Narendra Modi government's first Budget: Boon or bane for auto industry

Jun 17 2014, 14:18 IST
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The budget will be first major economic standpoint from the newly formed government The budget will be first major economic standpoint from the newly formed government
SummaryThe budget will be first major economic standpoint from the newly formed government

Within a few weeks from now, Union Budget 2014-15 will be tabled before the Parliament. The budget will be first major economic standpoint from the newly formed government. Earlier this year, the auto sector was gifted with the excise cut relief in order to stabilize the reeling industry. The same tax relief will come to an end this month. The newly formed government will most probably be retaining the decision of the previous government as a measure to recover the slump in the sector. The relief was on small passenger cars, two-wheelers and commercial vehicles from 12 percent to 8 percent while big vehicles like SUVs got respite from 30 percent tax cut to 24 percent.

The BJP led NDA government and the new Finance Minister, Mr. Arun Jaitley will have to take decision whether to stick to the previous resolution or not but as per the recent statement, a government official said that the relief provided to the automobile sector will remain intact. He also said that the past two months have not been favorable for the sector and it would be difficult to provide input given the hard fiscal consolidation the new government has to carry out. So the best option would be to continue with the earlier concessions.

The Society of Indian Automobile Manufacturers (SIAM) in its pre-budget memorandum has already requested for the retention of the tax cuts. The organization also asked for bringing down excise duty to 24 percent on all vehicles except the smaller cars. According to the official figures, approximately one-fourth of the entire manufacturing GDP is contributed by automobile sector which also generates 18 percent of the gross excise revenue. Altogether, the automobile industry feeds about 19.5 million people in the country from direct and indirect sources.

Besides this, the Federation of Automobile Dealer Association (FADA) also called for the retention of the same excise sops in the upcoming Union Budget. The organization gets a step further from SIAM demanding to reduce the duty to 12 percent on all vehicles irrespective of their size and engine capacity. And they have already submitted their request to the honorable Finance Minister a few days back. Moreover, looking at the current state of the auto industry, they have also requested for some other tax reliefs in the sector such as increasing depreciation allowance on passenger cars to 33 percent across various segments.

If we cast a glance at the

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