Union Budget 2021: Auto industry seeks GST reduction, incentives on EVs and more

Carmakers, motorcycle manufacturers as well as start-ups that have EVs in their portfolio have sent in their demands from the Union Budget 2021 and here's what they have to say.

By:January 30, 2021 4:58 PM
Legacy and new-age businesses alike such as Hero Electric, Ather Energy, Ampere, Okinawa, and several others are also establishing similar units pan IndiaImage used for representation.

With the new Union Budget 2021 a couple of days away, the auto industry has been in a state of anticipation. The previous budget sessions didn’t have much for the industry as such and the hopes are definitely at an all-time high after the corona pandemic that swept the world. Carmakers, motorcycle manufacturers as well as start-ups that have EVs in their portfolio have sent in their demands from the Union Budget 2021. Here is what they have to say.

Lamborghini India

“The super luxury segment in India is niche and does not represent the true potential of the market. In the last decade the segment has seen many ups and downs and has struggled to cross 300 mark in annual sales. India is home to the 4th largets population of millionaires in the Asia-Pacific region and 4th largest population of Billionaires in the world but India contributes to less than 1 percent to the global luxury trade. For our country to revive back from the economic repercussions of COVID-19, government stimulus packages need to push consumer spending across segments. High taxation and frequent changes in rates have had a considerable impact on the super luxury segment in India. With 110% import duties, 28% GST and 22% additional cess makes India among the highest tax countries in the world and we expect the government to review the 22% cess on luxury cars in the upcoming budget to push the demand and drive the growth to its potential in the segment.” says Sharad Agarwal, head, Lamborghini India.

Minda Group

“2021 will be the year of recovery for the entire economy globally and in India. I believe the Indian automobile industry will play a prominent role in the revival of the Indian economy. Industry-focused plans, policies and support by the government will energize the industry and sustain the momentum. The upcoming 2021-22 Union Budget should focus on strengthening the manufacturing sector, in keeping with the government’s visionary Make-in-India and Atmanirbhar Bharat initiatives. The government has already taken some positive measures in this direction with the introduction of Production-Linked Incentive (PLI) scheme, but there is a need for more clarity.

The automobile sector has experienced a rough phase for over two years now. The industry witnessed some of the major technology upgrades in terms of emissions and safety standards, besides going through the worst slowdown cycle, which was exacerbated by the Covid-19 pandemic. Being optimistic, we believe that the worse is behind us and a united effort all of us in the automobile ecosystem will help recovery.

The government can play a critical role in reviving the industry confidence. It should reduce the GST rate to 18% from 28%, introduce a scrappage policy, along with an incentive or tax rebate. We would also welcome a special allowance or rebate on R&D on green vehicles such as EV, hybrid and other alternate fuel vehicles.” says Suni Bohra, group CFO, Uno Minda group.

Hi-Tech Robotics Systemz Ltd

“After a roller-coaster 2020, we expect 2021 to be the year of economic recovery, upbeat sentiments and demand revival, riding on newer technology and innovations. Going forward, industry across sectors need to be more self-reliant, efficient and attuned to technology to survive future adversities. Newer technologies like robotic and automation will be critical in driving the economy to pre-Covid levels and beyond. Budget 2021 should focus on enhancing productivity by incentivizing the use of technology to make India self-reliant and future-ready.

India has, so far, seen very low robot adoption compared to its regional and global peers. Timely policy interventions can accelerate robotic adoption in manufacturing and warehousing. Special focus should be on warehouse automation where we have seen an increase in customer traction.

Interventions are required on multiple fronts – boosting demand, accelerating technology development and building a conducive ecosystem. Reduction of customs duty/IGST and providing tax breaks/incentives to robotics adopters can boost demand. For accelerating technology and R&D, setting up of robotics centres of excellence/incubation centres, continued research grants for robotics R&D and continuation of income tax deduction will be the key drivers. This will boost the confidence of technology-driven industry players and strengthen the government’s Make in India for Global & Atmanirbhar Bharat vision, besides making a remarkable contribution to employment generation and will make Indian industry more efficient and surpass the global standard.” Anuj Kapuria, founder & CEO, Hi-Tech Robotics Systemz Ltd.

Okinawa Autotech

“2021 can prove to be a revolutionary year for the electric vehicle (EV) industry. We have high hopes from the union budget this year and are optimistic that the government will continue to take the right steps to place India on the global EV map. With that said, we urge the finance minister to reconsider the current taxation framework applicable on raw material and the final product in case of EVs. While the GST input on raw material is 18%, the tax on outward supplies currently stands at 5%, leading to an implicit inverted duty structure for us (manufacturers). This move could help in optimizing the cash flows.”

He adds, “The central government’s recent move to extend the PLI scheme to the automobile sector including for manufacturing of Advanced Chemistry Cells (ACC) is commendable. While this will definitely give a boost to local manufacturing, better yet, the government must also look at aggravating the domestic demand by further incentivising individual and commercial consumption of EV pan India. Such a holistic approach would create a thriving ecosystem for EVs and cement India’s position as a global EV hub offering abundant opportunities for growth and attracting huge investments for further innovation.” said Jeetender Sharma, founder & managing director, Okinawa Autotech.

