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Auto industry seeks removal of TCS for commercial vehicles

The Society of Indian Automobile Manufactures (SIAM) has asked the government to abolish the TCS (tax collected at source) levied on motor vehicles with sales value exceeding Rs 10 lakh, announced in the Union Budget 2016-17.

By Chanchal Pal Chauhan        Last Updated: January 12, 2017  | 17:53 IST
Auto industry seeks removal of TCS for commercial vehicles

The Society of Indian Automobile Manufactures (SIAM) has asked the government to abolish the TCS (tax collected at source) levied on motor vehicles with sales value exceeding Rs 10 lakh, announced in the Union Budget 2016-17. The apex body comprising automakers has said that the words 'motor vehicles' have caused confusion, and has led to other vehicles, like trucks and buses, being taxed, when it was originally intended only for cars. This, in turn, has been hurting the industry.

SIAM has also asked for the renewal of R&D incentives, claiming that these are the backbone of every industry. To encourage R&D and to make it an attractive proposition, companies get weighted deduction benefits on their investments to develop new products, and introduce newer technologies.
The move to reduce the weighted deduction from 200 per cent to 150 per cent with effect from April 1, 2017 - which will remain at that level till March 31, 2020, and abolished thereafter - will be a bane for the industry. SIAM has asked for the weighted deduction of 200 per cent to continue at least till March 31, 2020. This will provide immense boost to innovation and manufacturing, mainly for the automobile sector, a top functionary said.

The apex body has suggested an increase in the depreciation rate for motor cars, MUVs and two-wheelers to 25 per cent, from the current 15 per cent, under the IT Act because of faster obsolescence of technology. It further cited that the Companies Act also prescribes depreciation rate at 25.89 per cent, implying the useful life of 10 years for the vehicles.
On the customs duty front, it has asked that the concessions on identified parts of hybrid/ EV parts should be extended to certain other parts, too, to allow competitive pricing for vehicles. Besides, it has also sought for the custom duty on passenger vehicles and two-wheeler CBUs to be retained.

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With respect to GST, SIAM has, in principle, accepted the standard GST rate of 28 per cent for two-wheelers, three-wheelers, commercial vehicles (buses and trucks), small cars and utility vehicles. It has suggested that all other cars attract a uniform cess of 8 per cent; electric vehicles should attract a GST of 12 per cent or lower; and hybrid vehicles should have a 10 per cent rebate from applicable GST rate plus cess.

SIAM has suggested that the list of acts to be repealed after the introduction of GST should include the relevant part of the Act that levies NCCD, R&D cess on import of technology and infra cess. It has also demanded that the excise duty benefits currently available to units in hilly states and North-eastern states should be safeguarded.

Keeping in view the high potential of used vehicles, which are in the ratio of 1:1.3 to the newer ones, it has recommended that specific provision in Model GST Law be made for used vehicle business, else the organised pre-owned vehicles business will become unviable.
SIAM has reiterated that the ambitious 'Fleet Modernisation Scheme', that will allow the phasing out of large number of older vehicles running on obsolete technologies, should be introduced as an incentive-based programme to modernise the older vehicles.

 

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