Budget 2022: Auto industry calls for rate rationalization, other perks

The automotive sector has found itself in an unenviable position since the pandemic hit the economy in 2019. Additionally, the global disruption caused by electric vehicles has yet to rate regular cars.

The Union Budget 2022, due to be announced by Finance Minister Nirmala Sitharaman on February 1, 2022, is expected to shed much-needed light on the automotive sector.

The automotive sector in India is one of the major contributors to GDP and once again places its hopes in the upcoming budget for strong and successful reforms.

Following the COVID-19 pandemic, the automotive sector has been grappling with rising material prices, shortage of semiconductors, low sales volumes and hence now needs reforms for a strong recovery to come.

The government has introduced multiple reforms to support the sector in the past, but little has affected manufacturing and sales over the past two years.

In addition, there is the global shortage of computer chips which is forcing automotive organizations to cut production.

Targeted government reforms such as the Production Incentive Scheme (PLI) and Automotive Cells and Advanced Chemistry (ACC) PLI Scheme have helped to make Bharat self-sufficient in manufacturing advanced automotive technology products in the country and also helping to make the country an export hub for the global market.

Following the COVID-19 pandemic, the automotive sector has been grappling with rising material prices, shortage of semiconductors, low sales volumes and hence now needs reforms for a strong recovery to come.

Considering that the government has been emphasizing Indian-made products, it is quite predictable that there will be a plan to gradually increase the tariff rates on AAT and ACC products.

Thus, the industry is looking to streamline the rates to 18%, which will act as a reprieve from this long-standing issue and establish positive upward growth within the industry.

Currently, in this pandemic era, the chances of the government accepting such a proposal seem less because it needs revenue to combat the problems caused by the pandemic.

However, even if an announcement is made in this budget to express the intention to resolve this classification conflict, there could be a positive impact on the industry.

Another important reform that the automotive industry is looking forward to is an increase in the basis of the RoDTEP rate which is a refund granted on exports from India.

The industry is of the view that the current RoDTEP rates notified for the automotive sector are insufficient to cover the non-attributable taxes that are built in as a cost in the product exported out of the country.

The chances of the industry getting higher tariffs appear slim in the upcoming budget.

In 2022, we expect the automotive industry to witness an accelerated transition to the electric vehicle sector, which is expected to grow year on year as India moves towards achieving its goal of net zero carbon emissions and greener fuels.

Considering that the government has also shifted the focus to the electric vehicle sector, the 2022 budget offers an opportunity to put in place game-changing reforms to boost the electric vehicle sector. Currently, an EV is not the first choice of any consumer, mainly due to the higher costs associated with it and the lack of infrastructural arrangements.

In short, unlike the 2021 budget, the government could this time take the opportunity to outline reforms focused on the long-term strategy for the automotive sector, which can certainly lead to a significant increase in demand for vehicles in all areas. segments.

This would allow the automotive sector to contribute to the economy, especially in these turbulent times of pandemics.

(The author is founder and CEO of Big Boy Toyz.)

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