Changes in duties levied on the Automobile Industry will come post GST as Union Budget 2017 – 2018 leaves taxation policies for the sector unchanged for now.
The announcement of the Union Budget for the 2017 – 2018 fiscal year has not had any direct impact on the automobile industry. As a result OEMs and customers alike can breathe a sigh of relief as new car and motorcycle prices will not go up soon. The major shift for the industry will come around the middle of the 2017 calendar year when the uniform Goods and Services Tax (GST) regime is scheduled to be implemented by July. Owing to the upcoming GST, the excise duty structure remains unchanged for the automobile industry.
The new Union Budget though focuses on giving policy impetus to the rural sector which should result in increase in sales of two-wheelers (especially after the negative impact to sales after demonetisation), tractors and light commercial vehicles. Whereas the more favourable tax slab for individuals in the income bracket of Rs. 2.50 lakh to Rs. 5 lakh is seen as a favourable move for small car buyers.
Not so good news for luxury car buyers as is mostly the case owing to taxation policies being more stringent for the rich.
The Finance Ministry allocated Rs. 2,41,387 crore for the transport sector and increased allocation to the road sector at Rs. Rs 64,000 crore in FY17, while also emphasizing on multi modal transport infrastructure which should be favourable for the road logistics sector.
However, the continued 200 per cent weighted deduction on Research and Development for the Automobile Industry has not been appreciated by experts including the likes of Vinod K Dasari, President, Society of Indian Automobile Manufacturers (SIAM).
In order to provide an angle of understanding from what car makers have to say about the 2017 – 2018 Union Budget, here are some reactions from company officials.
Guillaume Sicard - President – Nissan India Operations, said, “The Union Budget 2017 agenda on Transform, Reform and Energise is a positive approach towards growth, with a clear focus on rural sector, increased spends on infrastructure development, and improve road construction for better last mile connectivity across India.
The Income tax rate cut from 10% to 5% for individual tax payers earning under 5 lakh per annum will create a positive sentiment among likely first time buyers for entry level and small cars. However, there is nothing substantial for R&D for automotive industry, EV and Hybrid vehicles, which is a dampener. We look forward to the implementation of GST for the automotive sector in the months to come to offer the much needed stimulus to the auto industry and encourage buyer sentiment and consumer confidence, he added.”
Vimal Sumbly MD of Triumph Motorcycles says, "It is a great step to boost rural economy which will result into a positive sentiments in rural and thereby boost spending. Good monsoons and good schemes will have good bumper sales in the upcoming festivals."
Roland Folger, MD & CEO, Mercedes-Benz India, said, “Budget 2017-18 has laid greater emphasis on rural population, the underprivileged, infrastructure development and digital economy. India has been viewed as one of the most unequal societies in terms of economic growth and distribution of income. This budget tries to narrow the gap between rural and urban India. By allocating a greater amount to transportation, airports and highways, the focus will be greater on infrastructural development. This will help the auto sector’s growth during the long-term. The total allocation for rural, agricultural and allied sectors is Rs 1,87,223 crore, up 24% from last year, which is hugely positive. The Finance Minister has hailed the clearance of GST related constitutional amendment bill and implementation of demonetisation as Tectonic policy initiatives. Even though no major indirect tax related changes have been made in the budget on account of the ensuing GST regime, Mercedes-Benz is hopeful that the government will take necessary steps to spur the growth of the luxury car industry, and help bring down the price of luxury cars. We hope GST will help recover the momentum that the auto industry in general and luxury car industry in particular, lost in 2016."
“Considering the unfavourable environment for the auto industry on the whole due to demonetization we had all pine highest ever hope with the union budget. The good news for the sector is that the GST will go as scheduled as the government has taken two tectonic policy initiatives - passage of GST Bill and demonetisation. GST implementation is positive for the auto sector on the whole. We are certain that positive sentiments will be restored as it bears good tidings for Electric Vehicle industry and the sector overall,” said, Ayush Lohia, CEO, Lohia Auto Industries.
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