With the 2022 Budget announcement around the corner, the automotive industry is expecting change and support from the government for the industry to grow. Most of them are looking at a reduction in taxation that will help boost automotive sales at the same time electric vehicle manufacturers are looking at better policies to help India transition to clean mobility.
On another hand, the auto suppliers industry body Automotive Component Manufacturers Association (ACMA) has also expressed its thoughts and expectations on the upcoming budget announcement, while the Federation of Automobile Dealers Associations (FADA) has listed down its recommendation in front of the finance ministry.
Express Mobility also spoke to various stakeholders of the automotive industry to get a holistic view of what is expected in the upcoming Union Budget 2022.
Extend FAME II Subsidy: The FAME II subsidy is one of the most talked-about policies of the upcoming Union Budget. Electric Vehicle manufacturers, as well as charging service providers, are hoping that the government extends the scheme beyond 2023. Electric vehicle manufacturers who build and operate in the low-speed segment want the government to extend the FAME II benefits to ‘Low-Speed EVs’. Companies in the retrofit segment also expect to come under the FAME-II scheme.
Reduction In GST On EV Components and Two Wheelers: Most of the automobile players want reduction and standardization of GST are most requested. Given the current dependence of the EV sector on imports, a reduction in import duties and GST would be a welcome relief. Reducing GST on components that are meant to be used in the production of EV’s would be one step to help bring down the cost of production and prices of EV’s.
On another hand, the auto component industry, being an intermediary, ACMA has recommended a uniform GST rate of 18 per cent on all auto components. The industry has significant aftermarket operations that are plagued by grey operations and counterfeits due to the high 28 per cent GST rate.
A moderate rate of 18 per cent will not only address this challenge but will also enhance the tax base through better compliance. Similarly, FADA has requested the finance minister to regulate and reduce GST rates on two-wheelers to 18%.
PLI scheme: Major auto components players seek reintroduction of investment allowance at 15% for manufacturing companies that invest more than INR 25 crore in plant and machinery. Apart from this, companies are expecting realistic announcements for sectors like battery cells, semiconductors as well as policy support for areas like remanufacturing and sustainability.
Support For Manufacturing of second-generation (2G) biofuels: With the government’s keen focus towards mandating automakers to offer biofuel vehicles in the next six months and directives to oil CPSEs to set up Second Generation (2G) Ethanol Bio-refineries in different parts of the country using agri-residues and biomass, companies are anticipating the upcoming Union Budget 2022-23 to provide impetus and policies for promoting the manufacturing of second-generation (2G) biofuels across the country.
SOPs For Last-mile delivery Operators: Companies in the space are expecting the government to come up with additional sops or incentives for the nation’s fleet aggregators to switch entirely from IC engines to EVs in order to pave a sustainable and zero-emissions future.
Introduce benefits of claiming depreciation on vehicles for Individuals paying Income Tax: FADA has recommended the Finance Ministry to allow individuals to account for depreciation. This will not only help in increasing the number of individuals filing their IT returns, but will also help in igniting the automobile demand (especially two-wheeler) from individuals, and will thus up the GST collection for the government. The vehicles depreciate for both corporate as well as individuals, and it would be judicial that the salaried class should also get the same benefit.
DLI Scheme: The DLI scheme was introduced by the government, under which domestic companies, startups as well as MSMEs will receive fiscal and design infrastructure support at various stages of development and deployment of their plans over the next five years. The Design Linked Incentive (DLI) scheme that the Ministry of Electronics and Information Technology (MEITY) announced last month for semiconductors should be extended to other critical markets up the supply chain like motor controllers.