With less than 10 days to go for Union Budget 2017, automobile industry, which has been encountering challenges following Prime Minister Narendra Modi’s demonetisation, dearly needs certain measures from the Modi government which could promote sales to get it back on track, according to Ravi Shingari, Partner, KPMG in India. “Series of events happened prior to the Budget, especially demonetisation, have impacted the auto sector in a negative way. Sales figures have dropped by almost 18 per cent in December. The biggest ask from the auto industry will be certain measures from the government which could promote sales to get them back on track,” Shingari said in an exclusive chat to FE Online. Apart from this, he also pitched for the simplification of indirect tax structure for automobiles which he felt will be a major boost to the industry.
Banking big on the implementation of Goods and Services Tax (GST), Shingari said combination of changes through GST will help auto industry grow further. “Hopefully GST will take care of complicated multiple tax structure that are there for auto industry as well as auto-components industry. GST will provide that seamless credit and simplification of multiple tax rates into into singular one,” he told FE online.
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Regarding the scrappage policy in India, he said a ‘strong implementation process’ is the need of the hour to curb the pollution which is primarily caused by old vehicles. Along with strict measures, he proposed incentives or compensatory mechanism to get the job done.
Terming green vehicle as an ‘important aspect’, Shingari said if this aspect is considered seriously, it could serve multiple purposes. He said that big ask from the industry would be to make components that are imported duty free to promote green vehicle manufacturing in the country. This way, it can help ‘Make in India’ programme.
Indian automotive industry is one of the key drivers of economic growth—it accounts for 7.1% of national GDP. Strong backward-forward linkage and allowance of 100% FDI has attracted investment worth billions of dollars in the last few years. The Indian auto sector is ranked sixth-largest in the world, and is growing. Make-in-India, Automotive Mission Plan, and Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME) have been the key pillars of growth.
With the goods and services tax (GST) round the corner, the auto industry is not likely expecting too many changes in the current tax structure. However, the wish list includes, reduction in the number of excise duty rates, withdrawal of National Calamity Contingent Duty (NCCD), decrease in import duty for environment-friendly vehicles, incentives for replacing old cars, Multiple cesses to be removed.