Steelbird Helmets

“Govenment should keep working on the road safety so that millions of important lives can be saved. The prices of safety gears and helmets which helps in saving the lives of pillion riders should be lessen. The GST on helmets is 18% which should be reduced to 5% or 0. Affordable Helmets will save millions of lives as people won’t opt for cheap fake ISI helmets but for affordable good quality helmets. I would also suggest the GST should be lessen on the things where the labor and the hand work is more as a larger number of people will be employed by this move. This will not only help in better employment rate but also our country’s economy will rise up”, said Rajeev Kapur, MD of Steelbird Helmets.

Nexzu Mobility

“India as a resilient economy, has been quick to bounce back from difficult situations – the period of sub-prime financial crisis, the global recession and now the Covid-19 that brought with it prolonged lockdown, affecting the economy. People belonging to all walks of life and Business Leaders from across sectors including retail, manufacturing, FMCG, travel, aviation, automobile, among others are eagerly awaiting the Union Financial Budget.”

“In the upcoming Budget the Finance Minister should consider announcing allocations that stimulate job creation, ease of doing business, speed up domestic manufacturing capabilities (Atmanirbhar Bharat) by incentivising R&D initiatives taken by companies and most importantly relaxing the prevailing tax regime so as to cushion the corporates gradual return to normalcy.”

“For the different sections of the people, see avenues of growing consumerism by increasing liquidity and cash in hand, where-in further relaxation in income tax slabs will help to promote buying trends. A lot will depend on budgetary allocations that the Finance Minister has for rural India, as tier-2 and tier-3 regions are that need support, and also serve as key consumer markets that have potential to drive economic growth. For the Automobile and other manufacturing sectors – the Finance Minister could consider provisions that promote the cause of increasing elements of localisation, especially for the electric-vehicle segment, ancillaries and component manufacturers to stimulate investments”, said Pankaj Tiwari, Chief Marketing Officer, Nexzu Mobility.

Ather Energy

“The introduction of several progressive policies and incentives by the Government like the FAME 2 subsidy and offering income tax rebates on the purchase has led to an increase in consumer demand for electric vehicles in India. We are also witnessing the growth of the EV Industry in terms of companies launching high-quality and well performing new products in the market.

For manufacturers, one of the key challenges on investments in the sector is the concerns regarding GST inverted duty structure. In order to minimise working capital blockage, the Government should look at extending end use based benefits to the EV industry like lowering GST rates on raw materials, allowing inverted duty refunds for research and development and capital expenditure. Especially for startup’s like ours in their growth phase, offsetting inputs on such major expenses without being GST profitable is a big challenge.

We also see a need for banking institutions to come up with innovative financial products for EV purchases. Further startup’s in their growth phase suffer from lack of options on debt financing thereby increasing finance cost burden. From an operational perspective, we are closely following the Production-linked incentive (PLI) scheme and we look forward to more progressive schemes designed for OEMs”, said Tarun Mehta, Co-Founder & CEO, Ather Energy.

 

FixCraft

” Overall automobile industry has been suffering for quite long. Due to COVID 19, the situation has become even more challenging. The upcoming budget is expected to address this long-standing situation. Also, for the startup community, it is imperative to maintain strong capital support. Investors have become very cautious about investing in the sector, hence a major fund allocation is required to keep the wheel rotating. There is also a need to ensure the ease of business procedures at all levels.” said Vivek Sharma – Founder and CEO, Fixcraft.

Earth Energy EV

“Hoping for a huge opportunity in the sector to get localized, we are keeping up our expectations high on this year’s Union Budget, which will certainly bring up advancement in the sector. We expect the government’s Atmanirbhar Bharat Abhiyan to get more incentives as it aims to inspire companies and see India’s green mobility growing. To further support the localization of battery production which accounts for around 40 percent of the EV development cost, the government can reduce the GST on batteries as well as import duty slabs. It presently incorporates the GST of 18 percent on lithium-ion batteries and 28 % on lead-acid batteries. The cost of an EV can come down significantly with the GST reduction. Also, the Govt should finalize its incentives-based scrappage policy which can help create demand in the commercial vehicles (CV) segment as well.

We request govt. to also be liberal with Infrastructure spending and make charging stations mandatory in all the official and residential areas which will contribute to increasing penetration of EV across the country.” said Rushi Shenghani, CEO & Founder, Earth Energy EV.

Matter

“The automotive industry is definitely looking at 2021 to be the ‘Year of the EV.’ We would like an important anomaly with regards to the tax on batteries to be revised. There is an 18% GST on the replacement of Lithium Ion batteries for vehicles but the GST on vehicles is 5%. We would like a reduction in the GST on the replacement cost of batteries for EVs and bring it in line with the overall policy. The second expectation is that under FAME II subsidy, the government has kept a cap of Rs. 1.5 Lakh on the Ex-Factory price of the vehicle on which subsidy is applicable. This is a 5 year old price point , and with the moving commodity prices, we would expect the government to increase this limit by at least an additional 10% to Rs 1.65 lakhs. Finally we would like to urge the government to incentivise EV manufacturers when it comes to R&D. Given the government’s clarion call for Aatmanirbhar India, India needs to take the lead when it comes to the development of new technologies that go on to redefine motor vehicle transportation for decades. The government should incentivise manufacturers and academia to collaborate together to make this happen.” said Mohal Lalbhai, Founder and CEO, Matter.

 

 

 

 

 

 

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