Siam Indian Auto Industry

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    Indian Automobile Industry SWOT Analysis

    Strengths

    Domestic Market is large

    Government provides monetary assistance for manufacturing

    units

    Reduced Labor cost

    Weaknesses

    Infrastructural setbacks Low productivity

    Too many taxes levied by government increase the cost of

    production

    Low investments in Research and Development

    Opportunities

    Reduction in Excise duty

    Rural demand is rising Income level is at a constant increase

    Threats

    o Increasing rates of interest

    o Too much competition

    o Rising cost of raw materials

    Automobile Production Trends (Numberof

    Vehicles)Category 2004-

    052005-

    062006-07 2007-08 2008-09 2009-10 2010-11

    Passenger Vehicles

    1,209,876

    1,309,300

    1,545,223

    1,777,583

    1,838,593

    2,357,411

    2,987,296

    CommercialVehicles

    353,703

    391,083

    519,982 549,006 416,870 567,556 752,735

    Three 374,44 434,42 556,126 500,660 497,020 619,194 799,553

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    Wheelers 5 3TwoWheelers

    6,529,829

    7,608,697

    8,466,666

    8,026,681

    8,419,792

    10,512,903

    13,376,451

    GrandTotal

    8,467,853

    9,743,503

    11,087,997

    10,853,930

    11,172,275

    14,057,064

    17,916,035

    GROSS TUNROVER OF THE AUTOMOBILEINDUSTRY IN INDIA

    Year (IN USD MILLION)

    2004-05 20,896

    2005-06 27,011

    2006-07 34,285

    2007-08 36,612

    2008-09 38,238

    Conversion Rate Rs.40 = 1USD

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    Domestic Market Share for 2010-11

    Passenger Vehicles 16.25Commercial Vehicles 4.36

    Three Wheelers 3.39

    Two Wheelers 76.00

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    SIAM EXIM Policy Suggestions

    1. Credit of embedded tax

    SIAM had got a study done through ICRA Advisory Services to

    estimate the cascading impact of embedded tax in manufacturing

    vehicles in India for which no set-off is available under any scheme.

    ICRA looked at two states, Maharashtra and Tamil Nadu, which have

    automotive hubs and had estimated in July 2003 that the quantum of

    embedded tax amounts to around 12% of manufacturing cost.

    Since this makes our vehicles less competitive by 12% in the

    international markets, SIAM suggests that any export incentive

    scheme offered to the exporters should factor this in the total value of

    credit. This should be in addition to the Drawback/DEPB for actual

    import duty suffered on raw material and component.

    DEPB Scheme should be extended for at least two years till the

    internal reforms are done.

    2. Drawback for 2% education CESS should be admissible for claim

    Presently the import duty structure is as under

    a) Basic Custom Duty

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    b) CVD in lieu of Excise Duty + 2% CESS on CVD

    c) 2% CESS on total Duty (a+b)

    CVD and 2% CESS on all imported items are refunded as CENVAT

    credit. When the imported input is used for export production, basic

    duty is refunded as drawback. However, 2% CESS on total Duty

    remains non-CENVATable / refundable.

    Since all duties on inputs stage are neutralised by way of drawback

    and or under licence route, the 2% CESS on total duty should also be

    refunded as drawback.

    3. Brand Rate Fixation

    Effective from 1st April 2003 - the authority for fixation of drawback

    delegated to jurisdictional central excise authorities. The central

    excise authorities are raising several points while verifying the

    data/fixing the brand rate.

    Further all the rules concerning to fixation of brand rates are

    formulated by the drawback department, Ministry of Finance. For any

    clarification on these issues the central excise has to refer the matter

    again to the Ministry. There are problems which the Exporters are

    facing with the Central Excise Authorities - which is causing delay in

    fixation of brand rate.

    It is suggested that the choice should be given to the exporter to get

    the brand rate settled from Ministry of Finance as was earlier done

    under Simplified Drawback Scheme.

