With the hope that the new government will adopt necessary measures to revive the automotive industry in the country, the Automotive Component Manufacturers Association (ACMA), the apex body for the Indian auto component industry, has identified and voiced its expectations to the Government from the upcoming Union Budget 2014.

The auto industry has been facing one of the most challenging times ever. Issues such as fluctuations in the currency, high inflation and increasing interest rates have significantly dented the vehicle sales in the last one-year. ACMA has in the past through various initiatives tried to create synergies for the members to tackle these challenges, however, with new government in place the industry expects measures that would hasten the industrial revival and boost growth. 

Harish Lakshman

Harish Lakshman

The automotive industry is one of the key drivers of the Indian economy, which is currently undergoing unprecedented downturn, it is therefore critical that focussed attention be given for stimulation of the automotive industry; we are hopeful for a favourable outcome from the forthcoming budget”.

ACMA has proposed recommendations, voicing the expectations of the auto component manufacturers, which delve upon the following critical areas where industry is seeking urgent intervention of the Government:

Indirect Tax:

– Continue 10% Excise duty on Auto Components

It is recommend to continue with the existing rate of 10% on chapter 84 and 85 items, which is currently valid only till June 30, 2014.

– Eliminate Customs Duty on Alloy Steel, Mild Steel, Aluminium Alloy and Secondary Aluminium Alloy

Domestic steel / aluminium alloy suppliers benchmark their prices based on the landed prices. This makes the inputs expensive for the domestic component manufacturers. Further, due to various trade agreements, auto components are facing reduced customs tariffs in comparison to the basic raw materials needed for their manufacture; this has resulted in inverted tariff structure in some of the cases. Elimination of customs duty on the raw material will therefore set right the equation.

Allow Input Credit on Diesel

Due to power shortage manufacturers have to resort to generating their own power though gen-sets thus increasing the cost of production. It is recommended that such manufacturers be allowed to avail input credit on diesel procured for internal power generation.

100 percent Cenvat Credit on Capital Goods in Year of Purchase

Currently 50% Cenvat credit is allowed on capital goods during the year of purchase. The remaining balance 50% is allowed to be availed in subsequent years. To encourage investments, 100% Cenvat Credit may be made available in year of purchase itself.

 Service Tax – Credit on various Services should be provided

Services like canteen, transportation of employees, repair and maintenance of commercial vehicles etc. are directly related to manufacturing; therefore manufacturing units should be allowed to avail Cenvat credit on such services.

 Early implementation of GST / Phasing out CST

There is an urgent need to reduce multiplicity and complexity of applicable taxes through early implementation of GST. Further, it is recommended that till such time the GST is implemented, CST be reduced to 1% from existing 2%.

Direct Tax:

Encourage Research & Development

Presently 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. A 200% weighted deduction should be extended to R&D facilities, which are outsourced to Third-Party service providers or other institutions.

Depreciation Rate on Capital Goods

The current depreciation rate on Capital Goods should be enhanced to 25% from 15%. Further, domestically manufactured capital goods be allowed 40% depreciation. This will encourage capital investment in the industry


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