Auto industry wants stable GST rate ride

The automotive industry has urged the Centre to ensure quick stabilisation in implementation of Goods & Services Tax (GST). Failing this, the industry would be at a disadvantage when it comes to reaping the benefits of the uniform tax reform, according to the association representing the industry.

In Budget 2018, indirect taxes are likely to find little mention as they now come under the purview of the GST Council. But hiccups in GST implementation would indirectly impact any benefits announced in the budget, industry officials said.

“Budget will only have [mention of] customs duty and direct taxes. So there are very [few] issues to be addressed,” said Sugato Sen, deputy director general, Society of Indian Automobile Manufacturers (SIAM).

“The Centre must ensure that the benefits of GST percolate down so that the industry can work on a long-term strategy,” Kumar Kandaswami, partner, Deloitte India said.

Quick changes to GST rates have irked the industry. “[This] will have an adverse effect.

“I hope to see some stabilisation in the existing tax regime,” said Ashutosh Dixit, director, sales, service and marketing, Škoda Auto India.

The issue of petroleum products is another the budget must address, the analyst said. “When crude prices were low, the government increased additional excise duty to mop up resources. Now that crude prices are going up, the government should roll back the excise duty. Otherwise, the auto industry will be impacted and so will other sectors,” Mr. Kandaswami said.

A Tata Motors spokesperson said that rationalisation of tax slabs and reduction of cess by the Government would be a key step.

“Specific focus on promotion of infrastructure will provide the much-needed impetus to the Commercial Vehicle segment.

For passenger vehicles, we look forward to two tax rates as opposed to the multiple rates levied currently,” he said.

‘Retain customs duty’

SIAM has asked the Finance Ministry to maintain the current rate of customs duty on Completely Built Units. “There should not be any reduction; not even for electric vehicles (EVs),” Mr. Sen said.

“The applied custom duty on commercial vehicles should be increased to 40%.

“Custom duty concession must be extended to some additional critical components of EVs,” he said. “We [seek a] definition for CKD / SKD units of electric vehicles. R&D benefit, which was [earlier] 200% was reduced to 150% in April 2017. It will come down to 100% from April 2020. We request that withdrawal of weighted deduction should be done after reduction in corporate tax rate to 25%.”

“The depreciation rate for cars, MUVs and two wheelers, other than those used in the business of hire, should be raised from 15% to 25% WDV [equal to useful life of 10 years] which is more realistic and is also in line with the Companies Act,” he said.

In case of direct taxes, the government should restore the tax benefit facility which was made available for R&D spend. “The auto industry needs R&D to survive and excel,” he added.

Roland Folger, MD and CEO, Mercedes-Benz, said the finance minister must provide relaxation in personal income tax as that would have tangible effects on revenues for the government.

“GST on goods attracting maximum (GST+ Cess) rates at 48% / 50% needs to be looked into for optimization.

Eric Vas, President Motorcycles, Bajaj Auto Ltd said, “I have no major expectation from the budget. But the government must ensure economic growth and then only things will be back on track. We should have 8% growth and the budget should aim at that. The government should ensure economic reforms.”

Agreeing with him Skoda Auto;s Mr Dixit said, “I expect the Government to continue its pro-growth measures in manufacturing and infrastructure segments; this is likely to benefit Automotive sector and one can expect a healthy growth of 6-8% in 2018.”

Any rationalisation in income tax slabs will be welcome; this will shore up disposable income which in turn will drive consumption across the economy. Lastly, the government should focus on continuing its effective execution of policies,” he added.

The EV segment has expectations too. “NITI Aayog has been spearheading a comprehensive policy [for] EVs,” Ravneet Singh Phokela, chief business officer, Ather Energy, an electric scooter manufacturer said. “While the policy is planned to be released later in the year, we anticipate the budget to reflect some of [those] the recommendations.”

“We expect these recommendations to encompass both, the demand as well as the OEM/Vendor side of the ecosystem,” he added.

Some companies which are into EVs asking not to be named said EVs should be exempted from 6% excise duty which is also levied on polluting SUVs, mid-sized vehicles and MPVs.

Basic excise duty is charged at 6% on assessable value and there is 2% E cess and 1% HE cess.

They have asked for lowering the interest rate for electric vehicle loan for buyers and reducing the prime lending rate for EV industry at easy interest rate for setting up factories, to enable mass manufacturing.

They have also asked for development of adequate charging infrastructure and subsidy of up to 25% of the cost of the charges.

“Allow at least 35% subsidy on replacement of lithium ion battery packs for EVs for incentivizing faster adoption and larger lifespan, especially for electric two wheelers. Allow minimum five-year extension of the FAME scheme of the Government of India for ensuring the stability and continuity in terms of policy support for the EV industry,” an EV industry official said on the condition of anonymity.

“We expect the new budget to help boost consumer sentiments and define a tax structure that will support the overall ecosystem. Rationalization of tax slabs and reduction of cess by the Government will be a key step in this direction. A well-defined budget with specific focus on promotion of infrastructure will provide the much-needed Impetus to the Commercial Vehicle segment. With reference to Passenger Vehicles, we look forward to the implementation of two tax rates as opposed to the multiple tax rates levied currently,” a Tata Motors spokesperson said.

“Sustainable mobility is the need of the hour. While there has been a considerable push towards electrification and alternate fuel technology, we look forward to policies to make this segment attractive and viable for the end user and help smooth implementation of electrification, furthering the Government’s vision of Smart Cities. We would expect to see a cohesive view emanating from the government on the regulatory roadmap with a full 5-10 year view that will help manufacturers prepare for this change in a planned manner,” the spokesperson added.


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