    4. Export Obligations under EPCG Scheme

    Past exports average performance without EPCG licence should not be

    counted for imposing obligation on new EPCG licences.

    5. Export under bond to Nepal & Bhutan

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    Currently the customs authorities do not entertain any refund of duty

    on exported to Nepal and Bhutan if the payment is other than Letter

    of Credit (L/C).

    Payment terms such as TT / cheque, DD or Bank Guarantee may be

    allowed as applicable for export to other countries.

    6. Despatch of Documents to overseas parties

    Currently despatch of documents to overseas parties is allowed only

    through banks. This is a time consuming process and entail handling

    charges.

    Wherever the payment is coming in advance the exporter be allowed

    to send documents directly to the party instead of routing through the

    banks.

    7. Rejected material sent back to shipper by importer of repute

    Customs should not insist on physical verification of rejected material

    sent back by importer of repute, under section 74 of Customs Act.

    Customs may verify the export shipment with the incoming new

    import shipment for ensuring that the part being sent back is identical

    with the imported part. e.g. 100 pcs of Part A were imported by

    importer of repute and cleared from the Customs. When parts were

    examined at the factory it was found that 90 pcs of Part A are

    acceptable and 10 pcs of Part A are rejected.

    Importer of repute will instruct the shipper to send replacement of 10

    pcs of Part A on free of charge basis. On getting free replacement,

    importer of repute will process the documents under section 74 for

    these rejected 10 pcs of Part A for sending it to the shipper. At the

    time of export examination, to verify the physical identification of the

    material, Customs should examine the new import consignment of

    importer arriving at port/airport for Part A. On getting convinced that

    Part A being sent back is identical with the new imported Part A

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    (except that earlier was rejected on quality ground), customs should

    allow clearance of the export shipment under Section 74 and should

    process the refund of duty.

    8. Simplification of Notifications

    Notifications issued by Departments should be minimum & user

    friendly. From the subject itself the user should get the theme of the

    notifications.

    9. Interest on duty foregone under duty exemption schemes

    The Exim Policy provides import of Capital Goods, raw materials,

    components, consumables etc. either under concessional duty rate or

    at zero duty for carrying out manufacturing activities with time bound

    export obligations.

    Due to some unavoidable changed circumstances, if the importer is

    not able to fulfill the obligation, then importer needs to regularise the

    imports on payment of duty + interest @ 15% p.a.

    Under the prevailing market conditions, the ruling interest rate is in

    the range of 6% to 8% p.a for all types of transactions. To reduce the

    burden and to bring down the transaction cost, the interest rate for

    regularisation of imports need to be plugged max. @ 10% p.a.

    Exporters who undertake the business risks can survive during

    uncertainties.

    10. Self Assessment for Imports

    Excise and Sales tax rules provide opportunity to the assessee to

    assess the duty and pay to the government periodically. Only audit

    check is done on post payment activities. Government need to come

    out with such self assessment schemes which will enable importer to

    move the goods from the ports on arrival and pay duty on self

    assessment basis. Customs can introduce Audit checks to check

    adequacy similar to excise and sales tax.

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    The above will help better utilization of scarce and expensive port

    facility and reduce the transaction costs.

    The facility needs to be extended for import clearances also. Indian

    Port Authorities to look up global standard of operations and eliminate

    multiple handling and improving the port productivity levels.

    11. Export benefits like DEPB /DGFC / Advance License

    The above export incentives are admitted only for exports against

    Hard Currency and denied for Rupee trade. As a result Rupee trade

    with neighbouring countries are less attractive and as a result fullpotential is not realised. This also affects our competitiveness vis--

    vis other countries in these markets. The above export Incentives

    need to cover export under rupee trade also, especially with SAFTA

    being negotiated currently.

    12. Tools Imported For Specific Activity

    Calibration equipments and tools brought by Overseas technicians /

    specialists for erection, commissioning and serving of equipments

    supplied , imports made on re-export basis is liable for Customs duty.

