GST cut on auto, incentive to scrap old vehicles on SIAM's budget wish list

New Delhi: Passing through one of the longest sales slowdowns, the auto industry has sought reduction of Goods and Services Tax (GST) on all vehicles to 18 per cent from the current rate of 28 per cent.

Spelling out its Budget wish list, the Society of Automobile Industry (SIAM) has also asked the government an incentive based vehicle scrappage scheme in order to get polluting, unsafe and old vehicles off the road and help them replace with new ones.

During a pre-Budget meeting with finance ministry officials earlier this month, SIAM stated the GST rate on all categories of vehicles be "brought down to 18 per cent from the current rate of 28 per cent". Bringing down the tax rate will reduce vehicle prices, which will help in spurring demand that has been sluggish for the last 11 months, said an industry executive.

In April, passenger vehicles sales witnessed the steepest decline in nearly 8 years with sales dropping by 17.07 per cent -- the biggest fall since October 2011 -- as weak customer sentiment led by liquidity crunch, uncertainty before elections and high product prices hit sales.

During the meeting with the ministry officials, SIAM also proposed an incentive based vehicle scrappage scheme to get polluting, unsafe and old vehicles off the road.

With an aim to support local manufacturing, SIAM has asked for applied customs duty on fully imported commercial vehicles (CV) to be increased to 40 per cent from 25 per cent. Moreover, customs duty on semi-knocked down CVs should be reduced to 20 per cent from 25 per cent to promote local value addition, SIAM said in its recommendation.

The auto industry body also pitched for customs duty on CKDs (completely knocked down units) of all form of vehicles to be reduced to 10 per cent from 15 per cent, as it was earlier.