Currently facing one of the worst slowdowns in demand in its history, the country’s automotive sector has put in forward some suggestions that the government may consider announcing in the Union Budget, like a cut in the existing goods and service tax (GST) rates, incentives to bolster Research and Development (R&D) activity and changes in MSME classifications and definition.
For instance, the Automotive Component Manufacturers Association (ACMA) on Thursday released a statement stressing on the need to ensure a uniform GST rate of 18 per cent on all auto components. It has also highlighted an urgent need to increase the rate of weighted deductions on R&D spending for the industry.
“The industry has significant aftermarket operations, which is plagued by grey operations and counterfeits due to the high 28 per cent GST rate. A moderate rate of 18 per cent will not only address this challenge but will also enhance the tax base through better compliance,” Vinnie Mehta, Director General, ACMA said.
Stressing on the need for incentivising R&D, Mehta said that the entire auto industry is undergoing a major transition with the looming implementation of BS-VI norms and newer safety regulations. That apart, with the government keen to usher in electric mobility, enhancing spending on R&D and creating infrastructure for innovation are the need of the hour for the industry to stay relevant, Mehta added.
ACMA also said that it is important to provide exemptions on import duty on auto component prototypes to encourage R&D and testing.
It has also asked for a change in MSME definition, recommending that a tweaked definition will allow a larger number of companies to avail incentives and allow for better GST compliance.
Likewise, auto dealers also want their businesses to be considered under MSME classifications on an immediate basis and seek industry status in the near or mid-term for their segment.
“Today, only auto workshops have been kept out of the MSME category, despite qualifying and following all regulations required to be an MSME under all parameters. We are quite hopeful that the same will be considered looking at the overall contribution as well as the importance and need of the auto retail sector in our overall economic progress,” said FADA president Ashish Harsharaj Kale.