    At present the provision is to pay customs duty and claim duty draw

    back under Section 74. The process is cumbersome and takes long

    lead time. Needs provision to custom clear against bond an

    cancellation after re-export

    Imports in advance or as baggage be permitted without duty oncondition of re-export.

    13. Advanced Technology Has Demerits

    Imports under CTH 49.11 attracts Nil duty if imported in Hard copy

    form. However, if the same is imported in the form of CD, Customs

    duty is applicable. The anomaly needs to be removed Manuals,

    drawings et covered under scope of CTH 49.11 if imported in CD ROM,

    customs duty to be exempted

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    14. Duty Free Credit Entitlement Licence

    Licensing authorities are issuing DFCE licence for service providersserved from India as per para 3.6.4.1 of Foreign Trade Policy 2004-09,

    which is cover under Customs Notification 54/2003-cus dated 01-04-

    2003.

    Whereas the Licensing authorities are not issuing DFCE Licence for

    Status Holders (Manufacturer & Exporters), which is covered under

    customs notification 53/2003-cus dated 01-04-2003. Even if they have

    issued, the licence is not operative, for the reason that Customs are

    insisting that the Licence should read as "DFCE issued for Status

    Holder", whereas it is mentioned as "Service Provider served from

    India Scheme".

    Advance Income tax has been paid (approx. 36%) for this accrued

    export benefit-DFCE Licence, whereas it is not operational.

    The last date for submission of DFCE application for Status Holder has

    been extended to 31-03-2005 from 31-12-2004 as per Policy circular

    No. 12/2004-09 dated 28-12-2004, which shows the intention of

    Licensing authority for issuing DFCE Licence for Status Holders

    Suggestion:

    1. The licensing authority should consider Manufacturer Exporters

    (Status Holder) at par with Service providers served from India, and

    issue DFCE Licence, as stated in Exim Policy 2002-2007. For the

    Licenses already issued, the amendment as required by Customs"DFCE issued for Status Holder" may please be incorporated in the

    Licence, so that it can be made operational.

    2. Customs Notification 53/20036 dated 1-4-2003 may be amended

    permitting the Status Holder to pay CVD at the time of Import, so as

    to enable them to avail Cenvat Credit, as in the case of DEPB Licence

    amended as per Cus. Notfn. 96/2004 dated 17-09-2004 (para v & vi).

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    Under Para 3.7.7 of Foreign Trade Policy, for the Target Plus Scheme,

    "the CVD Paid in Cash or through debit under the said licence, shall be

    adjusted as CENVAT Credit or Duty Drawback as per rules framed byDept. of Revenue."

    15. TARGET PLUS Scheme

    Even though Target Plus Scheme is announced in the Foreign Trade

    Policy 2004-09 on 31-08-2004, the Application form - Appendix 17D is

    yet to be provided by the Licensing Authority. Dept of Revenue is

    required to issue Customs Notification for the same, with a provision

    that CVD paid by cash at the time of importation, by the Status Holder

    is eligible for CENVAT Credit as mentioned in the Foreign Trade Policy

    Para 3.7.7.

    16. Conditions of Import of Vehicles

    The existing conditions of import of new and used vehicles should be

    retained as such.

    AUTO POLICY OF GOVERNMENT OF INDIA

    VISION

    TO ESTABLISH A GLOBALLY COMPETITIVE AUTOMOTIVE

    INDUSTRY IN INDIA AND TO DOUBLE ITS CONTRIBUTION TO

    THE ECONOMY BY 2010

    1. POLICY OBJECTIVES

    This policy aims to promote integrated, phased, enduring and self-sustained growth of the Indian automotive industry. The objectives

    are to:-

    Exalt the sector as a lever of industrial growth and employment

    and to achieve a high degree of value addition in the country.

    Promote a globally competitive automotive industry and emerge

    as a global source for auto components.

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    Establish an international hub for manufacturing small,

    affordable passenger cars and a key center for manufacturing

    Tractors and Two-wheelers in the world. Ensure a balanced transition to open trade at a minimal risk to

    the Indian economy and local industry.

