Budget 2017-18: Automakers hope for sops to revive demand

Steps to revive consumer demand following demonetisation, an extension of incentives for hybrid and electric cars, and timely implementation of GST are on the auto industry’s wish-list for Union Budget 2017-18.

“In the short term, the economy has been shaken and this Budget will have to put it back on growth track. We are also expecting an extension of incentives and infrastructure development support for electric vehicles from the upcoming Budget,” said Pravin Shah, president and chief executive (automotive), M&M Ltd. He added, “Further, the political support which was so critical for GST has suddenly seemed to have waned in the aftermath of the demonetisation drive. Even in its present less-than-ideal form, GST is a big game changer and the government must bring it back on top priority.”

Passenger vehicles will attract highest 28 percent tax under GST, while luxury vehicles will draw some additional tax.

“We expect the government to take some steps to really spur vehicle demand. This could be related to taxation to customers or excise duty for the industry. Right now, we need to charge up the consumer sentiment, and if that comes through, the automotive industry will realise its full potential,” Anurag Mehrotra, executive director of Marketing, Sales and Service at Ford told Autocar India.

Automobile industry body Society of Indian Automobile Manufacturers (SIAM) has recommended a 12 percent tax rate for electric vehicles and a 10 percent rebate for hybrid vehicles from the applicable GST rate. SIAM also suggested a rollback of the R&D cess on import of technology and the infrastructure cess levied in the previous Budget. It also appealed to the government to have a provision for used vehicle business in GST law, otherwise which organised pre-owned vehicle business will become unviable.

Sudhir Rao, Chairman and MD, Skoda told Autocar India, “Budget is likely to be neutral to keep things going until the GST is implemented. I don’t expect any major policy announcements from the Union Budget at this stage. I think a whole lot of stuff will be rolled out when the GST is implemented.”

SIAM further urged the government to continue the current tax sops on R&D expenditure in an effort to boost manufacturing. “Last year, the Finance Minister proposed to reduce the weighted deduction from 200 percent to 150 percent with effect from April 1, 2017, to March 31, 2020. It is recommended that the weighted deduction of 200 percent should continue till March 31, 2020.  This will provide an immense boost to innovation and the manufacturing sector of the country, mainly the automobile sector,” said Vishnu Mathur, director general, SIAM.

Carmakers also called for the implementation of a vehicle modernisation scheme under which owners scrapping their old vehicles get monetary incentives to buy a new one.

“One of the focal decisions for the automotive sector from this Budget is on GST roll-out and how different vehicle categories will be taxed. Another area which deserves attention is the vehicle scrappage policy or the proposed 'Voluntary Vehicle Fleet Modernisation Plan' which will keep older cars off the roads. This will benefit the environment, reduce fuel consumption and propel further demand for greener and efficient vehicles,” said Sumit Sawhney, country CEO and MD, Renault India.