Budget 2019 expectations for auto sector: Cheaper cars with GST cut, incentive to scrap old vehicles

Full Budget 2019 expectations for auto sector: Ahead of the first full Budget 2019 presentation in the second term of Narendra Modi government, the ailing auto sector has huge expectations. The sector is passing through one of the longest sales slowdowns. To get out of it, the auto industry is seeking the reduction of GST on all vehicles to 18 per cent from the current rate of 28 per cent.  The Society of Automobile Industry (SIAM) has asked the government to announce an incentive-based vehicle scrappage scheme to get polluting, unsafe and old vehicles off the road and help them replace with new ones.

In a pre-Budget meeting with finance ministry officials earlier this month, SIAM said that GST rate on all categories of vehicles should be "brought down to 18 per cent from the current rate of 28 per cent". This will reduce vehicle prices and help in spurring demand that has been sluggish for the last 11 months, news agency PTI quoted an industry executive.

In April, passenger vehicles sales dropped by 17.07 per cent. The was steepest decline in nearly 8 years - the biggest fall since October 2011. Experts blamed weak customer sentiment led by liquidity crunch, uncertainty before elections and high product prices hit sales.

SIAM has also proposed an incentive-based vehicle scrappage scheme to get polluting, unsafe and old vehicles off the road.

To support local manufacturing, SIAM asked the ministry for to increase applied customs duty on fully imported commercial vehicles (CV) to 40 per cent from 25 per cent and reduce the customs duty on semi-knocked down CVs to 20 per cent from 25 per cent for promoting local value addition.