What the Union Budget 2020 will have for the Indian Automobile Sector?

The automobile sector has been through the worst phase in history. Yet there seems to be some hope from the government in the upcoming Union Budget 2020 which may bring some relief to the automobile sector. What does the industry want from the budget? What will help to revive the knocked out industry? Let’s have a look.

1. Reduction In GST rates on new vehicles in Union Budget 2020

   

   The current GST for vehicles is set at 28%. The sector wants it to be reduced to 18%. The SUV segment attracts 43% of total tax which includes 28% of GST and 15% of cess. The manufacturers want the Union Budget to either scrap the cess or reduce the GST. Auto industry states that vehicles now have become a necessity. The BS6 upgrade cost can be reduced if the tax is reduced. The industry also demands to reduce the GST on auto parts.

2. Provide Incentives for In-house R&D Expenditure

   

   With many foreign manufacturers setting foot at our shores, it is necessary that the R&D is also carried out in-house. Thus the industry wants the government to provide incentives to the manufacturers getting the R&D done at their facilities in the country itself.

3. Scrapping Policy, Union Budget 2020 needs to get it done

   

   Vehicle scrapping policy has long been in talks. The manufacturers want to make it obligatory for the vehicle owners to get their cars scrapped which have finished their time period. But the government will have to provide incentives in order to boost the scrapping. This also needs to be done in order to ensure a better environment.
   
   Suggested read: Vehicle scrapping policy- Toyota’s expectation from the 2020 budget

4. Reduce or remove import duty on Lithium-ion battery

   

   The electric vehicles have starting gaining pace in the country whereas commercially, electric vehicles are being used for a long time now. The electric motor in such vehicles runs on a battery which is mostly imported which attract heavy import duty. The industry wants the government to consider reducing or removing the duty in the Union Budget 2020 in order to promote electric vehicle sales in India.

5. Reduce GST rates for used cars too

   The used cars attract a GST of more than 12% which increases the price of the vehicle. This used car business is 1.5 times as that of the new car business. Thus the industry wants the GST rate on these cars to be reduced to 5% in order to increase inflow in this sector too.

The Union Budget 2020 is surely going to be a game-changer for the automobile industry. It will determine whether the industry stays on knees or get back on foot. What is your take on the demands by the auto industry? Let us know in the comments.