Union Budget 2021-22: Highlights For The Automobile Industry

Finance Minister Nirmala Sitharaman has rolled out the Union Budget for the year 2021-2022. While this year’s budget was mainly focussed on bringing the economy back to shape after the pandemic, the Finance Minister has also announced a few key changes for the automotive sector. Scroll down to have a read:

Voluntary Vehicle Scrappage Policy

The Finance Minister introduced a new vehicle scrappage policy for old vehicles to keep the country’s air pollution levels in check. The policy states that any passenger vehicle that’s 20 years or older would need to undergo a fitness test. One would be allowed to drive if the car is declared fit, otherwise it would be scrapped. More details will be revealed soon by the Ministry of Road Transport and Highways (MoRTH). 

Recently, the Union Minister for Road Transport and Highways, Nitin Gadkari, had proposed a Green Tax for old vehicles to curb air pollution that will come into effect in April 2022. Its highlights are:

• Personal vehicles to be charged green tax during renewal of registration certificate after fifteen years. 

• Vehicles in polluted cities to attract higher green tax (50% of road tax). 

• Tax amount to vary depending on fuel - petrol/diesel. 

• EVs, strong hybrids, and CNG vehicles to be exempted from green tax.

Raising Customs On Auto Parts

The Finance Minister has also announced that custom duties on select auto parts will be hiked to 15 percent. This could come as a disadvantage for manufacturers who assemble their vehicles as a completely knocked down unit (CKD). But on the other hand, it could promote domestic manufacturing of automobile components in the country. 

That said, custom duties on steel products have been reduced to 7.5 percent and that could benefit automobile manufacturers and the customers.

Our Opinion

While these two new announcements are indeed welcome, we hoped the government could have made a few tweaks to the automobile industry’s tax structure to make cars and bikes more affordable. India attracts one of the highest taxes for automobiles in the world and that’s the reason we see less global models. We hope the Government considers this while announcing the budget in 2022.