Top 10 expectations of Auto Inc from Union Budget 2020

There is a need to give strong stimulus through continued and aggressive demand creation policy interventions, export incentives policy, re-working on GST tax rates, cutting custom duties on certain parts and boost R&D through tax holidays for R&D investments. NEW DELHI: With falling GDP estimates and a slowing economy, the fiscal budget 2020 is strife with speculations and huge expectations from the Hon’ble Finance Minister for actions to boost the Indian economy.Auto one of the most organised sector is expecting corrective steps to boost demand and largely the union budget announcements will determine how it pans out in FY’2021. In the backdrop, the corporate sector is struggling on credit crunch and dwindling demand, and confidence has hit the lowest ebb. There is a need to give strong stimulus through continued and aggressive demand creation policy interventions, export incentives policy, re-working on GST tax rates, cutting custom duties on certain parts and boost R&D through tax holidays for R&D investments.Here is the wishlist of the auto sector: what are the basic expectations from Union Budget 2020 to be announced on February 1, 2020. Increased cost of BS-VI may affect demand, hence we have also requested the government to reduce GST rates for BSVI vehicles effective 1st April from 28 percent to 18 percent, said Rajan Wadhera, President, SIAM. 1. Reduction in Goods, Service Tax (GST) Rates: Topping the expectation list is the reduction in GST rates from 28% to 18% on vehicles. Auto Inc says owning a vehicle is no more luxury or sin, in fact, personal mobility is needed for every household. Moreover, reduction in the GST rate will boost the sentiment among vehicle buyers, also help to offset the extra cost burden on BS-VI vehicles. “Increased cost of BS-VI may affect demand, hence we have also requested the government to reduce GST rates for BSVI vehicles effective 1st April from 28% to 18%.”.Rajan Wadhera, President of the Society of Indian Automobile Manufacturers (SIAM).Apart from reducing the GST on vehicles, the auto inc is also requesting the government to reduce GST on auto parts from 28% to 18%. “To meet the Government of India’s Vision of a USD 5 trillion economy by 2025, of which the manufacturing industry would be USD 1 trillion, it is critical that steps be taken to get the automotive industry back on trac,” said Deepak Jain, Preseident ACMA. 2. Incentivising R&D Spend: To encourage domestic R&D and testing, it is important to provide exemption on import duty on auto component prototypes. Also retaining of a weighted tax deduction on R&D expenditure is critical. The 2016-17 Budget reduced weighted deduction benefit from 200 per cent to 150 per cent and has further restricted the deduction to 100 per cent from 1st April 2020. We are hopeful that the Government would consider our long-standing recommendation of 18 per cent GST on all auto components as also extend impetus to R&D and indigenous technology development.Deepak Jain, President, ACMA “To meet the Government of India’s Vision of a USD 5 trillion economy by 2025, of which the manufacturing industry would be USD 1 trillion, it is critical that steps be taken to get the automotive industry back on track. The automotive industry accounts for almost half of India’s manufacturing economy, while the component industry accounts for a quarter. We are hopeful that the Government would consider our long-standing recommendation of 18 per cent GST on all auto components as also extend impetus to R&D and indigenous technology development.” said Deepak Jain, President, ACMA. “The auto industry is willing to share its portion towards realizing such scrappage policy, which will eventually have a more sustainable impact on the environment,” said Naveen Soni, Senior Vice President, Sales & Services, Toyota Kirloskar Motor 3. Scrappage Policy: One of the key demands of auto inc is the implementation of scrappage policy as it will spur demand without putting any additional burden on the government exchequer. It will also help remove old vehicles which are causing major pollution problems. SIAM has urged the Finance Ministry to consider announcing an incentive-based scrappage policy. Naveen Soni, Senior Vice President, Sales & Services, Toyota Kirloskar Motor, “The auto industry is willing to share its portion towards realizing such scrappage policy, which will eventually have a more sustainable impact on the environment.”4. MSME Definition: Include Wholesale and Retail Trade and Repair of MotorVehicles and Motorcycles in the MSMED Act. The subsidies and incentives received under the MSME division will provide much-needed relief to automobile Dealerships which provide 25 lakh direct employment to people near their homes without displacing them. It will also help us with loans with lowered interest rates thus boasting the trade further. A new MSME definition will allow a larger number of companies to avail of government incentives. As per the proposed definition, MSMEs will be categorized on the basis of their annual turnover instead of investment in plant & machinery/equipment as under:* Microenterprise – Annual turnover that does not exceed Rs. 5 crore.* Small enterprise – Annual turnover more than Rs. 5 crore but does not exceed Rs 75 crore.* Medium enterprise – Annual turnover that is more than Rs. 75 crore but does not exceed Rs. 250 crore.

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