The Federation of Automobile Dealers Associations (FADA) has announced its expectations from the upcoming union budget hoping for a revival of the auto industry. FADA President, Vinkesh Gulati hopes that the 2021 Union Budget includes measures to revive the Indian economy from the downturn which resulted from the pandemic. Additionally, FADA hopes that it also boosts consumption-led demand.
Gulati states “The Indian automobile industry is a barometer of the Indian economy and its revival will, in turn, pull up the economy. The auto retail industry is one of the key pillars of India’s growth trajectory, contributing ~4.5 million jobs. We look forward to a demand-led growth-oriented budget.”
Additionally, the federation also highlighted some recommendations which it believes will help revive the economy and the auto sector in particular.
FADA believes that the budget should have provisions to introduce benefits of claiming depreciation on vehicles for Individuals paying Income Tax and extend depreciation period for corporates. The union body believes that the increase in depreciation rate for all types of vehicles which was valid till March 2020, should be extended to 2021 as well to further fuel demand.
In addition, a reduction in corporate tax for proprietary and partnership firms should be included in the 2021 Union budget is recommended by FADA. As most traders in the auto dealership community are in this category, the reduced corporate tax to 25% for private limited companies would help the auto industry.
Along with the reduction in corporate tax, FADA hopes that auto dealers are exempted from the annual TCS of .1% as well. The auto dealer union body feels that it is a huge financial burden on the auto retail industry. FADA claims that it will affect demand since vehicle acquisition cost will go up and hence auto dealers should be kept out.
Finally, FADA continues to advocate the requirement of the vehicle scrapple policy which has been in the works for some time. It recommends the government to design a robust Inspection & Certification (I & C) policy or End of Life Vehicles (ELV) policy for vehicles in the country.
The overall expectations from the federation are for an incentive-based policy rather than strict mandates. FADA believes that it is more feasible to encourage people with incentives, rather than to force them to replace their old vehicles with new ones.
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