Budget 2018 Podcast: A look at the expectations of the automobile industry

The automobile industry is hoping that this year’s budget will focus on restoring incentives for R&D.

The government had reduced incentives on research and development , which were in the form of weighted tax deduction,  from 200% to 150% in last year’s budget. This was done on the assurance that direct tax liability for corporates would be brought down to 25% from the current 30%.
The automobile industry invests heavily in R&D and has requested that incentives on R&D be restored if reduction of corporate tax is not possible.

Following the governments push to adopt electric vehicles, a leading industry association has also identified some components specific to electric vehicles for import with lower duty. The body said if the government is considering a higher tax rate for completely knocked down (CKD) units as relates to electric vehicles, it should be defined clearly to avoid confusion.  Currently, customs duties of 10% and 30% are levied on completely knocked down (CKDs) units and semi-knocked down (SKDs) units respectively.

The electric vehicle manufacturers' body has suggested the government roll out phase two of the FAME, or Faster Adoption and Manufacturing of Hybrid & Electric Vehicles, scheme for a longer duration of up to six years. They also suggested that the govt consider income tax rebates for consumers purchasing electric vehicles and put in place measures to promote indigenisation of components which will bring down the cost of EVs. This, they say, will help realise the government's vision to attain 100% e-mobility in the country by 2030.

As far as incentives go, higher JNNURM orders for bus manufacturers and incentives for EVs should also bode well for the sector, according to reports. The incentive for scrapping old heavy commercial vehicles that are more than 10-15 years old could impact major players like Ashok Leyland, Tata Motors, and Eicher Motors.