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Indian automobile firms eye tax cuts to rev up sales
Tuesday, 06 July 2004, 19:30 IST
NEW DELHI: India's fast growing automobile industry is looking forward to a further reduction in product tax in the upcoming financial budget for the current fiscal year with a view to putting sales in top gear.
Industry representatives also hope that the government will unveil some tax incentives for encouraging research and development activities in the domestic vehicle and component manufacturing industries.
Finance Minister P. Chidambaram will unveil the Congress-led coalition government's maiden fiscal budget Thursday.
The United Progressive Alliance (UPA) government, which is supported by Left parties from outside, is expected to present a budget that will mainly seek to boost agriculture and rural sectors.
"The automobile industry in India is going great guns at the moment. Most of the companies in the sector are witnessing a dream sales growth," said noted automobile sector analyst Murad Ali Baig.
"So there is nothing really in terms of major fiscal framework that the local vehicle makers are expecting in this year's budget. Even with the existing framework, the industry is poised to do very well," Baig told IANS.
"Having said that, I believe a further cut in the excise duty structure will go a long way in lowering the cost of production for manufacturers and further boosting demand in the domestic market."
Baig said the lowering of excise duty on cars and utility vehicles in the budget of fiscal year 2003-04 from 32 percent to 24 percent had put sales on a sharply higher trajectory of growth.
Car sales in the domestic market rose from 541,491 in fiscal 2002-03 to 696,207 in the year ended March 31, 2004, registering a growth of 27 percent year-on-year as a booming economy boosted consumer spending.
"We have reasons to believe if the excise duty is further reduced to 16 percent from 24 percent in this year's budget, it will really come as a major boost to the industry people," he said.
The Society of Indian Automobile Manufacturers (SIAM), the domestic vehicle industry umbrella group, wants the import duty on raw materials of certain products to be reduced sharply to bring down the production cost.
"Raw material like cold-rolled steel, hot-rolled steel, alloy steel, and certain specific grades are not available in India due to low volume and quality limitations," said the industry association.
"Hence raw material should be available at lowest duty rates for the growth of automobile and auto component industry," it said in a pre-budget memorandum submitted to the finance ministry.
SIAM has also urged the government to increase allocation from automotive cess fund for research and development activities. "Extend the allocation from the cess fund to recognised and approved projects undertaken by the industry."
Indian automobile component makers want the government to set up three special economic zones in the north, west and south India clustering around the major automotive manufacturing hubs.
"There should be exemption from customs duty on inputs, sales tax and excise duty for supplies to units in the special economic zones," said the Automotive Component Manufacturers' Association (ACMA).
"All barriers to inter-state trade and commerce should be removed and a uniform national market to be created on the implementation of value added tax."
India's car market has come a long way in recent years. From the economically priced Maruti-Suzuki 800 compact cars to the Maybach, the new car craze in India is unmistakable.
According to the National Council of Applied Economic Research, a New Delhi-based economic research group, car sales in India will rise to one million vehicles a year by 2012.
Source: IANS
Source: IANS