    Conduce incessant modernization of the industry and facilitate

    indigenous design, research and development.

    Steer India's software industry into automotive technology.

    Assist development of vehicles propelled by alternate energy

    sources.

    Development of domestic safety and environmental standardsat par with international standards.

    SIAM welcomed the announcement of Auto Policy, and feels that the

    policy would serve as a reference document for all stake holders and

    other interested parties.

    The Auto Policy has spelt out the direction of growth for the auto

    sector in India and addresses most concerns of the automobile sector,

    including-

    Promotion of R&D in the automotive sector to ensure

    continuous technology upgradation, building better designing

    capacities to remain competitive.

    Impetus to Alternative Fuel Vehicles through appropriate long

    term fiscal structure to facilitate their acceptance.

    Emphasis on low emission fuel auto technologies and

    availability of appropriate auto fuels and

    encouragement to construction of safer bus/truck bodies -

    subjecting unorganised sector also to 16% excise duty on body

    building activity as in case of OEMs

    The policy has rightly recognised the need for modernising the parc

    profile of vehicles to arrest degradation of air quality. The terminal life

    policy for commercial vehicles and move toward international taxing

    policies linked to age of vehicles, are steps in the right direction.

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    SIAM has always been advocating encouragement of value addition

    within the country against mere trading activity. However, this aspect

    has not been fully addressed. The Auto Policy allows automaticapproval for foreign equity investment upto 100% in the automotive

    sector and does not lay down any minimum investment criteria.

    The recommendation of promoting passenger cars of length upto 3.8

    meters through excise benefits is not in line with the free market

    concept and may lead to market distortion.

    However, with the Auto Policy in place, the automotive industry would

    get further fillip to become vibrant and globally competitive. The

    industry would get the required support from other Ministries and

    departments of Government of India in achieving the goals laid down

    in the auto policy.

    Home>>Economic Affairs>>Duties& Taxes>>Custom Duty

    Heading No

    SubHeading No

    Description ofarticle

    Rate of duty

    (1) (2) (3) (4)87.01 Tractors (other than tractors of heading

    No. 87.09)8701.10

    Pedestrian controlled tractors 10%

    8701.20

    Road tractors for semi-trailers 10%

    8701.30

    Track-laying tractors 10%

    8101.90

    Other 10%

    87.02 Motor vehicles for the transport of ten ormore persons, including the driver

    8702.10

    With compression-ignition internalcombustion piston engine (diesel or semi-diesel)

    10%

    8702.90

    Other 10%

    http://www.siamindia.com/Default.aspxhttp://www.siamindia.com/Default.aspx
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    87.03* Motor cars and other motor vehiclesprincipally designed for the transport ofpersons (other than those of heading No.87.02), including station wagons andracing carsVehicles specially designed for travelling onsnow; golf cars and similar vehicles

    8703.10

    Other vehicles, with spark-ignition internalcombustion reciprocating pistons engine

    100%

    8703.21

    Of a cylinder capacity not exceeding 1,000 cc 100%

    8703.22

    Of a cylinder capacity exceeding 1,000 cc butnot exceeding 1,500 cc

    100%

    8703.23 Of a cylinder capacity exceeding 1,500cc butnot exceeding 3,000 cc 100%8703.24

    Of a cylinder capacity exceeding 3,000 cc

    Other vehicles, with compression-ignition

    internal combustion piston engine (diesel or

    semi-diesel)

    100%

    8703.31

    Of a cylinder capaity not exceeding 1,500 cc 100%

    8703.3

    2

    Of a cylinder capaity exceeding 1,500 cc but not

    exceeding 2,500 cc

    100

    %8703.33

    Of a cylinder capacity exceeding 2,500 cc 100%

    8703.90

    Other 100%

    87.04 Motor vehicles for the transport of goods8704.10

    Dumper designed for off-highway use 10%

    Other, with compression-ignition internalcombustion piston engine (diesel or semi diesel)

