"The Union Budget is less than two weeks away and the automotive industry is hoping that it will signal good news for the sector. Leading the wish list is a road map on the government's much-delayed plans for implementing GST. The industry expects that, after this budget, India will finally move towards a uniform GST model.
Making headlines now is the possibility of a diesel tax being introduced in the pre-budget period. The auto industry is already reeling under sluggish demand. We hope the FM refrains from imposing an additional levy on the personal auto segment. This will bring some relief to auto players who have significant diesel variants in their portfolio.
A key expectation from the sector is a reduction of excise duty and service tax on passenger cars and two-wheelers to encourage consumer buying. The FM, with the objective of aligning the rate structure to the overall GST framework, has increased the basic excise duty and service tax rate by 2 per cent. While the Indian economy is currently recovering from an inflationary cycle, any further proposed hike in the excise duty and service tax could push the economy back into the inflationary mode. The steep increase in the excise duty for large cars would lead auto players dealing in big cars to relook at their budgets.
Looking beyond just the sector, we believe the focus of the budget this year should continue be on infrastructure. The FM must also increase the budgetary allocation towards the National Highways and Development Project. Of course, this impetus to infrastructure development will act as stimulus to the demand in the auto industry, especially for commercial vehicles."
(The article has been written by Abdul Majeed of Price Waterhouse)
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