ACMA calls for a growth-oriented Budget

With a goal to cross the US$ 100 billion (Rs 631,700 crore) mark and have at least five Indian suppliers amongst the Top 100 by 2020, the Automotive Component Manufacturers Association (ACMA) has submitted its recommendations to the government for the forthcoming Union Budget for the year 2015-16.

These recommendations, says ACMA, reflect the spirit of the auto component manufacturers who are looking forward for support from the government to revive the industry and to realise their ambition of growing exports to US$ 35-40 billion and build overseas revenues of US$ 20-22 billion over the next five years. The industry clocked a turnover of US$ 35 billion (Rs 221,095 crore) in 2013-14 with exports of over US$ 10.2 billion (Rs 64,433 crore).

Commenting on the auto component sector’s expectations of the forthcoming Budget, Ramesh Suri, president, ACMA, said, “The clarion call to ‘Make in India’ by prime minister Narendra Modi which is designed to facilitate investments, foster innovation, enhance skill development, protect intellectual property and build best-in-class manufacturing infrastructure in the country could not be more timely; it has enthused the entire manufacturing industry. We expect the forthcoming Budget to lead to the creation of a favourable and stable policy environment to boost industrial revival and enable growth in domestic auto sector.”

The auto sector faced one of the most trying times in the last fiscal; flagging vehicle sales, high capital cost, high interest rates, fluctuating exchange parity, slowing down of investment and infrastructure challenges had adversely impacted the growth of the auto component industry.

Some of ACMA’s recommendations to the government are:

- Continuation of 10 percent excise duty on auto components: ACMA has recommended continuing of the excise duty rate of 10 percent, which was valid only till December 31, 2014.

- Early implementation of GST / phasing out CST: There is an urgent need to reduce multiplicity and complexity of applicable taxes through early implementation of GST.  Further, till such time the GST is implemented, CST be reduced to 1 percent from the existing 2 percent.

- Elimination of customs duty on alloy steel, mild steel, aluminium alloy and secondary aluminium alloy: Domestic steel / aluminium Alloy suppliers benchmark their prices based on the landed prices. This makes the inputs expensive for the domestic component manufacturers. Further, due to various trade agreements, auto components are facing reduced customs tariffs in comparison to the basic raw materials needed for their manufacture; this has resulted in an inverted tariff structure in some of the cases.  Elimination of customs duty on the raw material will therefore set right the equation.

- Allowing input credit on diesel: Due to power shortage manufacturers have to resort to generating their own power though gen-sets thus increasing the cost of production. ACMA has recommended that such manufacturers be allowed to avail input credit on diesel procured for internal power generation.

Direct Tax:

- Encouraging R&D: At present 200 percent weighted deduction under section 35(2AB) of the Act is available for in-house R&D facility and 175 percent weighted deduction on outsourced R&D from approved institutions – national laboratories, universities, scientific research institutes and IITs.

ACMA says the 200 percent weighted deduction should be extended to R&D facilities, which are outsourced to third-party service providers or other institutions. Furthermore, the amount of weighted deduction under Section 35(2AB) maybe allowed when computing tax under 115JB. This will alleviate accumulation of MAT credit.

- Enhancing depreciation rate on capital goods: The current depreciation rate on Capital Goods should be enhanced to 25 percent from 15 percent. Further, domestically manufactured capital goods be allowed 40 percent Depreciation. This, says ACMA, will encourage capital investment in the industry.