The union finance ministry has clarified the definition of sport utility vehicles (SUV) for the purpose of cess and taxation. While the clarity has been welcomed by the automotive industry, major players like Maruti Suzuki are concerned about the high rate of taxation not just on SUVs but on all passenger cars.
Some states have also demanded that multi-utility vehicles (MUVs) be taxed at a higher rate. CBIC chairman Vivek Johri said an internal committee will look at whether MUVs should also be taxed at a higher rate. This comes at a time when FY23 has been a record year for the passenger car segment, but two-wheeler sales are still lesser than in 2016-17.
CNBC-TV18 spoke to Vinod Aggarwal, president of SIAM on what are the headwinds for the auto sector right now and their budget recommendations. SAIM has been requesting the government to rationalise the taxes and wants the government to continue with the growth-oriented approach for this union budget.
He said, "We have also requested the government to continue with the growth-oriented approach with more capex. Like last year, they provided Rs 750,000 crore which was very good so, we have requested that a similar approach should be followed.”
Entry-level motorcycle or entry-level scooters has dropped significantly and therefore they are requesting some incentive for rural consumers.
Aggarwal said, "Even though the motorcycle market overall might drop by maybe 10 to 12 percent, however, drop in these entry-level scooters or 200 CC motorcycles that can be as high as maybe more than 20 percent so, therefore, that is a concern. These entry-level cars and scooters they are also purchased more in the rural economy. So if we can boost the rural economy through some means that will be good for the industry."
On hiking taxes on the auto sector, Aggarwal mentioned that the consequences will not be good and additional taxes on the auto sector will not bode well.
On the electric vehicles, Aggarwal said, "These are the new technologies which are evolving and we are seeing a lot more action in the electric vehicle technologies both in two-wheelers are in passenger cars as well as electric buses. So, we are expecting this will grow more and more and we will see more and more electric vehicles on the roads in the coming years. So it is going to evolve right now the percentage is very small, but it will evolve."
Talking about commercial vehicles Aggarwal said it's in a good situation to grow, "The commercial vehicle industry has seen a very bad recession for three years. Therefore, it is the growth cycle now, and we will see good growth coming in the next one to two years."
He believes there are some segments in the industry, which are away from the earlier peak for example buses and heavy-duty trucks. However, he expects to see growth in these segments too.