ACMA seeks uniform GST rate of 18 per cent on all auto components

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The Automotive Component Manufacturers Association (ACMA), on Tuesday, stressed the need to ensure a uniform GST rate of 18 per cent on all auto components, in its recommendations to government for the forthcoming Budget.

The apex body of the Indian auto component industry also requested the government to consider upward vision of Remission of Duties and Taxes on Export Products (RoDTEP) rates adopting measures for enhancing investments, including for research and development.

“The industry has significant after-market 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,” Sunjay Kapur, President, ACMA, said.

The RoDTEP scheme was introduced effective January 1, 2021, replacing the MEIS scheme (Merchandise Exports Incentive Scheme). However, the rates notified for auto components sector at one per cent or lower are inadequate to cover the incidence of unrefunded taxes and duties borne on export products, deterring the competitiveness of Indian auto component industry, he said.

Other recommendations

Other key recommendations include: to encourage domestic R&D and testing, to retain weighted tax deduction on R&D expenditure, which is critical. The 2016-17 Budget reduced weighted deduction benefit from 200 per cent to 150 per cent and further restricted deduction to 100 per cent from April 1, 2020.

ACMA sought provision to reintroduce investment allowance at 15 per cent for manufacturing companies that invest over ₹25 crore in plant and machinery, to motivate manufacturers to invest in new technologies, specifically e-mobility and its components/ancillaries related plant and machinery. It also voiced suggestions to ease ‘cost of doing business’ in India.

“Policy announcements on PLI scheme for ACC battery, for auto and auto components, and extension of FAME-2 facilitate Indian automotive sector becoming integral to global value chains,” Kapur added.

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