Mumbai: Dun and Bradstreet (D&B), world's leading provider of global business information, knowledge and insight, has outlined certain expectations from the finance ministers' Budget 2008 speech, for different sectors of the Indian economy.
Key highlights of D&B's wish list are:
Passenger Vehicles: Presently, certain category of small cars enjoys a concessional excise duty at the rate of 16 per cent.
Such cars require being below 4,000 mm in length and having an engine capacity of 1,200cc in case of petrol and 1,500cc in case of diesel.
All other categories of cars and multi-utility vehicles attract excise duty of 24 per cent.
The industry expects the forthcoming Budget to bring down excise duty on the remaining categories of cars, i.e., on cars other than below 4,000 mm in length and having an engine capacity of 1,200cc in case of petrol and 1,500cc in case of diesel.
If excise duty is brought down, then vehicle manufacturers are expected to pass on the benefit of reduced excise duty to the consumers, by way of lowered vehicle prices. This, in turn, would boost demand for such vehicles.
Auto Components: The auto component industry has been registering appreciable growth for the past several years. The industry is projected to maintain its growth level in the coming years due to widely successful acquisitions and joint ventures, adoption of new technology and inflow of huge investments from domestic and foreign players.
The industry expects the following on part of the government to encourage the industrial growth.
- Direct tax breaks for exports and investments above the set threshold level of Rs500 million
- Reduction of excise duty on components for small cars and two-wheelers to 8 per cent from current 16 per cent
- Correction of inverted duty structure arising from the FTA (Free Trade Agreement) signed with Thailand
- Devise an incentive structure similar to that prevalent in countries like China and Thailand
- Extension of the weighted deduction of 150 per cent of the expenses incurred on research and development (R&D) for at least 10 years even after 2012
- No further reduction in custom duty
- Reduction of duty on steel and other raw materials
Tax breaks for investments above the stipulated level would attract more investments in the sector. Simultaneously, formulating an incentive structure at par with countries like China and Thailand will make the Indian auto component industry an attractive sector for investments.
The industry is presently facing an inverted duty structure wherein import of auto components is cheaper compared to imports of raw materials for the manufacture of the components. The correction of this structure would provide some form of respite to the component manufacturers.
Reduction of excise duty would reduce the cost of components. Similarly, reduction of duty on steel and other raw materials would make raw materials cheaper. These reductions would be of great relief to the manufacturers as it would further reduce the cost of production and mitigate pricing pressures.
The industry is already witnessing a surge of cheap imports from countries such as China. Any further reduction in customs duty would make the scenario worse. Extension of benefits in the field of research and development (R&D) would be significant to the industry, as it will help the players graduate to high-end service providers. This would also aid rising exports and growth of the industry.