2015 Union Budget: What It Has For Indian Automobile Industry

The much-awaited first full-term budget of the current government is finally out, which attempts to address several issues, including a few raised by the Indian automobile players. Additional excise duty on vehicles, speeding up the implementation of GST (Goods and Service Tax), lowering interest rates on vehicles, etc. were the primary demands raised by the Indian auto players. Save for the assurance of speeding up the implementation of GST, most demands raised by auto players were not addressed in the current budget. That said, reduced corporate tax (from 30% to 25%) and the government's focus on infrastructure will indirectly help the auto industry.

Lower excise duty benefit was the primary demand that all the automakers were asking, which in the new budget has not been addressed. This means that cars and two-wheelers will not get cheaper. The previous UPA government had cut excise duty on cars, SUVs and two-wheelers in its interim budget in February 2014 to help the industry tide over a demand slump.

Excise duty was reduced to 24 per cent from 30 per cent in the case of SUVs, 20 per cent for mid-sized car from 24 per cent and 24 per cent for large cars from 27 per cent. In June, the new government led by Narendra Modi extended the excise duty concession by six months to December 31. But in January, it was rolled back and the excise duty slab came to the old structure once again.

While there is no change in the excise duty structure, the GOI has announced to speed up the implementation of Goods and Service Tax (GST) that the auto industry had been demanding for quite a long time. It will create a uniform tax structure across all states. The govt said that the GST will come into effect from April 2016.

Also, the Indian auto players were hoping the govt to ask banks and financial institutions to lower the interest rate on vehicles to bring the positive sentiments among buyers. But the 2015 Union Budget hasn't addressed this issue as well.

To promote green vehicles, the government of India has proposed Rs. 75 crore for electric vehicle manufacturing. Also, the excise duty concession on EV manufacturing will continue.