ACMA welcomes Union Budget 2016; shows concern over additional taxes levied on vehicles

Arvind Balaji, President, ACMA

ACMA welcomed the measures given in the Union Budget providing the needed thrust to the economy and making it inclusive. The industry body expressed satisfaction on the focus on infrastructure development including roads and power, education, skilling, infrastructure development, ease of doing business and attracting investments.

However, the area of concern for the industry is the reduction in the 200% weighted deduction on R&D spend. This will now be limited to 150% from 1 April, 2017 and 100% from 1 April, 2020, which will immensely impact the growth in domestic innovation at a time when there is a need for higher spend on R&D. That apart government’s move to levy an extra 1% tax on purchase of luxury cars additionally 1% infrastructure cess on small, petrol, LPG,CNG cars while 2.5-4% on diesel and SUV’s having higher engine capacity will have a adverse impact on the automotive industry that has been witnessing a flat growth over the last nine months.

Arvind Balaji, President ACMA, said, “The Budget unveiled by Hon’ble Finance Minister has brought in a welcome change giving an adequate focus on development of the agricultural and social sector, as well as, that of the industry and infrastructure. This focus on rural wealth creation will lead to increased demand for vehicles which have of late been impacted.

ACMA also welcomes the Government’s move of setting up of 1500 multi skill training institutes in partnership with the industry and academia, amendment to the Motor Vehicle Act, amendment in the CENVAT Credit Rules, 2004, which will enable manufacturers with multiple manufacturing units to maintain a common warehouse for inputs and distribute these inputs with credits to the individual manufacturing units, also the hike in interest rate to 9% from earlier 6% in case in delay of refund by the authorities.”

Further, the proposal made in the Rail budget to establish India’s first rail auto hub is a welcome move since it will significantly bring down the logistic cost and facilitate the last mile connectivity for shipments. This is a clear demonstration of the government’s commitment towards the Make in India initiative.