Budget 2012: TUDS will help auto component industry | SupportBiz

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Budget 2012: TUDS will help auto component industry

With Budget 2012 in view, Vinnnie Mehta, the Executive Director of ACMA (Automotive Components Manufacturers Association), has put forth his main expectations from the policy makers.

Mehta has put great emphasis on the Technology Upgradation and Development Scheme (TUDS) for the auto component industry.

While re-narrating the Automotive Mission Plan 2016 (AMP), he said: “Since we have to emerge as the destination of choice in the world for design and manufacture of automobiles and auto components with output reaching a level of USD145 billion accounting for more than 10 percent of GDP and providing additional employment to 25 million people by 2016. The industry needs to invest in technology and scale capacity to support local automotive industry growth and to become world-class, world-scale industry. It is in critical need of significant infusion and absorption of technology to build domestic capability and to support faster product development plans of OEMs. India possesses competitive advantage in low-cost, high-quality engineering capabilities. It needs to maintain and further enhance its competitiveness. Auto component industry is faced with major threat of imports, currently 21 percent of total domestic consumption.”

By 2015-16, size of Indian auto component industry is expected to be around USD60 billion. Considering over 70 percent of the auto component companies in India are SMEs, Government support for R&D is critical. The TUDS structure for the auto component industry would provide the much-needed access to technology, particularly to SMEs.

“Government ought to support companies as they modernize/upgrade technology, envisaging that the scheme would provide support to companies by financing 50 percent of the project cost by way of soft loans, at nominal rate of interest,” Mehta stated.

ACMA’s recommendations


Eliminate Customs Duty on Alloy Steel and Secondary Aluminum Alloy

Domestic steel/aluminum alloy suppliers benchmark their prices based on the international price and the customs duty thereon etc. making the inputs expensive. Raw material needs to be made available to domestic component manufacturers at international prices to be competitive, to ensure level playing field with FTA countries.

Eliminate customs duty on alloy steel and secondary aluminum alloy - all items falling under HS Code 7208, 7220, 7222, 7223, 7224, 7225, 7226, 7227, 7228 and 7229.

Benefits available to specific raw materials used in the manufacturing of Catalytic Converter (Notif. No. 21/2002 dated 01-03-2002)

Immediate need for reduction in customs duty to five percent for SS Wirecloth Stripe HS 73141410, Others ( Washcoat ) HS 38249090


100 percent Cenvat Credit on capital goods in year of purchase

Currently 50 percent Cenvat Credit is allowed on capital goods in year of purchase, balance 50 percent to be availed in subsequent years.

Unutilized Cenvat Credit balance

Need a provision to provide for refund of unutilized credit amount periodically No levy of interest on suo moto reversal of Unutilized Cenvat Credit.

Allow Input Credit on Diesel

Manufacturing units should be allowed to avail input credit on diesel procured for internal power generation and industrial use.

No interest for differential Excise Duty paid due to price increase subsequent to sale of goods in case supplies made to OEMs

It is suggested that, the following explanation to Section 11 AB of the Central Excise Act 1944 should be added: “No interest is however payable on account of differential duty paid/payable arising of any revision of prices subsequent to the removal of goods which is supported by proper proof and documentation as to genuineness of the subsequent revision.”


Phasing out CST

Need to reduce multiplicity of applicable taxes with an early implementation of GST. Last three years CST remained at two percent. It is recommended that CST be removed or reduced to one percent pending GST.


Corporate Tax Rate

Corporate tax rate for domestic companies is currently 32.445 percent (including surcharge of five percent and education cess of three percent). It is suggested to bring down the effective tax rate for domestic companies to 30 percent.