Expectations will be running high from the upcoming Budget with the automotive industry unitedly expecting a harmonisation of the goods and services tax (GST) on various automotive components, and the move could give a huge demand-generation push to the sector. The industry body – Automotive Components Manufacturers Association of India (ACMA) – has been voicing its demand for a very long time to rationalise GST on components in order to give a fillip to the industry. “Though it is not strictly a matter of the Budget, our key request to the government is to bring a uniform 18 percent GST rate across components,” said Vinnie Mehta, director general, ACMA.
“Having said that, we are also thankful to the government for the allocations of FAME and PLI that are in the interest of the auto industry,” Mehta adds.
According to Akash Minda, executive director, Minda Corporation, “We are looking forward to a Budget that supports both the manufacturing sector and the consumer. The transition of the sector towards electric vehicles needs special focus. To build an upward tick within the EV market, government schemes should strengthen the indigenous EV industry. The focus must be on providing incentives and schemes to aggressively build a robust ecosystem that supports the infrastructure, supply chains and material required for growth. This will ensure India’s participation in contributing to the EV revolution in India as well across global markets.
“We urge the government to consider incentivising the journey of ‘electronification’ by rationalising the GST rate for auto components. While EVs are priced with a 5% GST, component manufacturers are currently mandated to pay GST of 18% to 28%. We are hoping for a tax standardisation that will help the component manufacturers scale up and strengthen to provide parts and consistent quality and reduce litigation.”
“Of the 219 various tariff lines, the auto industry has 40 percent of the tariffs that are over 18 percent. There is an urgent need to harmonise GST to below 18 percent for all components,” said Harshvardhan Sharma, head, Auto Retail Consulting Practice, Nomura.
Hemal Thakkar, director, CRISIL Market Intelligence and Analytics, also emphasised the need for a uniform GST for components. “The production linked incentive (PLI) scheme, among other measures, supports advancement in transmission and electronic systems. However, the dual GST rate – 18 percent and 28 percent – on automotive components encourages grey market distribution in the aftermarket space. “This is a safety hazard as well as an incentive for the informal economy that leads to a loss of GST revenue. So, it is best to move to 18 percent for all components,” said Thakkar.
