The automobile industry contributes immensely to the economic growth of the country and expects support from the government for fostering the growth through fiscal measures from the upcoming Union Budget. While industry is always in favour of more streamlined taxes to augment overall capacity, it is important to ensure that key submissions are fulfilled on priority.
Last year’s Budget had proposed to reduce the weighted deduction on R&D expenses from 200% to 150%, with effect from April 1, 2017, to March 31, 2020. It is recommended that the weighted deduction of 200% continues till March 31, 2020. The auto industry would be moving from BS-IV emission norms to BS-VI by 2020, and this would require huge expenses in R&D. Hence, it becomes pivotal that the government extends the benefit. This will provide boost to innovation and manufacturing.
SIAM recommends that there should not be any cut-off (start) date for claiming/allowing the weighted deduction of R&D expenditure once the approval has been granted and cooperation agreement has been entered by the Department of Scientific and Industrial Research (DSIR).
This will ensure that the industry focuses more on R&D and maintains a futuristic outlook. It is also important from the point of view of making vehicles safer and more environment-friendly.
SIAM also requests some provisions in the Budget for implementation of a fleet modernisation scheme. While this will ensure development and production of safer vehicles in all categories, it will provide the right impetus for consumers to opt for improved, safer and better vehicles. Some rules and regulations are needed to give that required push which will create the necessary ecosystem to ensure that our fleet of vehicles matching the right standards.
SIAM also requests for correction of an anomaly that exists under the Central Excise Tariff Act, as per which tariff item 8702 (motor vehicles for transport of more than 10 people including the driver) attracts two rates of 12.5% and 27%. The rate of 12.5% is for all vehicles above 13 seats, while vehicles with 10-13 seats attract 27%. The 10-13 seater vehicles are essential for rural transport, because in the hinterland roads are narrow and bumpy and do not support transport using bigger vehicles. Hence, these vehicles should attract a maximum 12.5% excise duty.
The much-awaited GST Bill will soon be introduced, and it will streamline the current taxation system.
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In this direction, SIAM has already accepted the standard GST rate of 28% for two-wheelers, three-wheelers, commercial vehicles (bus and truck), small cars and utility vehicles, and suggested all other cars should attract a uniform cess of 8%, electric vehicles should attract a GST of 12% or lower, and all categories of hybrid vehicles should have about a 10% point rebate from the applicable GST rate.
The list of Acts to be repealed after the introduction of GST should include the relevant part of the Act that levies NCCD, R&D Cess on Import of Technology and Infra Cess. Also, the specific provision in Model GST Law should be made for used vehicle business, otherwise the organised pre-owned vehicle business will become unviable.
Auto industry is a driver of growth for the economy and we aim to fulfil all our responsibilities in the best possible manner. While GST will be a landmark development, we expect the Union Budget will consider the aspirations of the industry and reward them for good performance.
The author, Sugato Sen is deputy director general, Society of Indian Automobile Manufacturers (SIAM)