Auto industry expects friendly Budget for EVs and ICE from FM

The 2023-24 budget is critical to the sustenance of growth for the Indian auto industry and for the shift towards zero emission vehicles, the industry is hopeful of a favourable budget, Amit Vijay M reports.

-  Amit Vijay M

The forthcoming 2023-24 Union Budget will be a make-or-break . one for the automobile industry, experts say. Expectations will be running high when Finance Minister Nirmala Sitharaman tables the 2023-24 Union Budget on February 1- the last one before the country gets into the general elections in 2024. Among industry incentives for import substitutes and Make in India, a favourable tax regime and announcements infrastructure push to help boost sales are also awaited.

Correcting the anomalies

Harmonising GST rates should be top priority, industry analysts say. "Of the 219 various tariff lines, the auto industry has 40 percent of tariffs that are over 18 percent. There is an urgent need to harmonise GST to below 18 percent for all components," said Harshvardhan Sharma, Head, Auto Retail Consulting Practice, Nomura.

Hemal Thakkar, Director of CRISIL Market Intelligence and Analytics also emphasised the need to uniform GST for components. The Production Linked Incentive (PLI) scheme, among other measures, supports advancement in transmission and electronic systems. However, the dual GST rate for auto components encourages grey market distribution in the aftermarket space. "This is a safety hazard, on the one hand, and an incentive to the informal economy and loss of GST revenue, on the other. Hence, it would make sense to have one GST rate for all auto components at 18 percent," said Thakkar.