Ten key reforms that auto sector hopes for in Budget
February 23, 2015
- Roll back the excise duty hike to buoy demand in the auto sector. The excise duty cut, which was initially implemented on February 2014 across all vehicle classes, was prolonged till December 2014. It was rolled back from January 2015 in the interim budget. The excise duty hike has roughly translated into a 4-6 per cent price hike across passenger vehicle categories, affecting demand.
- Avoid inverted duty structure. The excise duty on commercial vehicles is 8 per cent, while raw material and engineering inputs are taxed at 12 per cent. This results in accumulation of CENVAT credit.
- The tyre industry wants removal of anti-dumping duties on the import of raw materials like rubber chemicals (like Butyl Rubber SBR grade 1500/1700), which are not manufactured locally.
- Levy anti-dumping duty on imported Chinese tyres. The high import duty on rubber raw materials makes it difficult for the domestic tyre industry to compete against imported Chinese tyres, which are not subject to such high duty rates.
- Lower the Special Additional Duty (SAD) on imported raw material to 2 per cent from 4 per cent, and bring down customs duty on various inputs to 5 per cent from 10 per cent.
- Overloading of commercial vehicles: There are no policy level interventions to check the damage caused by overloaded vehicles. It affects demand.
- Announce a policy towards replacement of vehicles to promote cleaner environment and fuel efficient vehicles.
- Offer special incentives for automobile exports (Focus product scheme).
- Clear the uncertainty over exclusion of automobiles from the Free Trade Agreement with the European Union. If it comes into effect, European carmakers would be able to sell vehicles at lower duty in India.
- Increase investments in building roads and promote parking infrastructure.