Budget 2021: New taxes may be counterproductive, say auto industry leaders

With Covid-19 pandemic hammering the auto industry to historic lows, the concern around taxes may have grown and right ahead of the upcoming Union Budget 2021, scheduled to be presented in Parliament on 1st February, several auto industry leaders are hoping there won’t be any tax increase, new taxes, or both.

Industry leaders like Maruti Suzuki’s Executive Director Shashank Srivastava, Audi India Head Balbir Singh Dhillon and Daimler India Commercial Vehicles' MD and CEO Satyakam Arya in a webinar hosted by HT Auto on Thursday pointed out their expectations from Budget 2021 and were mostly united in their opinions about additional taxes possibly working out to be counter-productive.

According to Srivastava, the cost of acquiring a vehicle for the Indian customers has gone up substantially due to the factors such as the shift to BS- 6 emission norms, road tax, insurance cost and GST. “The government should focus on reducing the cost of acquisition. To encourage consumption and increase the disposable income of the consumers, interest paid on car loans can be exempted from income tax. Depreciation value of vehicles can be extended," he said.

Dhillon also emphasized reduction of cess and easier financing options that could help the auto industry by encouraging buyers. “We need a stable policy regime where the auto industry stakeholders get ample time to comply with a new regulation, instead of just nine to 12 months, he said.

Arya firmly believes that commercial vehicles are the backbone of the country and that increase in disposable income with people will give impetus to demand for goods. “I am not asking for a tax cut, but rationalize the tax structure," said Arya. "Increased tax to increase revenue, I think, would be counter-productive."

Scrappage policy to help increase demand

The scrappage policy is likely to come into effect in a few months and this could help the auto industry as a surge in demand may follow. The general consensus among the panelists is that the policy will not only lead to a reduction in emissions but it could create fresh demand.

Of EVs and more

A cautious approach when it comes to electric vehicles is perhaps the best way forward, especially when it comes to luxury segment. Dhillon confirmed once again that Audi is planning to bring in its EV offering to India but that careful planning and infrastructure push would be crucial. "Infrastructure is the key. Massive motorization is yet to happen in India. We are cautiously optimistic but we have to be careful because people have range anxieties," he explained.

Srivastava pointed out the need for giving impetus to hybrid vehicles. "Cost of battery technology is extremely high and this makes cost of EVs high. We believe alternate technology like CNG and hybrid vehicles are the way forward. We especially expect support for hybrid vehicles," he outlined.