    10%

    8704.21

    g.v. w not exceeding 5 tonnes 10%

    8704.22

    g.v. w exceeding 5 tonnes but not exceeding 20tonnes

    10%

    8704.23

    g.v.w exceeding 20 tonnes

    Other, with spark-ignition internal combustion

    pistons engine:

    10%

    8704.31

    g.v.w not exceeding 5 tonnes 10%

    8704.3 g.v.w exceeding 5 tonnes 10%

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    28704.90

    other 10%

    87.05 Special purpose motor vehicles, other thanthose principally designed for thetransport of persons or goods (forexample, breakdown lorries, crane lorries,fire fighting vehicles, concrete-mixerlorries, road sweeper lorries, sprayinglorries, mobile workshops, mobileradiological units)

    8705.10

    Crane lorries 10%

    8705.20 Mobile drilling derricks 10%

    8705.30

    Fire fighting vehicles 10%

    8705.40

    Concrete-mixer lorries 10%

    8705.90

    Other 10%

    87.06 8706.00

    Chassis fitted with engines, for the motorvehicles of heading Nos. 87.01 to 87.05

    10%

    87.07 Bodies (including cabs), for the motor

    vehicles of heading Nos 87.01 to 87.058707.10

    For the vehicles of heading No. 87.03 10%

    8707.90

    Other 10%

    87.08 Parts and accessories of the motorvehicles of heading Nos 87.01 to 87.05

    8708.10

    Bumpers and parts thereof

    Other parts and accessories of bodies (including

    cabs):

    10%

    8708.21

    Safety seat belts 10%

    8708.29

    Other

    Brakes and servo-brakes and parts thereof

    10%

    8708.31

    Mounted brake linings 10%

    8708.39

    Other 10%

    8708.4 Gear boxes 10%

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    08708.50

    Drives axles with differential, whether or notprovided with other transmission components

    10%

    8708.60

    Non-Driving axles and parts thereof 10%

    8708.70

    Road wheels and parts and accessories thereof 10%

    8708.80

    Suspension shock-absorbers

    Other parts and accessories

    10%

    8708.91

    Radiators 10%

    8708.9

    2

    Silencers and exhaust pipes 10%

    8708.93

    Clutches and parts thereof 10%

    8708.94

    Steering wheels, steering columns and steeringboxes

    10%

    8708.99

    Other 10%

    87.09 Works trucks, self-propelled, not fittedwith lifting or handling equipment, of thetype used in factories, warehouses, dockareas or airports for short distancetransport of goods; tractors of the typeused on railway station platforms; parts ofthe foregoing vehicles

    Vehicles :

    8709.11

    Electrical 10%

    8709.19

    Other 10%

    8709.9

    0

    Parts 10%

    87.10 8710.00

    Tanks and other armoured fightingvehicles, motorised, whether or not fittedwith weapons, and parts of such vehicles

    Free

    87.11* Motorcycles (including mopeds) and cyclesfitted with an auxiliary motor, with orwithout side-cars; side- cars

    8711.10

    With reciprocating internal combustion pistonsengine of a cylinder capacity not exceeding 50cc

    100%

    8711.2 With reciprocating internal combustion piston 100

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    0 engine of a cylinder capacity exceeding 50 ccbut not exceeding 250 cc

    %

    8711.30

    With reciprocating internal combustion pistonengine of a cylinder capacity exceeding 250 ccbut not exceeding 500 cc

    100%

    8711.40

    With reciprocating internal combustion pistonengine of a cylinder capacity exceeding 500 ccbut not exceeding 800 cc

    100%

    8711.50

    With reciprocating internal combustion pistonengine of a cylinder capacity exceeding 800 cc

    100%

    8711.90

    Other 100%

    87.12 8712.0

    0

    Bicycles and other cycles (including

    delivery tricycles), not motorised

    10%

    87.13 Invalid carriage, whether or not motorisedor otherwise mechanically propelled

    8713.10

    Not mechanically propelled 10%

    8713.90

    Other 10%

    87.14 Parts and accessories of vehicles ofheading Nos. 87.11 to 87.13Of motorcycles (including mopeds)

    8714.1

    1

    Saddles 10%

    8714.19

    Other 10%

    8714.20

    Of invalid carriages

    Other :

