Budget 2022 Wishlist: Auto retailers seek bold steps, lower GST rates on two wheelers, used cars

The Federation of Automobile Dealers Association highlights certain issues that are impacting the Indian automobile industry and auto dealerships.

With just days to go before Finance Minister Nirmala Sitharaman presents her Union Budget 2022-23, the Federation of Automobile Dealers Association or FADA has highlighted certain issues that are impacting the Indian automobile industry and auto dealerships.

Seeking to reenergize the auto retail trade, the apex body for Indian automobile retailers has sought benefits for claiming depreciation on vehicles for individuals paying Income Tax. This, according to FADA, will only help in increasing the number of individuals filing their IT returns but will also help in igniting automobile demand from individuals and at the same time increase GST collection for the government. 

The vehicles depreciate for both corporate as well as individuals and it would hence be judicial that the salaried class should also get the same benefit, FADA said in a statement. The Association further sought the reintroduction of the Depreciation Scheme, which was valid only till March 31, 2020.

Another recommendation made by FADA was with regard to the regulation of GST rates to boost volumes in two-wheeler automobile sales. Reducing GST rates on two-wheelers to 18 per cent, the association said, would bring the industry and auto retail trade back on the growth path. 

Justifying its demand, FADA noted that two-wheelers are not used as a luxury but as a necessity to travel distances by lower class and rural segment for their daily working needs. Hence, the rationale of 28 per cent GST + 2 per cent cess that is applicable on luxury products does not hold good for the two-wheeler category. Further, FADA said that currently, vehicle prices are increasing after a gap of every three-four months due to continuous price hikes in metals and various other factors. So, a reduction in the GST rate will counter the price hike and help spur demand.

The auto retailers body has also sought a reduction in GST rates for used cars to five per cent from the current rate of 12 per cent (for sub-4000 mm vehicles) and 18 per cent (for vehicles over 4000 mm). The association noted that the used car business occupies 1.4 times the size of the new car market, accounting for 5-5.5 million cars per annum with a turnover of over Rs 1.75 trillion. 

A uniform GST rate of 5 per cent on the margin for all used vehicles will lead to a win-win situation for all three stakeholders -- the government, dealers and vehicle owners, FADA said. The GST reduction will help the industry to shift from unorganized segment to organized segment, thus bringing in more business under the ambit of GST helping in putting a brake on tax leakages, it further said.

FADA India, which represents over 15,000 automobile dealers having 26,500 dealerships, has also sought a reduction in Corporate Tax for LLP, proprietary and partnership firms. Highlighted that the Centre had reduced corporate tax to 25 per cent for private limited companies with turnover of up to Rs 400 crore, the association sought similar benefits for LLP, proprietary and partnership firms. 

This, FADA claimed, will help boost the morale and sentiment of the traders which employ 5 million people, out of which 2.5 million employees are on direct employment. Asserting that the auto industry is the barometer of any country's economic performance, FADA has appealed to the Finance Minister to take bold steps to foster sector growth.

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