018. The overall performance of the automobile sector in India largely depends on two-wheelers and passenger vehicles that contribute 81% and 13% of the total production value respectively. The ever-rising and fluctuating fuel prices, higher rates of insurance premiums and GST have been cited the top reasons for the diminishing sales of passenger vehicles. GST rationalization in Budget 2019 is on the priority list of the automakers. The industry body was expecting a reduction of Goods and Services Tax in the GST Council’s last meeting, however, there was nothing much to rave about on the Auto front. It has been a long pending demand from the FinMin to reduce GST on all vehicles including SUVs and bring it to flat 18%, apart from GST cess to be levied only on luxury vehicles. The stakeholders and CEOs of passenger vehicles have also shown grave concern on the centre’s think tank – NITI Aayog’s recommendation to levy Green Cess on cars to support manufacturing and sales of Electronic Vehicles in the country. Reduction in Corporate Tax irrespective of turnover also remains one of the key demands by the auto-industry, apart from restoring 200% Income-tax rate for Corporates on R&D expenditure. The automobile sector has also demanded the government in the past year to restore custom duty on CKDs and components which was hiked during Budget 2018. Bring petroleum under GST can also prove to give impetus to the slouching sales in the automobile sector. The automobile industry hopes that Finance Ministry should announce a One-Time Incentive in the form of GST rebate, lower interest rate on car loan, no road tax, etc to lay pre-2000 vehicles off-road. Lastly, the EMV automakers expect the government to extend FAME i.e. Faster Adoption and Manufacturing of Hybrid and Electric scheme by minimum 10 years for a smooth transition for the industry as well as for the consumer; besides keeping GST at flat 5% for all Electric Vehicles. The Finance Minister must address these concerns of the Automobile sector in his Budget 2019 speech and chalk out policies that can boost sales while keeping fiscal prudence intact.