Budget 2019: SIAM Asks Budget Council To Reduce GST Rates And Incentivise R&D Expenses

The Indian auto market has been on the decline since September 2017. The industry did recover for a short period but the sales went down the drain again in the last quarter of calendar year 2018. Going forward, the upcoming budget session seems the only silver lining for the industry and Society Of Automobiles Manufacturer Association (SIAM) is expecting some positive news from the upcoming budget session. SIAM is demanding the government to bring the passenger vehicle segment under 18 per cent GST bracket form current 28 per cent which will help carmakers to bring down the prices. In last 18 months, prices have been revised thrice due to increase in commodity prices and this has made customers unhappy. Other factors like lower availability of credit and one-time payment of insurance premium have further dented sales and some external support from the government can help the industry recover from the slowdown.

Also Read: Low Demand Continues To Take A Toll On Auto Retail Sales In May 2019

Speaking with carandbike, Vishnu Mathur, "At this point we need some support from the government. We are asking for just three things, first to reduce GST on vehicles from 28 per cent to 18 per cent, continuing 200 per cent weighted deduction on R&D expenses and to announce voluntary vehicle scrappage policy." While the vehicle scrappage policy will help to improve sales in the long run by not allowing older vehicles to ply on the road, reduced GST rates and 200 weighted deductions on R&D will speed-up sales immediately and help industry to recover from the dearth.

As per Section 35 (2AB) of the Income-Tax Act 1961, government allows a sum equal to two times of the expenditure incurred by a manufacturing unit. In April 2016, the Central Board Of Direct Taxes (CBDT) had amended the rule proposing to give 150 per cent weighted deduction instead of 200 per cent. Carmakers spend a huge amount on R&D and if the government continues with the previous scheme, the companies will have more money in hands to absorb the price hike to an extent. In May 2019, the passenger vehicle (PV) segment witnessed a drastic decline of 20.55 per cent selling 239,347 units as against 301,238 units which were sold in the same month last year.