Indian auto industry boost from Union Budget 2014-15, ACMA

Automotive Component Manufacturers Association (ACMA) is keeping a close eye on upcoming Union Budget 2014 with hopes it ushers in Indian auto industry revival. Having faced a few dull and lacklustre months, India’s auto industry once projected to reach great heights in quick time hasn’t quite gotten there yet.

Indian auto industryCurrency fluctuation, high inflation and increased interest rates have compacted vehicle sales for over a year now. ACMA hopes India’s newly elected new government will put into play measures to hasten revival and sales growth. Harish Lakshman, President, ACMA emphasised on the automotive industry’s role as a key Indian economy driver. Focussed attention is imperative to reverse downturn and fuel automotive industry growth for a favourable outcome this forthcoming budget.

ACMA’ proposed recommendations identify critical areas requiring urgent Government policy. Existing rate of 10% excise duty on auto Components on chapter 84 and 85 items, which is currently valid only till June 30, 2014 should be continued.

Domestic Steel / Aluminium Alloy suppliers benchmark price based on landed price increasing input price for domestic component manufacturers. Existing trade agreements result in reduced customs tariffs compared to basic raw materials needed for manufacture resulting in inverted tariff structure in some instances. Elimination of customs duty on raw material (alloy steel, mild steel, aluminium alloy and secondary aluminium alloy) will set pricing in the right equation.

Power shortage sees manufacturers resort to generating their own power though gen-sets thereby increasing production cost. Manufacturers should be be allowed to avail input credit on diesel procured for internal power generation.

At present, 50% Cenvat credit is allowed on capital goods through year of purchase, and 50% is allowed to be availed in subsequent years. Investment can be encouraged through 100% Cenvat Credit on capital goods in year of purchase itself.

Service cost for canteen, transportation of employees, repair and maintenance of commercial vehicles, etc, being directly related to manufacturing are a pricey parameter. Manufacturers should be allowed to avail Cenvat credit on such service tax.

Complexity of applicable taxes should be reduced though quick implementation of GST, and until that time of phasing out CST, CST should be reduced to 1% from existing 2%.

200% weighted deduction under section 35(2AB) of the Act is available for in-House R&D facility and 175% weighted deduction on outsourced R&D from approved Institutions i.e. National Laboratories, Universities, Scientific Research Institutes and IITs. ACMA proposes 200% weighted deduction be extended to R&D facilities outsourced to 3rd Party service providers or other institutions in order to encourage research and development.

Depreciation rate on Capital Goods should be increased to 25% from 15%, and domestic manufactured capital goods be allowed 40% dep to improve capital investment in India.