    10%

    8714.91

    Frames and forks, and parts thereof 10%

    8714.92

    Wheel rims and spokes 10%

    8714.93 Hubs, other than coaster braking hubs and hubbrakes, and free-wheel sprocket wheels 10%

    8714.94

    Brakes, including coaster braking hubs and hubsbrakes, and parts thereof

    10%

    8714.95

    Saddles 10%

    8714.96

    Pedals and crank-gear, and parts thereof 10%

    8714.99

    Other 10%

    87.15 8715.0

    0

    Baby carriages and parts thereof 10%

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    87.16 Trailers and semi-trailers; other vehicles,not mechanically propelled; parts thereof

    8716.10

    Trailers and semi-trailers of the caravan type,for housing or camping

    10%

    8716.20

    Self-loading or self-unloading trailers and semi-trailers for agricultural purposes

    10%

    Other trailers and semi-trailers for the transportof goods:

    8716.31

    Tanker trailers and tanker semi-trailers 10%

    8716.39

    Other 10%

    8716.4

    0

    Other trailers and semi-trailers 10%

    8716.80

    Other vehicles 10%

    8716.90

    Parts 10%

    * Custom Duty for items falling under 8703 & 8711, If imported as Completely Knocked Down (CKD) unit 10%

    If imported CKD kit contained prefabricated engine, gear box

    and transmission system 30%

    If imported in any other form/ new 60%

    SIAM suggestions for VAT Implementation

    1. VAT in all States

    VAT system of taxation required to be implemented simultaneously

    throughout the country in all States and Union Territories at the same

    time. This will avoid serious market distortions and enhances

    industry's competitiveness.

    2. Uniform VAT Law and procedure

    India has often been described as a country with large market. But

    unfortunately this large market has been highly fragmented by inter-

    state barriers. It is further complicated by State specific law on sale of

    goods. The wide divergence in the structure and practice has

    hampered free flow of goods and services within the country and

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    effected competitiveness of Indian Industry.

    Homogeneity is the essence of VAT and all States should cometogether to accept a common law under VAT. All forms, returns &

    declarations should be common to avoid artificial barriers and

    complexities.

    3. State VAT Rate and Classification of goods

    Uniform rate structure across the country helps in avoiding diversion

    of trade from one State to another, checks unhealthy competition and

    reduces tax evasion. It helps automobile industry to plan and commit

    long term investments.

    Basic rationale needs to be developed for generation of revenue from

    industrial products. This should be long term and the share of taxation

    in the total value of the ultimate customer needs to be defined. SIAM

    recommends such a policy in taxing goods and services under VAT.

    Total taxes from both Centre and State as proposed by SIAM not to

    exceed 25%. Considering Cenvat at 16%, Designated rate should not

    exceed 9%.

    The classification of goods should be aligned to central taxes to

    reduce litigation. Uniform classification across all States and central

    taxes would create favourable environment for growth of industry. No

    separate classification of Capital Goods

    4. Multiple levies and Industrial input

    One of the stated objectives of VAT is to reduce multiple levies.

    Number of rates under VAT should be 0%, 4% & RNR in addition to 1%

    on precious metal and 20% on petroleum products. All other levies

    like Octroi, Entry Tax should be abolished.

    Inputs used in the manufacturing should be taxed at 4% against issue

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    of declaration. There should not be any specific list of industrial input,

    as it will deprive the benefit to the industry using input other than the

    one mentioned in the list. Reduced rate on industrial input will avoidrefund problem and avoid unnecessary interaction with the

    Department.

    Further when interstate transactions are zero rated, manufacturer

    selling predominantly in interstate ends up having huge input tax

    credit without set-off. Automobile manufacturers having one

    manufacturing facility in the country sells more than 80% of the

    production outside the Sate and forced to seek refund from the StateGovernment for excess input tax credit. SIAM suggests VAT rate of 4%

    on all industrial input to mitigate the refund issue.

