Union Budget 2019: Auto Components Body Seeks Uniform GST Rate, Says Sector Witnessing Challenging Times

New Delhi: Automotive component industry body ACMA on Thursday asked the government to ensure a uniform GST rate of 18 per cent on all auto components as part of measures to support the sector that is going through a downturn.

Automotive Component Manufacturers' Association (ACMA) further said there is also an urgent need to increase the rate of weighted deduction on R&D spend.

"The automotive industry is witnessing one of the most challenging times ever. Domestic consumption of all vehicle segments is witnessing negative growth. We hope that the measures in the forthcoming budget will lift the market sentiments and help the industry to be back on track," ACMA Director General Vinnie Mehta said in a statement.

He further said, "The auto component industry, being an intermediary, has recommended a uniform GST rate of 18 per cent on all auto components."

The industry has significant aftermarket operations, which is plagued by grey operations and counterfeits due to the high 28 per cent GST rate, Mehta said.

"A moderate rate of 18 per cent will not only address this challenge but will also enhance the tax base through better compliance," he said.

Mehta also said the entire auto industry is undergoing a major transition with implementation of BS-VI and newer safety norms apart from the government's intention to usher in electric mobility.

Enhancing spend on R&D and creating infrastructure for innovation are therefore need of the hour for the industry to stay relevant, he said.

"Facilitating new product development through a technology development and acquisition fund, as also enhancing the rate of weighted deduction on R&D spend will be steps in the right direction by the government," Mehta added.

ACMA said, "The 2016-17 Budget reduced weighted deduction benefit from 200 per cent to 150 per cent and has further restricted the deduction to 100 per cent from April 1, 2020."

It also suggested setting up of a fund for supporting R&D and indigenous technology development for shift from BS IV to BS VI, electric mobility and to meet new regulations on safety emission and environment.

Apart from seeking exemption of import duty on auto component prototypes, ACMA also said reduction of basic customs duty on raw materials such as steel and aluminium alloys that currently attract basic customs duty of 15 per cent and 10 per cent respectively, must be considered.