Union Budget 2018: Reactions from the Indian automobile industry

Team OD Updated: February 05, 2018, 03:26 PM IST

Gaurav Karnik, Tax Partner Automotive sector, EY India

"From an automotive sector perspective, much was expected from the Budget. However, the Budget provided only a few positives on the direct tax side such as reduction in corporate tax rate to 25 percent for companies having turnover up to Rs 250 crore, rationalisation of the tax incentive for hiring new workers. On the indirect tax side, with a view to promoting the Make in India program the customs duty rates have been increased on automobile parts, CBU and SKDs. However, there has been no extension of direct tax benefits for R&D which was much needed keeping in perspective the upgradation to BS VI emission standards.

Abhishek Jain, Tax Partner, Automotive sector, EY India

To further foster the national initiative of Make in India by automobile players as well, basic customs duty rate for import of various parts (including engines) by automobile manufacturers have been increased. With doubling of the BCD rate for engines from a current levy of 7.5% to 15%, manufacturing cost of automobiles with imported engines is expected to see a steep rise. The costs further being stressed with increase in BCD rates for various parts & accessories as well as seats. While these would typically impact auto manufacturers in India who import parts of the vehicle, similar impact is expected to be sensed by those importing motor vehicles in CKD forms as well.

Raghupati Singhania, Chairman & Managing Director, JK Tyre & Industries Ltd

"Budget 2018-19 as anticipated has put major thrust on the agro-rural economy. The allocation of nearly Rs. 15.7 lac crore to this sector, which is almost 10% of the GDP, is many time higher than in the previous year. Various measures to put in place a mechanism to boost farmers' income, higher credit for agri sector, creating clusters for horticulture crops and supporting food processing, will give tremendous boost to agro rural economy. This in turn will improve their buying power and will encourage consumption. Health protection programme envisaging medical care and hospitalization for 10 crore poor families is indeed a bold step forward in ensuring healthcare for all.

Credit support and lowering of tax rates for the MSME sector will boost the sector that plays an important role in the economy. Renewed emphasis on infrastructure development, in particular large outlays in railways, will keep the economy ticking. The corporate sector was hoping that the Finance Minister will live up to his promise of reducing corporate tax from 30%. On the other hand, surcharges have been increased, thereby making effective rates even higher than before.

Increase in import duties on Truck Radial tyres is a welcome move, which will help the domestic Industry."

Yevgen Sokolnikov, CEO, co-founder of boodmo

I am happy to note that India is giving special attention and treatment to medium and small enterprises (MSMEs), which is said to have been due for long. I expect that businesses like ours having technology interface, will gain due to the country's renewed focus on digital transactions and ease of doing business

Sohinder Gill, Director- Corporate Affairs, Society of Manufacturers of Electric Vehicles

"As the EV Policy is not a part of the budget, we were not expecting any major announcement related to electric vehicles in today's budget. However, we are happy to note that there are general announcements made today, which will support the cause. For example air pollution, higher excise duty for indigenization, increase in agriculture infrastructure spends as well as other announcements alike, which will directly and indirectly support the automobiles, especially two wheelers, hence giving a further boost to EVs. We all know that the new EV policy is in the advance phase of formulation and it will be a separate policy which will come after a few months. It is expected that the policy will be stable in the long term, which will shape up the future of the electric vehicles.

The only thing we were expecting from the budget was rationalization of GST rate i.e. currently 12% for EVs and 28% for EV batteries. Also, we had requested that GST should be made at least either 0 or 5% for initial years. But we didn't find any mention of the same. Perhaps it will be covered in the policy, later. Overall we are happy with the outcome of the budget."

Sridhar V, Partner, Grant Thornton India LLP

Increased outlay for rural roads covering 3.1 lakh km, meeting targets on NHAI roads and bringing 36 km roads under renovation, facilitating smooth hassle-free travel on toll roads by bringing in Fast Tag features (electronic payment) mandatorily in all vehicles, focus on increasing rural income through various measures in the agri sector, are top enablers for the auto sector in this budget. Having said that, one will have to look at fine print for further details.

Rohit Saboo, President and CEO, National Engineering Industries Limited (NEI).

While there was no specific mention about the automobile industry in the budget, the sector is poised to benefit from the government's strong focus on boosting infrastructure and connectivity. Increased allocation of funds for roads and highways will bring positive sentiments for the sector by increasing demand for transport. Infrastructure development has always been prerequisite for growth and the key focus towards boosting rural economy and improving the farming sector will further spur the demand for automobile components especially for tractors and two-wheelers. With a certain focus on increase in custom duty on the auto component, we also expect a boost for the manufacturing sector.

Nawneet Vibhaw, Associate Partner, Khaitan & Co.

"It is a great initiative by the Government as it will not only incentivise sustainable ways of disposing crop residue but will also ensure that unnecessary burden is not imposed on citizens and stakeholders who may not have done anything to contribute to the worsening air quality in NCR and adjoining areas."

Jatin Ahuja, founder and managing director, Big Boy Toyz.

"The lowering of corporate tax to 25% from 30% comes as a welcome move for corporate corridors. The industries will now be charged to take up new financial goals with reduced tax burden",

Rajeev Singh, Deloitte

"Increased allocation for infrastructure projects such as National highways (target completion in FY17-18 is -9000 KMs) and Bharat Mala project (target completion of 35,000 KM in Phase 1 at cost of Rs 5.35 lakh crore)for seamless connectivity in the union budget should give much needed push to the sector especially M&HCVs (Medium and Heavy Commercial vehicles). Good rural focus (credit for agricultural activities increased from Rs 10 lakh crore to 11 lakh crore )will primarily help to boost retail growth in rural market and thereby bring more growth in auto industry. For example the Min purchase value for khariff crops 1.5 times the cost will boost rural income thus driving demand for 2 Wheelers, farm equipment's and LCVs (light commercial vehicles) in Rural areas. Other transformational initiatives such as focus on building 3.71 lakh rural roads, mandatory introduction of Fasttags in all new vehicles from Dec 2017, National Policy on "Pay as you use" model, will help in providing seamless connectivity between cities / towns and hassle free travel on National highways. The Finance Minister's decision to promote skill development in the industry by announcing a National Apprentice scheme to train 50 lakh youth by 2022, increased allocation of Rs 3794 crore towards MSMEs credit support, increasing the turnover range of MSME companies from 50 crore to 250 crores to pay a standard corporate tax rate of 25 percent will benefit nearly 8000 auto component players, as nearly 90 percent of these fall under MSME category."