    5. Set-off mechanism

    Set-off of tax paid should be allowed for all inputs including raw

    material, components, consumables, fuel and capital goods. Tax paid

    on services should be allowed to be set-off. Tax paid on capital goods

    should be allowed as set-off in full in the same year to avoid confusion

    and litigation later.

    6. Interstate transactions

    All interstate transactions should be at zero rate.

    Further automobile manufacturers 'Stock Transfer' goods by setting

    up huge facilities to strengthen distribution net work in order to reachthe product to the customer at the earliest and at least cost. This

    mechanism should not be affected even under VAT.

    7. Sales Tax Incentives

    Automobile manufacturers have made huge investments, which are in

    phases in unviable locations. These locational disadvantages are

    partially offset by fiscal incentives. Any detrimental variations or

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    withdrawal will affect the viability of such investments. This may

    adversely impact the country's image as an attractive investment

    destination. It is heartening to note that all States have agreed inprinciple to honour all existing incentives under VAT

    SIAM suggests the following:

    Incentive SIAM Suggestion

    Input Tax Exemption . Refund Input Tax separately - adopt Maharashtramodel

    Output Tax Exemption Continue exemption, Option to Defer output tax

    Output Tax Deferral Continue Deferment, refund input tax separately.

    Input Tax Exemption &Output Tax Exemption

    Refund Input Tax separately,Option to Defer outputtax

    Input Tax Exemption &Output Tax Deferral

    Refund Input Tax separately,Option to Defer outputtax

    8. Refunds

    Due to various reasons there is no alternative but to seek refund from

    the Government in case of excess credit. Given the state of finances,

    refunds will be difficult and uncertain while locking up working capital

    for industry.

    Refunds should be honoured within 15 days from the date of filing

    returns and credited to the assessee's account.

    Alternatively, VAT Entitlement Certificate on the lines of freely

    tradable DEPB may be considered.

    9. Industry Representation

    Empowered Committee may consider inducting industry

    representation in the committee for transparency and smooth

    introduction of VAT.

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    Highlights of Union Budget 2007- 08

    A. Main Highlights

    Budget focused on Agriculture, infrastructure and social sector.

    Plan allocation increased by 18% - However, Capital

    expenditure increase only 9% against Revenue expenditure

    increase of 20%.

    Focus on Roads including NHDP allocation which is 7.2%; PPP

    model to be encouraged further.

    Increased outlay on JNURM from Rs 4595 cr to Rs 4987 cr.

    Use of Foreign Exchange reserve for infrastructure finance.

    Emphasis on developing skilled and trained manpower;

    Increased funds and Interest free loan for upgradation of ITIs.

    Setting up of Green House Gas Emission Committee.

    B. Excise Duty Structure (in %)

    Bio-Diesel is exempted from excise duty.

    C. Customs Duty Structure

    Peak Rate of Customs Duty reduced to 10% from 12.5%.

    Customs Duty on various Components & Raw Materials reduced.

    D. Central Sales Tax

    CST reduced to 3% from 4%.

    GST to be introduced with effect from April 1, 2010.

    E. Education Cess

    Additional Cess of 1% on all taxes for secondary and higher

    education.

    2% Education Cess continued on Income Tax, Corporate Tax,

    Customs Duty, Excise Duty & Service Tax.

    F. Direct Taxes

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    Weighted deduction for R&D U/s 35(2AB) of Income Tax Act

    extended for a period of five years.

    No change in rate of Income Tax on individuals or firms. Personal Income Tax exemption raised by Rs 10,000.

    Increase in Dividend Distribution Tax from 12.5% to 15%.

    Bringing of ESOPs under FBT.

    G. Service Tax

    No change in the Service Tax rate.

    Service tax net widened; Service tax imposed on design

    services.

