Auto component industry wants budget to give boost to R&D & quality

The Automotive Component Manufacturers Association (ACMA), the apex body for the Indian auto component industry has stressed on the need for an early implementation of GST in its recommendations to the Government for the forthcoming budget for 2016-17.
 
The auto component sector is looking forward to support from the government to achieve $ 200 billion in turnover from existing $ 38.5 billion, with exports ranging between $ 80-100 billion from current $ 11.2 billion, as stated in the Automotive Mission Plan 2026 - a collective vision of the Government of India and the Indian automotive industry.
 
Commenting on the auto component sector’s expectations of the forthcoming budget, Arvind Balaji, president, ACMA, said, “This year ACMA has adopted ‘Make Quality & Technology in India’ as its theme, which is in tune with ‘Make in India’ campaign of the Government of India. ACMA is committed to strengthening the capabilities of the component industry on quality, product development, improving technology to meet the changing regulatory environment, especially on emissions and safety, and customers’ expectations, among others. We expect the forthcoming budget to lead to creation of a favourable and stable policy environment to enable growth and development of the domestic auto sector.”
   
There is an urgent need to reduce multiplicity and complexity of applicable taxes through early implementation of GST, said ACMA.
 
The focus of the industry is to manufacture lightweight and fuel efficient products, which involves heavy investments in R&D. Many companies are not getting adequate Duty Drawback benefits, as the focus is to progressively reduce the product weight. ACMA therefore has recommended that the weight cap for engineering products should be waived off. 
 
ACMA wants the government to expand list of tools for availing CENVAT credit and permit 100 percent CENVAT credit on capital goods in year of purchase. “At present, the provision is limited to jigs, fixtures, moulds and dies sent by a manufacturer to a contract manufacturer/job worker. This provision needs to be extended to include tools,” it said.
 
Due to power shortage manufacturers have to resort to generating their own power though gen-sets thus increasing the cost of production. ACMA has recommended that such manufacturers be allowed to avail input credit on diesel procured for internal power generation.
 
Services like canteen, transportation of employees, repair and maintenance of commercial vehicles etc are directly related to manufacturing, therefore manufacturing units should be allowed to avail CENVAT credit on such services, said ACMA.
 
With regard to direct tax, ACMA’s recommendations to the government include:

• Encourage research & development: Presently 200 percent weighted deduction under section 35(2AB) of the Act is available for in-house R&D facilities and 175 percent weighted deduction on outsourced R&D from approved institutions, ie national laboratories, universities, scientific research institutes and IITs. The 200 percent weighted deduction should be extended to R&D facilities, which are outsourced to third-party service providers or other institutions
• Enhance depreciation rate on capital goods: The current depreciation rate on capital goods should be enhanced to 25 percent from 15 percent. Further, domestically manufactured capital goods be allowed 40 percent depreciation. This will encourage capital investment in the industry
• Tax exemption on expenditure incurred on power from renewable sources: Tax benefits be made available to the users of green technologies to incentivise and popularise clean energy sources