Commenting on the auto component sector's expectations of the forthcoming budget, Ramesh Suri, president ACMA, said, The clarion call to Make in India by Honourable Prime Minister Mr Modi which is designed to facilitate investments, foster innovation, enhance skill development, protect intellectual property and build best in class manufacturing infrastructure in the country could not be more timely; it has enthused the entire manufacturing industry. We expect the forthcoming budget to lead to creation of a favourable and stable policy environment to boost industrial revival and enable growth in domestic auto sector."
The auto sector faced one of the most trying times in the last fiscal; flagging vehicle sales, high capital cost, high interest rates, fluctuating exchange parity, slowing down of investment and infrastructure challenges had adversely impacted the growth of the auto component industry.
Continuation of 10% excise duty on auto components.ACMA has recommend continuing of the excise duty rate of 10%, which was valid only till December 31, 2014.
There is an urgent need to reduce multiplicity and complexity of applicable taxes through early implementation of GST. Further, till such time the GST is implemented, CST be reduced to 1% from existing 2%.
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.
Due to power shortage manufacturers have to resort to generating their own power though gen-sets thus increasing the cost of production. ACMA has recommended that such manufacturers be allowed to avail input credit on diesel procured for internal power generation.
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.
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.
The 200% weighted deduction should be extended to R&D facilities, which are outsourced to Third-Party service providers or other institutions. Furthermore, the amount of weighted deduction under Section 35(2AB) maybe allowed when computing tax under 115JB. This will alleviate accumulation of MAT credit.
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