With less than a month to go for the Union Budget, the Automotive Component Manufacturers Association (ACMA) has reached out to the government with its recommendations. Core among them is the apex body’s request to ensure a uniform GST rate of 18% on all auto components.
In addition, ACMA has requested the government to consider upward revision of RoDTEP (Remission of Duties and Taxes on Exported Products) rates adopting measures for enhancing investments, including that for R&D, a release issued by ACMA stated.
Introduced effective January 1, 2021, the RoDTEP scheme replaced the earlier Merchandise Exports Incentive Scheme (MEIS). At 1% or lower, the rates notified for auto components sector are inadequate to cover the incidence of unrefunded taxes and duties borne on export products. This, ACMA said, is deterring the competitiveness of the Indian auto component industry.
Secondly, the body requested for a provision to reintroduce investment allowance at 15% for manufacturing companies that invest more than INR 25 crore in plant and machinery. ACMA believes this would motivate manufacturers to invest in new technologies, specifically e-mobility and its components/ ancillaries related plant and machinery.
ACMA also recommended retaining the weighted tax deduction on R&D expenditure, which is expected to encourage domestic R&D and testing. It must be noted that weighted deduction benefit was reduced in the 2016-17 budget from 200% to 150%, and was further restricted to 100% April 1, 2020.
While stating that the automotive industry is witnessing one of the most challenging, yet interesting times, ever, Sunjay Kapur, President, ACMA said, “Disruptions due to the pandemic, new technologies and regulations are redefining mobility. In this backdrop, the recent policy announcements by the Government on PLI scheme for ACC Battery, PLI for Auto & Auto Components and extension of FAME-2 scheme are indeed very timely and will facilitate the Indian automotive sector in becoming integral to global automotive value chains as also staying relevant.”
The industry has significant aftermarket operations that are plagued by grey operations and counterfeits due to the high 28% GST rate. A moderate rate of 18% will not only address this challenge but will also enhance the tax base through better compliance, Kapur said.
“That apart, with focus of the Government on environment, energy security and vehicular safety, it is an imperative for the auto components industry to invest in newer technologies and create capacities to meet the growing domestic demand for such products. Facilitating investments for capacity building and encouraging R&D and new product development will be steps in the right direction by the government,” added Kapur.
The association has also put forth several suggestions in order to ease the ‘cost of doing business’ in India.