With a massive $222 billion market, India is in the fourth spot when it comes to automobile manufacturing in the world. The financial year 2022 witnessed tremendous growth in the Indian automobile sector and the trend is expected to continue in FY 2023-24. From initiating electric vehicle manufacturing to easing foreign direct investment (FDI) norms and starting a semiconductor mission, the auto sector has seen many firsts. Hence, the EV industry wants to retain its growth and expects the government to remove all hurdles. Further, the Central government also wants to renew its approach towards India’s flagship programs like ‘Make In India’ and ‘Atmanirbhar Bharat’. The Centre aims to take India to the 3rd position in the automobile sector.

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Here’s what industry leaders expect from the Union Budget 2023:

When compared to the production tax payable on electric vehicles, which is set at 5 per cent, EV auto parts like lithium-ion batteries and raw materials attract 18 per cent, resulting in an inverted duty structure that restricts working capital.

When it comes to GST rates, some parts are still subject to a massive 28 percent tax. Rationalising the GST rate for such vehicle parts to 18 percent will aid in dispute resolution and reduce the end users’ overall cost of ownership, the industry leaders say.

To encourage the use of light, fuel-efficient products, the calculation of duty drawback has been changed from a weight basis to a free on board (FOB) value basis. FOB value indicates the costs which are included when the price of the vehicle is quoted. The industry leaders expect the government to extend the relief under the Remission of Duties and Taxes on Exported Products (‘RoDTEP’) rate and the All Industry Rate (AIR).

The industry leaders also expect more support from the government for charging infrastructure in terms of friendly regulatory norms and consumer incentives. As the EV market is expected to grow, some states have offered incentives to install charging stations. Similar incentives are expected from the Centre as well.

India is on track to achieve net-zero carbon emissions, but to get there, it will need to adopt programs for flex-fuel engines, hydrogen fuel cells, and hybrid cars. The sector anticipates hearing more about the Product Linked Incentive (PLI) scheme for green hydrogen electrolyzers, including information on the coverage of the schemes and the anticipated timetable for implementation.

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