Budget 2021: GST Tax Rates Must Be Reduced To 18% To Boost Demand In Auto Sector

Budget 2021: The automobile sector has witnessed several challenges due to a reduction in demand and an increase in costs due to regulatory changes amid emission and safety norms. ''Some of the steps like reduction of the GST tax rates to 18 per cent, introduction of the incentive based vehicle scrappage policy to scrap over 15-year-old commercial vehicles, local sourcing of automobile parts and EV incentives for electric vehicle buyers can trigger a boost in demand for the sector,'' said Mr. Nilesh Shah, Chairman and MD, Atlas Integrated Finance Limited. The automobile sector suffered a slowdown in terms of demand and the expectations were not met for the sector in last year's budget.

The industry had demanded an incentive-based vehicle scrappage scheme for the removal of old vehicles. The Society of Indian Automobile Manufacturers (SIAM) had called for a reduction in good and services (GST) rate on vehicles to 18 per cent from 28 per cent, last year. SIAM also sought an increase in allocation for ICE bus procurement by State transport undertakings. On the introduction of an incentive-based vehicle scrappage scheme for the removal of old vehicles from the road, the automobile body had recommended that incentive be given in the form of 50 per cent reduction in GST and 50 per cent reduction in the road tax and registration charges.

It had also recommended the abolishment of customs duty of five per cent on lithium-ion cells to allow battery manufacturing to commence in the country.  One major highlight of last year's budget was the changes made to the income tax slab, which likely put more money in the hands of consumers. However, most of the expectations of the automotive manufacturers and related companies remain unmet in last year's budget.