The auto parts industry body is seeking some central government easing in the Union budget, including a uniform 18 percent goods and services tax rate on all auto parts. It stated that lowering the GST rate from the current 28 percent would help manufacturers deal with the impact of counterfeits in its aftermarket business. In its recommendations, the Automotive Component Manufacturers Association (ACMA), the highest representative body of manufacturers, urged the government to consider raising RoDTEP tariffs, or waivers of duties and taxes on export products.
RoDTEP is a flagship export promotion program that was introduced in January 2021 as a replacement for the Merchandise Exports from India Scheme after the WTO rejected the export subsidy program. ACMA says that RoDTEP rates for the auto parts industry of 1 percent or lower are insufficient to cover the occurrence of unrefunded taxes and duties on exports. It is proving to be detrimental to the competitiveness of India’s auto parts industry, it added.
ACMA President Sunjay Kapur said the auto parts industry, as an intermediary, is witnessing one of its most challenging yet interesting times as disruptions caused by the pandemic, new technologies and regulations redefine mobility.
Mr Kapur added in a statement that due to the high VAT rate of 28 percent, the industry’s major aftermarket processes are plagued by gray operations and counterfeits. He added that an 18 percent rate not only addresses this problem, but also improves the tax base through better compliance.
ACMA also advised that reintroducing the investment deduction at 15 percent for manufacturing companies investing more than Rs 25 crores in factories and machinery will motivate manufacturers to invest in new technologies. To encourage research and development, it advised the government to keep the weighted tax deduction, citing the gradual reduction from 200 percent to 100 percent between 2016 and 2021.
Mr Kapur further said the government would take steps in the right direction if it allowed capacity building investments and boosted research and development.