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Positive Impact on Automobile industry in Budget 2009 Print E-mail
Written by Rajeev, Anand   
Tuesday, 07 July 2009
New Delhi: Several proposals in the Union Budget, including increased expenditure by National Highway Authority of India (NHAI), enhancement of outlay of Prime Minister’s Gram Sadak Yojana by 59% and further expansion of allocation to JNNURM would have significant positive impact on the automobile industry, in the medium to long term.

Mr Ravi Kant, President - SIAM,  welcomed the Finance Minister’s announcement stating that Goods & Services Tax (GST) would be in place from 1st April 2010.

This is an important announcement for stability and predictability in the taxation structure. However, absence of any mention about reduction of Central Sales Tax (CST) from 2% to 1% as per the roadmap, was a cause of concern. The increased government borrowings may lead to liquidity issues and rise in interest rates. These would need to be addressed through monetary policy.

Citing these positive proposals in the Union Budget 2009-10, Mr Ravi Kant said that in recent times, rural market has been playing an important role for the automotive sector and measures aimed at enhancing the income levels in rural areas including increase in allocation to NREGA will have positive impact on automobile industry.

The announcement of formation of a Committee to review petrol and diesel pricing is a positive move.

Shri Pranab Mukherjee, Union Finance Minister, has announced the reduction of excise duty applicable to large cars / utility vehicles of engine capacity of 2000 cc and above from Rs.20,000 per vehicle to Rs.15,000 per vehicle. The excise duty on petrol driven trucks/lorries has been reduced from 20% to 8%, while on chassis of such trucks/lorries, the reduction is from ‘20% + Rs.10000’ to ‘8% + Rs.10000’.

On indirect tax front, SIAM welcomed retaining of the rates of excise, customs and service tax. The reduction of the additional levy of Rs 20,000/- to Rs 15,000/- is an important first step and the industry hoped that further tax rate rationalization would take place and the excise duty on Utility Vehicles and Cars other than Small Cars would go down.

On direct tax front, abolition of Fringe Benefit Tax (FBT), Commodity Transaction Tax (CTT) and removal of surcharge of 10% on personal income tax will also have positive impact.

However, Mr Ravi Kant added that while these proposals will have a positive impact on the automobile industry, these will be visible in the medium term and long term rather than having any immediate impact, more so for the commercial vehicle segment, which is going through severe downturn. A specific package for this segment is required.

Reacting to the Union Budget Kurt Rippholz, Volkswagen India said, "Volkswagen Group who is present in India with its brands Audi, Skoda and Volkswagen welcomes the 2009-2010 Union Budget’s aim to touch 8% to 9% level of economic growth. In our opinion it seems that the best move possible made by the government would have to be the three focused fiscal stimulus package that they have come up with.  We also look forward to the proposal by the Government to set up an expert group to advise on a viable and sustainable system of pricing petroleum products, as this will surely has an impact on the automobile industry."  

"India offers us a market with a promising future. The announced reduction on the basic customs duty on bio-diesel is great news for all companies working on environmental saving technologies. Weight-age has also been put on various other fronts, which we believe will lead to greater opportunities," he added.

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