Budget 2021: What can drive auto makers into a fast lane?

Budget 2021: What can drive auto makers into a fast lane?

NEW DELHI: The auto sector is eyeing a slew of sops in the forthcoming Budget, including an incentive-based scrappage policy for older vehicles, and proposal to cut GST rates on new and pre-owned vehicles as well as on auto components.

Besides, investors want to hear more on export incentives through production-linked incentive (PLI) scheme, and steps the government will takes to boost income at the hands of consumers.

Among the key wishes from the Budget are provisions of incentives for replacing old vehicles with new ones. Brokerage Sharekhan said such a scheme would support vehicle sales, especially commercial vehicles, in the long run.

At present, the GST levied on vehicles stands at 12-28 per cent. The industry wants it brought down by 10 percentage points in case of small vehicles, and to 8-14 per cent on pre-owned vehicles. While such a decision is outside of the ambit of the Budget, the FM might announce the government intent in her Budget speech.

Analysts note that auto sales have been hit hard by significant price hikes in the last one year, thanks to the industry’s transition to BS-VI norms and price rise in key raw materials. A GST cut could come in handy to navigate these challenges.

Auto components also attract a GST of 28 per cent and there are expectations that this might be reduced to 18 per cent to lower the cost of vehicles and spur growth.

“The announcement of a vehicle scrapping policy and allocation towards setting up vehicle scrapping infrastructure are among the key expectations. A GST cut on smaller cars and two-wheelers from 28 per cent to 18 per cent is also eyed,” Edelweiss said in its Budget preview.

Meanwhile, the industry would keenly follow updates on the PLI scheme.

“There is an expectation that the FM will provide clarity on incentives to be provided to automobile OEMs and auto ancillary companies for exports,” Sharekhan said.

Any tweak to income-tax to boost money in the hands of the consumer would be welcomed, analysts said.

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