Budget 2020: GST cut, EV incentives on auto industry's wishlist

Budget 2020: The auto sector has a lot of expectations from the upcoming Union Budget 2020. The industry wants Finance Minister Nirmala Sitharaman to take bold fiscal measures to revive the sector. The automobile industry reported worst-ever sales decline in two decades in 2019.

Here are the key demands:

1. GST cut on vehicles: GST reduction (on vehicles) from the existing 28% to 18% to boost consumption on the back of slackening demand and price hikes led by BSVI implementation from April 2020.

Hybrids are placed in the same bracket as large cars and SUVs and are taxed at 43%, which is very high as compared to EVs which have a GST of 5%. The industry expects FM Sitharaman to either lower the GST on hybrids to 18% from 28% or reduce the 15% cess.

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2. Incentive-based scrappage policy: In order to get old, outmoded and polluting vehicles such as trucks and buses off the roads, the auto sector hopes the government to implement an incentive-based scrappage policy soon. The policy will make it obligatory to dispose of old vehicles (older than a specified period of holding) which will create demand for new (commercial) vehicles in the market.

3. Incentivise private buyers of electric and hybrid cars: The industry wants the government to incentivise private buyers of electric and hybrid cars, apart from the ones who put up their vehicles for commercial use under the Faster Adoption and Manufacturing of Electric and Hybrid Vehicles (FAME) scheme. This should be done to increase vehicle sales and push demand for EVs and hybrid vehicles.

4. Abolition of duty on import of lithium-ion battery cells: Industry wants the government to provide relief to the auto industry from customs duty on lithium-ion battery cells import. This is vital to develop the EV ecosystem in India, notably battery manufacturing. The finance minister should also give incentives for local manufacturing of EV batteries.

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