UNION FINANCE Minister Arun Jaitley’s budget failed to bring cheer to the automobile sector which was hoping for positive intervention to rev up its stalled growth.
The industry feels that the decision to impose infra cess and deduction of TDS on luxury vehicles will have a negative impact on it in the days to come.
While the Union budget made substantial outlays for roads and infrastructure (Rs 2,18,000 crore), the Budget has introduced infra cess ranging from one per cent (small vehicles) and 2.5 per cent (medium vehicles) to four per cent (large vehicles and SUVs).
Anant Sardeshmukh, director-general of the Mahratta Chamber of Commerce Industries and Agriculture (MCCIA), said that the decision would have a negative impact on the automobile industry.
“The automobile industry is the mother of all industrial segments and is reeling under severe demand absence, but has not received any favourable consideration. A large number of MSMEs are dependent on this segment, and hence the budget was not positive for them either,” he said.
The other announcement that will negatively impact automotive companies would be withdrawal of benefits of deduction for research and development. A statement issued by Tata Motors pointed out that it would disincentivise passenger vehicle customers.
“While the passenger vehicle industry has been facing challenges over the last few years, it has barely begun to show some signs of recovery. Additional cesses may disincentivise passenger vehicle customers, impacting the industry,” the statement read.
The statement, however, welcomed the government’s decision to open up private participation in the road transport sector. “Boost in spends related to infrastructure and construction of roads and highways will help increase spends on commercial vehicles, and at the same time improve last mile distribution,” the statement read.
Passenger vehicles form the chunk of vehicles in the automobile industry by volume and have been witnessing single digit growth in the past few quarters.
Wilfried Aulbur, managing partner and CEO India at consultancy firm Roland Berger, said that the budget has been mute as far as passenger vehicles are concerned.
“Charges on luxury vehicles and high capacity SUVs may not dent sales, but clearly, these charges don’t support demand either. The same holds true for pollution cess on various car models,” Aulbur said.