Budget 2020: Industry Body Calls For Reduction In GST On Automobiles To 18%

While falling demand has forced manufacturers to lower production, declining sales have caused thousands of job losses in the sector, say analysts.

Budget 2020: Industry Body Calls For Reduction In GST On Automobiles To 18%

The auto sector accounts for nearly half of the country's manufacturing output

Finance Minister Nirmala Sitharaman will present her second Union Budget on February 1. All eyes will be on what the Budget holds for car buyers. In the first Budget after the re-election of Prime Minister Narendra Modi's government in May last year, the government made few key announcements to boost the electric vehicle industry. The Society of Indian Automobile Manufacturers (SIAM) has pitched for a reduction in the Goods and Services Tax (GST) rate applicable to automobiles to 18 per cent from the current 28 per cent.

The recommendations from industry body SIAM come at a time India's automobile industry has endured a range of challenges in the past few months. While falling demand has forced manufacturers to lower production, declining sales have caused thousands of job losses in the sector, say analysts. 

The industry body has also suggested the government to abolish the customs duty of 5 per cent on Lithium-ion cells to allow the manufacturing of the batteries in the country.

Among other recommendations, the industry body has suggested that an incentive-based vehicle scrappage policy be introduced for the removal of old vehicles from the road. SIAM has suggested an incentive in the form of 50 per cent reduction in GST as well as a 50 per cent cut in road tax and registration charges.

Here are some other recommendations made by industry body SIAM: 

  • Allocation for procurement of buses by state transport undertakings (STUs) over and above the allocation for procurement of electric buses under the FAME (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) II scheme
  • Increase in the depreciation rate for passenger vehicles and two-wheelers to 25 per cent permanently

The crisis in the auto sector presents a major problem for the government as it accounts for nearly half of the country's manufacturing output and employs more than 3.5 crore people directly and indirectly.

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