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2023 Union Budget Proposal: 5 Benefits For Auto Industry In India

The Union Finance Ministry has ambitious goals for the growth of the economy in the 2023-24 financial year

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Today, Nirmala Sitharaman, the Union Minister of Finance, announced the ministry’s proposals for the Union Budget for the financial year 2023-2024. Automakers and peripheral industries are key contributors to the Indian economy, and here’s how this year’s Budget could affect the auto industry at large: 

Growth targets and opportunities

Despite a looming worldwide economic slowdown, the Finance Ministry is hopeful for growth in the coming financial year. The government has set 2070 as the deadline for net-zero carbon emissions in the country. To achieve this ambitious goal, the government has provided several direct and indirect benefits to automakers and their peripheral manufacturing industries. 

Premium cars to get more expensive 

But first, let’s see how the budget could affect car prices. The finance minister has proposed to increase the custom duties for cars that are imported as completely knocked down kits (CKDs) for local assembly, as well as completely built-up (CBU) cars. CKDs will be subject to a 35 per cent duty (previously 30 per cent) and CBUs will attract a 70 per cent duty (earlier 60 per cent). 

This will lead to hikes in the prices of premium cars, nearly all of which are either locally assembled or imported as CBUs. 

Excise duty exemption on CNG fuel

“To avoid cascading of taxes on blended compressed natural gas, I propose to exempt excise duty on GST-paid compressed bio gas contained in it.” – Nirmala Sitharaman, Union Finance Minister. 

Compressed Natural Gas will be exempt from the central excise duty as long as it is blended with compressed biogas. This move should encourage oil companies to add small amounts of sustainably-made biogas to CNG, which should subsequently help keep CNG affordable. 

Electric vehicle manufacturers to benefit 

“To further provide impetus to green mobility, customs duty exemption is being extended to import of capital goods and machinery required for manufacture of lithium-ion cells for batteries used in electric vehicles.” – Nirmala Sitharaman 

One reason why EVs are expensive in India is that many of their components, such as batteries and power transmission units, are imported from overseas at high rates of customs duties. The current budget doesn’t ease the duties on these components, but it does make it easier for manufacturers to import the high-tech machinery needed to produce these components locally. 

More purchasing power to YOU 

The current budget impacts the working population directly with new incentives for income tax. The tax slabs are similar as before, but with the new rebates, workers earning up to Rs 7 lakh will be effectively tax-exempt. The rates for higher income tax brackets have been reduced across the board, making it a bit easier for you to invest in the economy by, among other ways, buying that new car or bike you’d been eyeing. 

The Finance Ministry’s proposals feature some important changes that will certainly affect car, two-wheeler and fuel prices throughout the country. Nevertheless, you can still expect the automotive industry to grow steadily with the advent of new models, more electric vehicles and other cutting-edge technologies.

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