1. Budget 2018: Expectations for vehicle buyers and how it could affect car prices

Budget 2018: Expectations for vehicle buyers and how it could affect car prices

Union Budget 2018 has already given hopes to many buyers and companies. However, with implementation of GST, the changes to car prices will be different from what we are used to seeing. Here's what to expect from the Budget 2018 for car vehicles.

By: | Updated: January 31, 2018 11:13 AM

As India’s Finance Minister, Arun Jaitley gets ready to present the Budget 2018 in parliament on 1st Feb 2018, Indian automobile industry has its own Wishlist and will keep a look out for a mention during the speech. While GST has removed indirect taxes, luxury car makers do expect reduction in import duty for its Completely Built Units (CBU) especially after an increase in the Cess on luxury cars and SUVs. Post implementation of GST, there have been a lot of changes to tax structure and frequent changes in the GST slab and additional cess has left many car makers disappointed. Many car makers had to slow down their pace in terms of product strategy and the industry expects a few major announcements specific to auto sector and otherwise.

Society of Indian Automobile Manufacturers (SIAM) believes that if India has to meet its electrified mobility goal by 2032, the Government will need to include certain imported electric vehicle parts in preferential tariff list to help promote the eco-friendly technology. There is a huge expectation that the finance minister might bring down the Corporate tax too. Sugato Sen, Deputy Director General, SIAM had earlier said that “When the government reduced the weighted tax deduction, it was stated that the corporate tax rate would be reduced from 30 percent to 25 per but that hasn’t happened.”

Automakers are also hopeful that on increasing weighted tax deduction on research and development (R&D) expenses has been reduced to 150 percent from 200 percent earlier. “What we have requested the government is that if the tax rate is not reduced then the incentive on R&D through weighted deduction should be increased,” he added.

On the EVs (Electric Vehicles) front, the industry expects government may lower the Goods and Services Tax (GST) from existing 12% to 5% and further there could also be income tax benefits for companies to encourage the shift to electric cars. While incentives in Income Tax can be announced through the budget 2018, changes in taxation and tax slabs will require GST council’s approval.

The Society of Manufacturers of Electric Vehicles (SMEV), the nodal body that represents electric vehicle manufacturers in India, has urged the government to reduce GST rate to 5% on all-electric vehicles and electric vehicle subsystems. The body sees unreasonably high GST as one of the key impediments to faster adoption of electric vehicles in the country and as one of the main stumbling block in achieving the electric-green vehicle adoption target as visualized in Government of India’s Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles policy rolled out two years back with much fanfare. “GST reduction is critical to achieve FAME targets and galvanize E-vehicle industry,” said Sohinder Gill, Director, Corporate Affairs, SMEV.

Electric automakers makers believe IGST for all imports should be 5%. In addition, import duties on motors, controllers and DC-DC converters should be ZERO in the first 3 years, and should be increased to 10% in YEAR Four and 20% in YEAR Six. This will encourage local manufacturing and give time to companies to set up their local manufacturing.

Jeetender Sharma, MD, Okinawa Scooters says, Need of the hour is to incentivise Research & Development (R&D) which is key to Innovation and Manufacturing that will push the ‘Make in India’ agenda ahead. I think the vision statement should be revisited, ‘Develop and Make in India’ for the EV segment. The other aspect which we expect the Finance Minister to be generous about is the Goods and Services Tax (GST), which needs to be rationalized to ensure that EVs don’t become dearer, which currently at a high of 12% makes them beyond the reach of prospective customers. Keeping GST at 5% will be a welcome step. Also, the RTO fee waiver will further the cause of overall effective pricing for EVs.”

It is unlikely that the prices of cars, SUVs, scooters and motorcycles will go down post the Budget 2018 announcement. Expect cost of electric vehicles to come down a bit and used benefits in the used car market segment.

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