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Budget 2016 Mixed Bag For Indian Automobile Industry: SIAM

Introduction of service tax on passenger transport will have a dampening effect, says Society of Indian Automobile Manufacturers

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The Society of Indian Automobile Manufacturers (SIAM) has said that the Union budget for the fiscal year 2016-17 is a mixed bag for the domestic automobile industry.

"An additional 1 per cent tax to be collected at source on purchase of cars exceeding value of Rs 10 lakhs will be a deterrent. Infrastructure cess of 1 per cent on small petrol, LPG, CNG cars, 2.5 per cent on small diesel cars of less than 1500 cc and 4 per cent on other higher engine capacity vehicles and SUVs would be levied with immediate effect. We believe this would result in the rise of prices across categories of passenger vehicles and would hurt the industry," said Vinod Dasari, president of SIAM.

The auto industry body seems disappointed over no announcement on fleet modernization. With the government’s focus on rationalization and simplification of taxes, introduction of new taxes on vehicles will only dampen the spirit of the auto sector.

Introduction of service tax on passenger transport will have a dampening effect, SIAM added.

The industry is happy to note that a grant of Rs 200 crores have been made to the FAME scheme and NATRiP.

Moreover, the validity period of exemption granted to specified goods for the use in the manufacture of electrically operated vehicles and hybrid vehicles is being extended without time limit. This will help improve the consumer sentiment around these vehicles and promote faster adoption.

SIAM welcomes clarification regarding mode of payment of NCCD from cenvat for past period. This is something that SIAM had been suggesting for quite some time.

The basic customs duty on import of aluminium, aluminium products and zinc alloys has been increased which will impact the industry.

The weighted tax deduction on R&D expense has been reduced from 200 per cent to 150 per cent from April 01, 2017 and it will further be reduced to 100 per cent from April 01, 2020. This will go against indigenous R&D in India, said SIAM.

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