The Automotive Component Manufacturers Association (ACMA), in its budget recommendations, wants a uniform GST rate of 18% on all auto components.

It has also asked the government to  consider an upward revision of RoDEPT (Remission of Duties and Taxes on Export Products) Rates adopting measures to enhance investments, including that for R&D.

Sunjay Kapur, President, ACMA, said the auto   components  industry has significant aftermarket operations that are plagued by grey operations and counterfeits due to the high 28 per cent GST rate. "A moderate rate of 18 per cent will not only address this challenge but will also enhance the tax base through better compliance,” said Kapur. 

 “That apart, with focus of the government on environment, energy security and vehicular safety, it is an imperative for the auto components industry to invest in newer technologies and create capacities to meet the growing domestic demand for such products. Facilitating investments for capacity building and encouraging R&D and new product development will be steps in the right direction by the government,” added Kapur.

According to ACMA, the RoDTEP Scheme which  was introduced effective beginning January, 2021, replacing the MEIS scheme (Merchandise Exports Incentive Scheme) for auto components sector at 1% or lower, are inadequate to cover the incidence of unrefunded taxes and duties borne on export products, thereby  acting as a deterrent to competiveness.

In addition, the provision to reintroduce the investment allowance at 15% for manufacturing companies that invest more than Rs 25 crore in plant and machinery will motivate manufacturers to invest in new technologies, specifically e-mobility   and its components/ ancillaries related plant and machinery, Acma said.

Acma’s other recommendation is that in order to encourage domestic R&D and testing, it is imperative to retain the weighted tax deduction on R&D expenditure.  The 2016-17 Budget reduced weighted deduction benefit from 200% to 150% ,and has further reduced the deduction to 100% from 1st April 2020.