Volvo Group India seeks moderate taxation regime for auto sector

Pitching for a more moderate taxation regime for the automobile sector in the forthcoming Union Budget, Volvo Group India has stressed on the need for a careful and selective strategy on phased manufacturing programme in some areas to boost technology adoption.

In its pre-budget expectation note, Volvo Group India President and Managing Director, Kamal Bali also said that the industry is looking forward to a resolute policy to avoid inverted duty structure for components. He said that Volvo Group India was hoping and wishing to see the budget continuing to press forward on infrastructure-focused capital expenditure, clean, green and connected logistics, in order to ensure a robust, competitive and sustainable industrial ecosystem.

After a stellar peak performance in 2018, the automotive sector particularly the CV industry, hit a bit of a roller coaster with the new axle load mandate, graduation to BS-VI regulations, followed by the Covid-19 jolt and lockdowns, the rising commodity prices, chip shortage impacting the supply chain in the last few quarters, Bali said in the note.

While the last few quarters have been a period of strong recovery and rebound, the industry is still not close to the peak of 2018, he said. Terming the production-linked incentive (PLI) scheme together with the vehicle scrappage policy as "path breaking measures," Bali said these, and many more, initiatives strike at the root of the constraints that “we have been confronted with, and, therefore, bode well for the economic growth.

File photo used for representational purpose only (AFP)

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File photo used for representational purpose only (AFP)

Noting that the automotive sector, which contributes to almost half of India's industrial GDP, is at the cusp of major transformation on the back of emerging technologies, climate agenda and future mobility trends, he said the sector, however, also needs some support on a more moderate taxation regime. "For instance, the GST rate on some auto components is at the upper end of the spectrum (clubbed with luxury goods) at 28 per cent.

The industry would like to see a uniform GST rate of 18 per cent on all auto components in the upcoming budget. Apart from this, the industry is looking forward to a resolute policy to avoid inverted duty structure for components," Bali stated. The current Customs duty rates are high and there is a scope for reduction, he said, adding, since tax buoyancy has been sustained over a period of time, the GST rates can now be finally rationalized.

According to Bali, support from all stakeholders is needed to pace up urban development towards sustainable living to support the influx into our cities. In this context, it is important that public transport development should be a focus at least in the top 100 cities, in order they do not face the same challenges as our top metro cities face today, he said. The sector should be provided infrastructure status (including lower GST) to get the necessary focus, lower interest rates, private investment and the desired impetus, Bali added.

The government policy and initiatives such as National Manufacturing Policy, PLI scheme, Industry 4.0, MSME and Startup focus, all of which aim to enhance the share of manufacturing in GDP to 25 per cent, are both ambitious as well as apt, he said in the note. "In addition, we need a careful and selective strategy on phased manufacturing programme in some areas to boost technology adoption to achieve our overall and inclusive development goals. This will also drive local innovation and strategic investment," Bali stated.

Reiterating specifically the need to focus on the MSMEs, which according to him are the backbone of the industrial ecosystem, he said it would be good to see measures that will further improve credit lending, support through SAMARTH and funding that will enable investments for emerging technology adoption. "I also expect further boost to initiatives that will make compliance easier to improve ease, cost and speed of doing business and fast implementation of National Single Window Scheme (NSWS)," he said.