Automobile Sector Expectations From Budget 2022
India's automobile sector, which contributes about half of industrial GDP and close to 7% of overall GDP, has been under tremendous pressure due to the pandemic. That's why the automobile industry has pinned high hopes from the upcoming Budget 2022. Let's have a look at some of the relief and remedies expected by the automobile sector.
The past couple of Covid hit years have hurt almost all sectors and industries in more ways than one.
And the automobile sector, which makes a significant contribution of close to half of industrial GDP and about 7% of overall GDP, has suffered to a great extent.
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Amidst all this, the upcoming Budget 2022 is a ray of hope for everyone, including the automobile sector which is looking forward to this Budget for some relief and remedial measures to fight numerous external factors as well as internal odds.
LetĄ¯s have a look at what hopes and expectations the automobile industry has pinned from next weekĄ¯s Budget 2022.
1.Reduce Two Wheeler GST Rate From 28% To 18%
Federation of Automobile Dealers Association (FADA), which is the apex body for Indian Automobile Retailers, has reportedly requested the Finance Ministry to regulate and reduce GST rates on Two Wheelers, in order to bring the industry and auto retail trade back on growth path.
It says that since two wheeler is used not as a luxury but necessity to travel distances by rural segment and lower class for their daily working needs, the existing GST of 28% plus 2% cess, which is for luxury/sin products, does not hold good and seems unjustified for the two wheeler industry. Hence, FADA requests the GST rate to be reduced to 18%, and believes that this will help boost demand.
Also Read: Budget 2022 Expectations From Salaried Employees
2. Include EVs In Priority Lending
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As per a recent report by NITI Ayog and RMI, banks and NBFCs in India have the potential to achieve an electric vehicle (EV) financing market size of ?40,000 crore by 2025 and ?3.7-lakh crore by 2030.
With such huge potential in the EV industry of India, granting the Priority sector lending (PSL) status in Budget 2022 can be a crucial pathway to realize this potential.
Given that RBIĄ¯s PSL mandate has historically proven to have a track record of boosting the supply of formal credit towards areas of national priority, including EVs into PSL category can provide a strong regulatory incentive for banks and NBFCs to scale their financing to EVs. Such creation of a robust ecosystem for EVs can thus result in more citizens being able to afford EV at lower interest rates and avail fringe benefits in the form of a tax deduction on loans.
Also Read: Investor Expectations From Union Budget 2022
3. Reduce GST Rate On Used Cars From 18% To 5%
At present, the GST rate on used cars is 18% for vehicles above 4,000mm and 12% for vehicles which are sub 4,000mm. The used car business accounts for 5-5.5 million cars per annum, with a big turnover of over ? 1.75 trillion, as per FADA.
With such significant size of the used car industry, FADA has put forth the request for a uniform GST rate of 5% on the margin for all used vehicles, which will help India, the worldĄ¯s fifth largest used car industry to regularize and shift from unorganized segment to organized segment, thus also bringing in more business under the ambit of GST.
4.Allow individuals to claim depreciation on vehicles
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Amongst other expectations from Budget 2022, the FADA has also requested the Finance Ministry to allow individuals to account for depreciation, a benefit that corporations already enjoy.
This move to allow depreciation would allow for greater tax savings for individuals, hence further boosting demand, and also help in increasing the number of individuals filing their IT returns. Moreover, as vehicles depreciate for both corporates as well as individuals, this move would hence be justified when the individual taxpayers also get the same benefit.
5. Citizen Reward Program For EV Buyers
As per suggestions of the Society of Manufacturers of Electric Vehicles (SMEV), the government can further provide an impetus for citizens to purchase Electric vehicles (EVs) by allocating a budget towards a green point card that can be given to all EV owners, which can be used at various establishments and occasions to access fast track services or acquire points for the rewards.
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