Union Budget 2017 had been followed very closely by everyone. Main reason, everyone knows “Demonetization”. This single move by Modi’s government was a hilarious for current Indian generation. Because of demonetization, every single sector got affected, obviously automotive too.
Just after the festive season which is always peak season for automobile and electronics, demonetization announces. Everyone understand it in no times that what will happen in last quarter of 2016 with the automotive industry.
Demonetization effect on Automotive sector
Let me show you effects of demonetization on the Automotive industry for them. who are unaware till yet.
Well, every segment in the automotive industry was making their very own record for selling figures. But overall downfall was 19%, which is huge and lowest of last 16 years. This report by Society of Indian Automobile Manufacturer (SIAM) is enough to show the effect of demonetization on the automotive sector.
Now let’s have a look at this downfall category wise:
2-wheelere segment: slipped by 22%
3-wheeler segment: settled down after sharp decline line of 36.23%
Passenger Vehicles: 1.4% of downfall
Commercial Vehicle: had to face downhill of 5.1%
This report and downfall recorded on the basis of selling figures of December in comparison with December 2015.
Expectation from Union Budget 2017 for Automotive Industry
If you were expecting some surprising move, which will hike GDP suddenly then be prepare for a shock. From the 1st day of governance, Modi Government shows that they will make a sustainable growth rate. No matter if some hard move will have to take. So its final, Union Budget 2017 will not enough to push back once again auto industry on the last year growth rate.
Everyone hoping for a well-defined and long-term growth rater financial infrastructure. But in terms of auto sector, there is one more well-organized segment on which government has to focus in their GDP structure. This is pre-own vehicle sector, it will also require a well-architect guideline for business. Otherwise, this business could witnessed of its worst days.
Now have a look,
What Automotive Industry got in Union Budget 2017
Demonetization Gives a huge and shocking no. to the government, that only 4.5 crore people are tax payee. but in India, more than 1.25 crore cars sold every year. These figures are showing exactly, on what level tax hiding were going on.
But after ‘Demonetization’ government are hoping for much more tax collection then before. FM Mr. Arun Jately announces huge relaxation in tax slab for salary paid middle-class families.
Up to 3 lakh per annum, there is no tax and from 3-5 lakh there is 5%. Which is 5% lower than before. Limit of 80C remain same 1.5 Lakh. This relaxation will shown on automotive industry very soon. Because relaxation ammount will definetly increase the expendature limit of middle -calss family on luxary.
There is a very simple calculation. If a person is earning 6 lakh per year then he had to pay 35k as tax.
But now he will pay only 17,500, and its half of earlier. So, now if he will buy a bike of 1.50 lakh rupees on EMI, then approx rupees 3500 will his monthly installment. The 17.5K rupees what he is saving now from taxes, can pay the EMI for 5 months from the same.
This tax rebate directly increase the potential of middle-class person to expense on their luxary or comfortablity. Wheather it could be on vehicles or in other form.
We can say there is no direct announcement for Automotive industry but many relaxation in MSMEs and SMEs will help people to evolve in auto sector on small level.
And the GST is not finalized yet. Most probably it will in action from 1st of April.
what automotive industry was expecting from Union Budget 2017
Well, after demonetization every brand pushed on the same boat to roll. They are expecting thing will be in favor of them by Union Budget 2017.
Volvo Auto India
According to an article of overdrive.com Tom von Bonsdorff, managing director, Volvo Auto India said, “We expect the government to bring in measures. That will boost consumer sentiments and announce a policy roadmap that would fulfill the potential of the auto industry. India requires critical thinking about environmental pollution and should be receptive to new technologies adopted by the automobile industry. There is a need to revisit the existing import duty structure for hybrid vehicles. We are expecting that the Union Budget 2017 will introduce more incentives or schemes like Faster Adoption and Manufacturing of Hybrid and Electric (FAME) scheme to promote eco-friendly driving and mobility.”
Recommendations of Society of Indian Automobile Manufacturers (SIAM)
Overdrive.in also published in the same article recommendation by SIAM, according to that statement
SIAM accepted standard GST rate of 28 per cent for two-wheelers, 3-wheelers, commercial vehicles (bus & truck), small cars and utility vehicles, and suggested all other cars should attract a uniform cess of 8 per cent, electric vehicles should attract a GST of 12 per cent or lower, all categories of hybrid vehicles should have a ~10% point rebate from applicable GST rate. The apex body has suggested that the list of acts to be repealed after an introduction of GST should include the relevant part of the Act that levies NCCD, R&D Cess on Import of Technology and Infra Cess. SIAM recommend specific provision in Model GST Law should be made for used vehicle business. Otherwise organized pre-owned vehicle business will become unviable.
R&D activities are the backbone of every industry. In order to encourage R&D and to make it an attractive proposition, the Government is providing the weighted tax deduction of a sum equal to two times of the expenditure incurred on scientific research on in-house R&D centers. SIAM recommends that there should not be any cut-off (start) date for claiming/ allowing the weighted deduction of R&D expenditure once the approval has been granted and co-operation agreement has been entered by the DSIR.
On the very same article of overdrive.in also shares the view of Managing Director, Triumph Motorcycles India
Let’s have a look at the view of
Triumph Motorcycles India
According to overdrive.in article, Vimal Sumbly, managing director Triumph Motorcycles India said, “India is one of the most promising economies across the globe and this budget is the perfect time to remonetize India. Auto sector hopes that budget will bring measures to boost consumer sentiments. There should be ways to increase disposable income in the hands of corporates and customers in tier-2 and 3 cities. I look forward to moderation of taxation and expecting, taxes will not impose heavily on luxury vehicle segment. The government has been making rapid strides in infrastructure development by carefully planning and implementing smart cities projects, strengthening road network and building bridges and flyovers. A little more push will set us firmly on the path of a long-term economic growth, which will create demand and more avenues for auto sector. I also feel that there is a need to revisit existing import duty structure”.
Anyway, there was no any automotive oriented announcement. Only hope GST is in the last phase for applying and most probably from 1 April 2017 it will roll on. First time in independent Indian history Union Budget merged with Rail budget and both announced on the same day.