Society of Indian Automobile Manufacturers (SIAM), the apex industry body which represents leading vehicle and vehicular engine manufacturers in India stated that automotive industry in country is “highly taxed” with levies accounting for up to 77 per cent on cost. For the upcoming union budget, SIAM has asked the government to merge multiple taxes into a single excise duty. So with few days left for the upcoming union budget, we decided to jot down some provisions that the auto industry expects from the upcoming 2016 union budget.

Implementation of GST (Goods and Services Tax)

In its Pre-Budget presentation to the Finance Ministry, SIAM said that Road Tax must be subsumed in GST in order to prevent state governments “tweaking it to raise further revenue as is being done today”. As suggested by the Kelkar Committee, all kinds of domestic indirect taxes, including Road Tax, R&D Cess and Octroi should be subsumed in the proposed GST.

Fun fact: Some states are charging Road Tax by 14 per cent while others are charging as high as 18 per cent to 20 per cent, which is why owning a car is more affordable in cities like New Delhi and Dehradun and expensive in Bengaluru and Mumbai and with the introduction of GST, this can be avoided.

Low Excise and Custom Duties

To boost the sales, government must lower down the excise duty on vehicles. Currently, small cars that are less than four meters in length attract excise duty of 12.5 per cent, while cars with more than four meters length but with engine of less than 1,500 cc capacity attract a duty of 24 per cent. Big cars and SUVs attracts an excise duty of 27 to 30 per cent.

The automotive industry now proposes that small cars/vehicles, two-wheeler, three wheeler, goods vehicle, chassis for motor vehicles, passenger vehicle designed for carrying 10 or more persons should attract lower duty of 12.5 per cent while all the other passenger vehicles should be charged with excise duty of 20 per cent.

Also Excise & Customs taxes on recognized parts of hybrid/electric vehicle parts should be made duty free or should be given rebate in excise and custom duties.

Low Rate of Interest on vehicles

If the rate of interest is lowered in the upcoming budget, it will create a positive feeling amongst the buyers, which will lead to better sales of these vehicles.

Promotion of Hybrid and Electric vehicles


More subsidiaries and encouragement should be given on the purchase of hybrid/electric vehicles which will contribute to a cleaner environment. Loan interest should be waived off on the purchase of electric cars.

Encouraging FIIs (Foreign Institutional Investor ) and Foreign Automakers to Invest in India


Initiatives like Make In India should be aggressively followed and new initiatives should be introduced which will focus more on auto industry.

More Encouragement on Spare Parts Manufacturing in Country


Localization of spare parts will again help the auto sector as it will result in lower vehicle maintenance costs

NCCD (National Calamity Contingent Duty)

Although it sounds fair to us but at the same time other products that comes under this duty are pan masala, cigarettes and tobacco products. SIAM is now pitching the government to wave-off this 1% NCCD on vehicles.

On the Happy Note

With this we believe Indian government will introduce the union budget which will be more friendly to car buyers and at the same time it would bring smile to car makers. And as per the Automotive Mission Plan 2016-2026, the auto industry aims to cross gross value of 18.9 trillion rupees ($285 Billion) by 2026, ‘the auto industry friendly’ 2016 union budget will be the first big step in this direction.



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