Budget 2020 expectation from auto component industry: R&D funding support and investment allowance

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Updated: Jan 31, 2020 4:02 PM

As the automotive industry in India has been dealing with the worst sales slump in its history. Be it passenger cars, two-wheelers, three-wheelers or even commercial vehicles. The downturn of the economy has hit the Indian auto industry hard. With demand for vehicles being at an all-time low, the domino effect has impacted the supply chain of the industry just as strongly.  The Auto Component Manufacturer’s Association (ACMA), members of ACMA and other auto component manufacturers in India have released statements regarding their hopes and expectation from the Ministry of Finance from the Union Budget 2020 which will be announced by Finance Minister, Nirmala Sitharaman on February 1.

Deepak Jain, President, ACMA

“The automotive industry in India is undergoing a significant transformation due to new regulations and policy changes. On top of it the economic slowdown has deterred domestic consumption, we hope that the forthcoming budget will help uplift both the consumer and industry sentiments. The auto component industry contributes significantly towards employment generation and exports. To meet the Government of India’s Vision of a USD 5 trillion economy by 2025, of which the manufacturing industry would be USD 1 trillion, it is critical that steps be taken to get the automotive industry back on track. The automotive industry accounts for almost half of India’s manufacturing economy, while the component industry accounts for a quarter. We are hopeful that the Government would consider our long-standing recommendation of 18 per cent GST on all auto components as also extend impetus to R&D and indigenous technology development.”

Some of ACMA’s recommendations for the Union Budget 2020 include a Technology Development & Acquisition Fund that can support R&D and indigenous technology development. The fund could be utilised for technology development of e-mobility components, and to meet new regulations on safety, emission and environment, among others. ACMA also recommends encouraging domestic R&D and testing by incentivising R&D expenditure for companies and provide exemption on import duty on auto component prototypes. Along with R&D support, ACMA is also expecting an Investment Allowance provision to be reintroduced at 15% for manufacturing companies that invest more than Rs 25 crore in plant and machinery.

Sunjay Kapur, Chairman, SONA COMSTAR

Given the current market conditions, I feel all expectations from this Union Budget are essentially to enable revival of automotive growth and a smooth transition to the next phase in the year to come. For that, the number one step would be Uniform 18% GST on all Auto Components. The direct outcome of a reduced GST will be lower prices to propel sales and a multiplier effect on small industries and employment to address the macro-economic slowdown. Secondly, A lot is riding on the automobile sector to transform the face of mobility in India. Evidently this is not possible without innovation and the inherent need to embrace new technologies that will emerge only out of a sustained and consistent thrust on research and development. We are hoping for a specific Technology Development & Acquisition fund, a definitive step towards promoting R&D, licensing agreements and indigenous technological explorations.” 

Yash Rane, Founder, Chizel

With Indian economy on slowdown, we need a policy with long term sustainable growth and not just for a few years. We are looking at 9% GDP growth and that is not easy. GST has hampered the cash flow of SMBs thereby affecting their buying power. The government should enable monthly filings and quarterly GST payments. Also, it is time to accept that manufacturing is and has always been the backbone of India. With China-US relationship getting better, India needs stronger partnerships to bolster exports. 

Dhananjay Sharma, Director & CEO, Log 9 Spill

Cleantech companies around the country seek special incentive programmes and larger tax benefits with an aggressive government push for innovative cleantech solutions. So that this sector becomes more desirable and stable resulting in more investments in this sector. A conducive environment should be provided to encourage the creation of new cleantech businesses by easing regulatory and compliance policies for such companies.

Siddharth Jain, Co-founder, Vaahika

Indian economy needs an urgent dose of consumption booster; thus it would be wonderful to have provisions in the budget which could assist in an instant rise in consumer expenditures. Relaxation on personal income tax rates could be one such move that can act as a booster shot. We expect the budget to bring in provisions for lesser and reduced compliance for smaller companies; which as of today have to follow almost similar compliance that of a larger corporation. We expect this budget to come up with revolutionary steps to overhaul the complete compliance and fillings guidelines for smaller companies and startups and do away with the current penal provisions. The current economic slowdown could be linked with the rapidly declining health of MSME in India; especially the ones in the manufacturing sector. Though the government has already reduced the applicable income tax for this segment; but it appears that it has not been helpful in bringing the required turnaround. More needs to be done to address the concerns of liquidity crunch, ever-increasing compliance and reducing competence for the overseas markets. It has a worse impact on the Logistics sector, especially on the small and medium-sized fleet owners. On one side it is the demand which is declining and on the other side increased operating expenditures have made it very difficult for them to even pay the EMI’s regularly thereby increasing defaults. It is very much expected that the coming budget would have provisions to support not only the survival; but the revival of the logistics sector.  

Akshay Singhal, Founder, Log 9 Materials

I think for startups  there are already a  lot of initiatives in action, improved mechanisms for the execution of those schemes is extremely important. However, I am more concerned about the economy as a whole. To boost economy my suggestion would be to increase spending under Swachh Bharat Scheme may be via MNREGA to get Indian cities clean by employing the bottom of the pyramid.  

Sudhir Sharma, VP – Finance & Corporate Development, GoMechanic

“The Auto service sector is still split between Authorised Brand Workshops and small unregulated neighbourhood workshops. There is huge potential to attract capital to consolidate the space with standardised workshops offering multi-brand services under one roof. To this effect, the Union Budget can create avenues for easier access to capital and also simplify the lending procedures for fund availability for entrepreneurs to upgrade their workshop equipment. A single GST rate on services and consumables will also come in handy.”

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