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Home arrow News arrow Govt. levys, taxes and budget arrow Union Budget 2011-12 is on expected lines for the Automotive Industry
Union Budget 2011-12 is on expected lines for the Automotive Industry Print E-mail
Written by Anand   
Tuesday, 01 March 2011
New Delhi: As far as the automotive industry is concerned, the Union Budget 2011-12 is on the expected lines. Finance Minister, Shri Pranab Mukherjee, informed that the share of manufacturing in GDP is expected to rise from about 16% to 25% over a period of ten years.

Dr Pawan Goenka, President, SIAM welcomed the Union Budget 2011-12, terming it as a 'Reform Oriented Budget'. Dr Goenka remarked that Hon’ble FM has given a clear message to the industry by announcing setting up of National Mission for Hybrid and Electric Hybrid vehicles.

He thanked the Department of Heavy Industry for taking it up on behalf of the industry. He also talked about several fiscal measures for promoting such vehicles including introduction of 10% excise duty for Fuel cell and Hydrogen vehicles, exemption to specified parts from Basic Customs Duty and CVD along with 5% excise duty, etc. which would provide a significant incentive to promote the development, manufacturing and sale of such vehicles in India.

The Hon’ble Finance Minister has also removed certain anomalies in the excise duty structure, which SIAM has been requesting for removal, like Taxi Refund extended to vehicles with seating capacity up to 13 persons and exemption to factory-built ambulances from additional excise duty.

Dr Goenka also welcomed that the Hon’ble FM has accepted our request of not rolling back the economic stimulus package and maintaining the Central CENVAT rate. The industry, however, was expecting some rationalization of excise duty on larger cars and utility vehicles, at least removal of additional excise duty of Rs 15,000/- from such vehicles, which was not announced.

He hoped that the implementation of all the measures announced in the Union Budget today would fuel growth of overall economic activity and have a positive impact on the automotive industry.

S Sandilya, Vice President, SIAM welcomed increased allocation to the National Clean Energy Fund and National Skills Development Fund.

CKD Redefined

All vehicles with imported pre-assembled parts like engines, gear boxes, transmissions or chassis shall be excluded from the list of completely knocked down (CKD) units. So far such vehicles attracted a custom duty of 10 percent. If such vehicles get treated as a Completely Built Unit (CBU), it will attract a 60 percent import duty.

Automobile manufacturers in the premium segment such as Mercedes-Benz, BMW, Audi, Mitsubishi, Volkswagen, Toyota, Nissan, SkodaAuto and Harley-Davidson will be most affected by this move.

Some of the affected manufacturers are seeking further clarity on the matter, and have approached the respective industry associations for this.

ACMA - Automotive Component Manufacturers Association

Congratulating the Union Finance Minister, Shri Pranab Mukherjee, President ACMA, Srivats Ram, said, "We are glad that the Hon’ble Finance Minister has unveiled the roadmap for Direct Tax Code (DTC) with a definite date for implementation i.e. April, 2012 and for introduction of Constitutional Amendment Bill in the current session of the Parliament for the GST. Implementation of GST will help not only in creation of ‘one-India’ market, but also bring transparency in implementation of taxation as also mitigate a significant number of taxation issues."

"ACMA also welcomes the setting up the National Mission for Hybrid and Electric Vehicles, which could not have been possible without the support of the Department of Heavy Industry. This is a step in the right direction as the world over a significant investment as also initiatives are being taken in this area. This will also help improve the environmental impact of the automotive industry on the environment. Further, to create an ecosystem for manufacturing of the Electric vehicles in the country, some of the components for the same would now attract nil customs duty. While this may be a benign measure in the short run, we must ensure that we encourage local manufacturing and the entire value-chain, including components, are manufactured in the country, in the long run," added Ram.

Budget on the expected lines - Karl Slym, President & MD, General Motors India

"The Government’s intention to reach consensus with state governments and introduce GST bill in the current session of the parliament, introduction of DTC by April 1, 2012, setting up of National Mission for Hybrid and Electric Vehicles are welcome decisions," said Karl Slym, President & MD, General Motors India.

"Some of the other announcements made by the finance minister for manufacturing and R&D activities should enhance the competitiveness of Indian industry.  The intention to further promote the development of infrastructure, particularly in rural areas, is a positive step.  The government’s commitment to continue with its reform process is likewise positive.  These proposals, if implemented effectively, should have a positive impact on industry and the economy as a whole.  The challenge now is the implementation of the proposals.  Our hope is that the market will respond favorably," Karl Slym added.

Cut on excise duty in hybrid - Krishnakumar Srinivasan, Managing Director –Truck Division - India, Eaton Corporation

"We welcome the government’s decision to set up the National Mission for Hybrid and Electric Vehicles to encourage manufacturing and selling of alternative fuel-based vehicles. Moreover the cut in excise duty to 5% and exemption of customs and CVDs on imports indicate a clear will to promote clean energy for mass transportation. Our hybrid technology for mass transit was recently introduced during the CWG on TATA buses, while globally, vehicles running on our hybrid systems have already completed 160 million kilometers. We are hopeful that these steps by the government will pave the way for us to leverage our capabilities in providing cleaner energy for the mass transit," said Krishnakumar Srinivasan, Managing Director –Truck Division - India, Eaton Corporation.

Unchanged excise duty on automotive segment – Ramchandhra Rao, Executive Director – Automotive Division – India, Eaton Corporation

"The decision to keep the excise duty intact is at 10% is very positive for the automotive industry. This will help the industry to keep the momentum of growth witnessed in the last two years. At a time when the country is battling inflation, this will help the auto industry to remain price competitive. As leading suppliers of engine valves, we at Eaton believe that this will set a positive outlook for growth," said Ramchandhra Rao, Executive Director – Automotive Division – India, Eaton Corporation.


Last Updated ( Thursday, 03 March 2011 )
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