Automobile Sector Expectations Budget 2022
The past Covid hit years have hurt almost all sectors and industries in more ways than one. Since the COVID-19 jolt, the automobile sector contributes half of industrial GDP and about 7% of overall GDP. It has been struggling with rising commodities, and it needs a long-term strategy outline for a strong recovery, say experts, ahead of the upcoming Union Budget 2022-23. The upcoming Budget 2022 is a ray of hope for everyone, including the automobile sector.
Let’s have a look at the expectations the automobile industry has pinned from next week’s Budget 2022
Reducing Two Wheeler GST Rate From 28% To 18%
To boost the two-wheeler industry, FADA, the apex body for Indian Automobile Retailers, has requested the Finance Ministry to regulate and ease GST rates to 18% on Two Wheelers.
It says that since two-wheeler is a necessity and not a luxury to travel distances by rural segment and lower class for their daily working needs, the existing GST of 28% plus 2% cess was for luxury/skin products seems unjustified for the two-wheeler industry.
Include EVs in Priority Lending
As per the report published by NITI Ayog and RMI, banks and NBFCs in India can achieve an electric vehicle (EV) financing market size of ₹40,000 crores by 2025.
Having such potential in the EV industry of India and granting the Priority sector lending (PSL) status in Budget 2022 can be an essential pathway to realize this potential.
As we know, RBI’s PSL mandate has been confirmed to have a track record of boosting the supply of formal credit towards areas of national priority. If we include EVs into the PSL category, it can provide a strong regulatory incentive for banks and NBFCs to scale their financing to EVs. Moreover, providing EVs at low-interest rates and benefits such as tax deductions on loans can attract more citizens.
Reduce GST Rate on Used Cars From 18% To 5%
Presently, the GST rate on used cars is 18% for vehicles above 4,000mm and 12% for vehicles that are sub 4,000mm. The used car business has over 5-5.5 million cars per annum, with a big turnover of around ₹ 1.75 trillion. Therefore, FADA has requested a uniform GST rate of 5% on the margin for all used vehicles, which will help India as it’s the world’s fifth-largest used car industry to regularise and shift from unorganized segment to organized segment.
Allow individuals to claim depreciation on vehicles
Amongst other expectations, the FADA has also requested the Finance Ministry to allow individuals to account for depreciation, a benefit that the corporations are already enjoying.
Depreciation would allow for better tax savings by individuals, further boosting demand and increasing the number of individuals filing their IT returns. Moreover, this move would be acceptable when the individual taxpayers also get the same benefit as vehicles depreciate for both corporates and individuals.
Citizen Reward Program For EV Buyers
As per proposals of the Society of Manufacturers of Electric Vehicles (SMEV), the government can further offer an incentive for citizens to purchase Electric vehicles (EVs) by giving a green point card that can be accessed by all EV owners that can be used at various establishments and occasions to access fast track services or acquire points for the rewards.