Union Budget 2022: Federation of Automobile Dealers Association Has These Suggestions
Union Budget 2022: Federation of Automobile Dealers Association Has These Suggestions
FADA believes that the automobile sector is not only one of the biggest employment generators but is also continuously skilling its workforce to keep them updated with the ever-changing technology.

Federation of Automobile Dealers Association (FADA) has highlighted a few issues to Union Finance Minister, Nirmala Seetharaman, which they feel are stunting the growth of the Indian automobile industry and automobile dealerships as a whole. The association has bifurcated the recommendation into two different aspects in a bid to urge the government to take notice of the concerns in order to allow the upcoming budget to re-energize the auto retail trade, which in turn will bring the sector and the entire automobile industry back on track and boost overall economic growth, too.

A. Demand Revival Appeal

Appeal No. A1: Introduce benefits of claiming depreciation on vehicles for Individuals paying Income Tax

– FADA requests the Finance Ministry to allow individuals to account for depreciation. This will not only help in increasing the number of individuals filing their IT return but will also help in igniting automobile demand (especially Two-Wheeler) from individuals and will thus up the GST collection for the government. The Vehicles depreciates for both Corporate as well as Individuals and it would hence be judicial that the Salaried Class should also get the same benefit.

Appeal No. A2: Depreciation rate for vehicles

– FADA requests for the reintroduction of the Depreciation Scheme which was valid only till 31st March’20 to be further extended for FY 2022-23. The dealer body is thankful to the government for increasing the depreciation rate for all types of vehicles purchased before 31st March 2020 as a temporary measure to revive growth.

Appeal No. A3: Regulation of GST rates to boost volumes in Two-Wheeler Automobile sales

– To bring the Industry and Auto Retail Trade back on the growth path, FADA requests the Ministry to regulate and reduce GST rates on Two Wheelers to 18 percent and continue to move our nation to global leadership. It is noteworthy that the 2W is used not as a luxury but as a necessity to travel distances by lower class and rural segments for their daily working needs. Hence the rationale of 28 percent GST + 2 percent cess which is for luxury products does not hold good for the Two-Wheeler category.

– At a time, when vehicle prices are increasing after a gap of every 3-4 months due to continuous price hike in metals and various other factors, a reduction in GST rate will counter the price hike and help spur demand.

– The Association believes that the growth in demand and the ripple effects it will have on many dependent sectors will increase the tax collections and in the mid to long term will actually be revenue positive along with getting positivity in the overall consumer sentiment and thereby the overall economy.

Appeal No. A4: Reduction in GST rates for Used Cars To 5 percent

– The rate of GST on used cars is currently 12 percent and 18 percent. 12 percent for vehicles which are sub 4000 mm and 18 percent for vehicles above 4,000 mm.

– The used car business occupies 1.4 times the size of new car market, accounting for 5-5.5 million cars per annum with a turnover of over Rs. 1.75 trillion. Authorized dealers account for only 10-15 percent of this trade, which is also the organised sector thus paying taxes.

– In case the used car is purchased from the end consumer by the dealer, no ITC will be there to be claimed by the dealer since, neither the tax has been paid under forward charge nor under RCM. In such a situation there will be cascading to the extent of value addition by the dealer.

– The Association, therefore, requests for a uniform GST rate of 5 percent on the margin for all used vehicles, to create a win-win situation for the Government, Dealers, and Vehicle Owners. With the reduction in GST, it 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 the brakes on tax leakages.

B. Dealer Issue

Appeal No. B1: Reduction of Corporate Tax for LLP, Proprietary & Partnership Firms

– The government has reduced corporate tax to 25 percent for private limited companies with turnover of up to Rs.400 crores. The same benefit should also be extended to all LLP, Proprietary and Partnership firms as most traders within the auto dealership community fall in this category. This will help boost the morale and sentiment of the traders which employ 5 Mn people, out of which 2.5 million employees are on direct employment. The auto trading community in its truest sense is the employment-generating mechanism for the country as it does not displace employees and gives them employment in their home locations!

FADA believes that the automobile sector is not only one of the biggest employment generators but is also continuously skilling its workforce to keep them updated with the ever-changing technology.

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Hence, to make the sector foster growth, the association requests the government to take bold steps.

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