Incentives for EV makers to GST relief: 5 key expectations of auto sector from Budget 2024

Industry stakeholders and experts across the sectors are looking forward to incentives and tax relief as the Union Budget for the financial year 2024-25 is getting closer. Finance Minister Nirmala Sitharaman is expected to present the full Budget for FY25 in the third week of July after the new government takes over. The upcoming budget is expected to be growth-oriented and experts hope the government will keep its focus on fiscal consolidation, reforms, and schemes that can facilitate growth across sectors.

The automobile sector has high hopes from the government, as the industry stands at the cusp of transition due to technological advancement and changing consumer preferences. Industry observers expect the government measures to drive growth, sustainability, and incentives, particularly for electric vehicle makers.

The short-term outlook for the automobile sector looks positive due to the prospects of a better monsoon which will augur well for the rural economy. A fillip to the rural sector will, in turn, could boost the two-wheeler and tractor sales.

On the other hand, ahead of the Budget 2024, the Automotive Component Manufacturers Association of India (ACMA) has asked for raising depreciation rates on plant and machinery, rationalising GST on EVs and components, and continued support under the PLI (production-linked incentive) scheme.

Favourable government policies and easy liquidity are the key factors that will decide how the sector fares in the next few years. That is why the automobile industry expects the government to keep its focus on infra projects which could be a booster for the sector. Moreover, if the government continues emphasising the adoption of green mobility, it will accelerate the growth of the EV space.

Here are five key expectations that the auto sector has from the Union Budget 2024:

Income-tax rebate: If the government offers some relief to the middle class on the tax front, it will increase disposable income in consumers’ kitty, which is likely to be a positive development for the automobile sector. The consumer vehicle producers and two-wheeler makers may benefit from this move.

The extension of FAME subsidy: The government introduced Faster Adoption and Manufacturing of Electric Vehicles (FAME) in 2015. It was a subsidy scheme for the purchase of electric and hybrid vehicles to promote their usage. The auto industry expects the government to extend this subsidiary scheme which will be a significant positive for the sector.

Extension of the ambit of PLI: The PLI scheme has proved to be a game-changer for many sectors. The automobile manufacturers expect the government to enhance the initiatives for the sector. Measures for ensuring the faster release of funds and incentivising the export of EVs will be major positives for the automotive industry.

GST relief: A cut in GST rates would make buying new vehicles more affordable for consumers. The Society of Indian Automobile Manufacturers (SIAM), the apex industry body, wants the government to cut the GST rate to 18% from the current 28%. It also expects the GST rates to go down even further to 12% for green vehicles.

Infrastructure boost: More spending on infrastructure would lead to overall economic growth by generating employment, and reducing freight charges and expenses on fuels. Better roadways and highways tend to give a boost to the auto sector. Along with other industry-specific measures, the auto industry expects the government to continue its focus on the infra sector in the upcoming budget.

To sum up, the automotive industry will keep a keen watch on the announcements on the capital expenditure for infra push and the government’s focus on green mobility in the Finance Minister’s Budget speech.