Budget 2022 Expectations: From uniform GST on spare parts to reintroduction of investment allowance, ACMA places wishlist for FM Nirmala Sitharaman

Auto components industry is seeking a uniform Goods and Services Tax (GST) levy of 18 per cent on all auto parts to curb the impact of counterfeits in the aftermarket operations. The demand was raised by Automotive Component Manufacturers Association (ACMA) on Tuesday ahead of the Union Budget 2022.

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In its pre-Budget recommendations, ACMA has also asked the government to consider upward vision of RoDTEP (Remission of Duties and Taxes on Export Products) rates as the rate notified for the sector at 1 per cent or lower is inadequate to cover the incidence of unrefunded taxes and duties borne on export products.

Finance Minister Nirmala Sitharaman will be presenting annual budget for the financial year 2022-23 on 1 February 2022.

"The auto component industry, being an intermediary, has recommended for a uniform GST rate of 18 per cent on all auto components," a PTI report said quoting ACMA President Sunjay Kapur.

The industry has significant aftermarket operations that are plagued by grey operations and counterfeits due to the high 28 per cent GST rate, he added.

"A moderate rate of 18 per cent will not only address this challenge but will also enhance the tax base through better compliance," Kapur said.

Investment in new technologies

With the focus of the government on environment, energy security and vehicular safety, he said it is imperative for the auto components industry to invest in newer technologies and create capacities to meet the growing domestic demand for such products.

"Facilitating investments for capacity building and encouraging R&D and new product development will be steps in the right direction by the government," Kapur added.

Reaction on PLI scheme

He also welcomed the government's policy announcements on the production linked incentive (PLI) schemes for ACC (advanced chemistry cell) battery, auto and auto components, and extension of FAME-2 scheme.

These steps were very timely and "will facilitate the Indian automotive sector in becoming integral to global automotive value chains as also staying relevant", he noted.

Challenging and interesting times for auto industry

"The automotive industry is witnessing one of the most challenging, yet interesting times, ever. Disruptions due to the pandemic, new technologies and regulations are redefining mobility," he added.

On its demand for upward revision of RoDTEP rates, ACMA said the current rate is deterring the competitiveness of the Indian auto component industry.

Reintroduction of investment allowance

Seeking reintroduction of investment allowance at 15 per cent for manufacturing companies that invest more than Rs 25 crore in plant and machinery, ACMA said, "This will motivate manufacturers to invest in new technologies, specifically e-mobility and its components/ ancillaries related to plant and machinery."

Drawing the attention of the government to encourage domestic R&D and testing, ACMA said retaining the weighted tax deduction on R&D expenditure is critical.

"The 2016-17 Budget reduced weighted deduction benefit from 200 per cent to 150 per cent and has further restricted the deduction to 100 per cent from 1st April 2020," it said.

Besides these recommendations, ACMA said it has also put forth several suggestions in order to ease the 'cost of doing business' in India.

(With PTI inputs)