Union Budget 2019 — This Is What The Indian Automobile Industry Is Expecting

Union Budget 2019, a detailed report of the Indian government's financial activities and revenue sources, is currently being prepared by the Ministry of Finance. The interim Budget 2019 will be presented by the government on February 1, 2019; two months prior to the general elections.

ET Auto shares that at present, the market is seeing decent growth in commercial, three-wheeler and two-wheeler sectors, at 32, 25, 11 per cent; respectively.

Various players of the Indian automobile industry is busy making the shift from BS-IV to BS-VI emission norms which are effective from April 2020. This has its own challenges since the existing powertrain setup has to be modified across the entire line-up, without compromising too much on performance and fuel efficiency.

Leading automotive brands are often left burdened with new policies and norms to adhere to, everytime a new budget is presented.

Taking that into account, here are some recommendations made by the Society of Indian Automobile Manufacturers (SIAM) for the Union Finance Minister:

  • Rationalisation of GST; bringing a base rate of 18% for all vehicle types, plus GST cess only for luxury vehicles and 5 per cent GST for EVs.
  • Passenger vehicle and two-wheeler vehicles' CBU should maintain status quo.
  • Custom duty for commercial vehicles' CBU examples should be brought to 40 per cent from the current 25 per cent. This shouldn't apply for CKD/SKD products.
  • Custom duty for CKDs with engine/gearbox/powertrain pre-assembled, but not mounted on the chassis of commercial vehicles should be reduced from 25 per cent to 20. Every other CKDs should have duty reduced to 10 per cent as it was before.
  • During Budget 2018-19, the custom duty on CKD units and their components was increased by a considerable margin. This has to be brought back to its initial state.
  • Income tax rate for domestic companies should be 25 per cent as it was proposed in Finance Bill 2015. Tax rates have been cut down for companies with a turnover of up to Rs 250 crore. The cuts should apply to others as well since most companies under SIAM have more than Rs 250 crore as turnover
  • Notification for reduction of income tax rate for corporates without any linkage to turnover. 200% weighted deduction on R&D expenses should also be restored.
  • A one-time incentive for replacing vehicles registered before 2000, when the first emission norms were introduced. The incentives should apply as a rebate in GST.

Thoughts On Union Budget 2019's Impact On The Indian Automobile Industry

As mentioned before, major automotive brands are given a new set of financial and strategic challenges, every time a budget is prepared. We hope the government will consider most of the recommendations made by SIAM this time, if not all of them.

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Article Published On: Tuesday, January 22, 2019, 10:46 [IST]
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