    WTO NAMA Discussions

    WTO negotiations on Industrial Goods have progressed in Geneva

    based on the Framework Agreement signed in August 2004. The

    discussions have mainly been technical. However, the mini-ministerial

    at Davos, which was attended by 30 trade ministers, including Mr

    Kamal Nath, Minister of Commerce, Govt of India has given a very

    strong political push to these negotiations.

    The following is the state of progress of NAMA negotiations till the

    Trade Negotiations Committee Meeting on February 14, 2005.

    Product Coverage: The main discussion on this has been what all

    products will NAMA cover. There is still some discussion on whetherfish and fish products should be sent into agriculture or should they

    remain in the realm of industrial goods. This is because fish and fish

    products is one of the products that has been identified for sectoral

    initiative of zero for zero.

    There is also this issue of deciding which of the environmental goods

    will be taken into the NAMA negotiations for reduction/elimination of

    tariffs. The environmental goods negotiations are done under the

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    Trade and Environment Committee and not Negotiating Group on

    NAMA.

    Bound vs. Unbound: Many countries (all developed and many Latin

    American Countries) have called for complete binding of all tariffs by

    all countries. They also want LDCs to bind their tariffs without

    providing for any tariff reductions. India has, however, said in these

    discussions that there cannot be automatic binding of all tariffs.

    Sensitive products will have to remain unbound, India said. Philippines

    and Kenya share this view.

    EU has said that if any country wants to use the exceptions given in

    the Framework Agreement then these exceptions will have to be

    compensated in other areas. EU said that the level of ambition in the

    Doha Round should not be compromised at any cost.

    Formula: There is not much progress on the formula on the ground.

    However, USTR Robert Zoellicks statement at the Davos mini-

    Ministerial that there can be two coefficients for the formula - one for

    developing countries and the other for the developed countires - hasstarted a debate in WTO circles. The effect of such formula is

    supposed to ensure that all high tariffs are cut more substantially

    than low tariffs, but the separate coefficient for developing countries

    will allow them to bring their tariffs to a higher absolute ceiling than

    developed countries.

    US negotiators have, however, indicated that application of such

    formula will mean reduction in flexibilities. Flexibilities include keepinga percentage of tariffs outside the bound level or keeping some

    products out of the formula for lower cuts, both of which is included in

    the Framework Agreement.

    The EU felt that this can possibly bring down the level of ambition in

    the Doha Round. They said that the Framework Agreement in itself

    provides for enough flexibility.

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    Treatment of Unbound Formula: There is no consensus on the way

    to proceed. Countries like India have insisted that some sensitive

    products have to be left unbound while many countries havequestioned this. Countries like Peru and Ecuador have asked all

    developing countries to bind 100% of their tariffs.

    US said that the problem of having unbound tariffs is only with 30

    countries and therefore it can only be an exception but not the rule.

    Reactions from Various Countries:

    India: Developing countries should be given the flexibility to cut less

    than what the developed countries cut tariffs. There should be a

    window for keeping sensitive products unbound as well.

    Jamaica/Cuba/ Costa Rica: Larger implementation period required

    for deeper cuts. Different coefficients should be applied for

    developing and developed countries.

    Kenya: Without flexibility the word development will elude the

    negotiations. Level of ambition should be on development perspective

    of the Round.

    Sectoral Initiative: There is need for flexibility while deciding on

    sectoral, is what most developing countries are saying. But flexibility

    means different things to different countries.

    Latin America including Brazil seems okay with sectoral initiatives(zero for zero) if it is voluntary.

    Switzerland is for the critical mass approach.

    US has said that sectoral initiative is key to any tariff reduction

    formula to be agreed.

    What is Voluntary Approach in Sectoral Initiatives? Voluntary

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    will mean that countries can choose if they want to join the sectoral

    initiative or not. But if they decide to join then they will have to do so

    for all sectors that are brought under the sectoral initiative. Ifcountries decide to stay away from the sectoral initiative then they

    will have to pay a MFN duty for export of those products, which will be

    fixed during the negotiations.

    Sectors will have to be negotiated but as of now the products that

    were decided earlier still stand - auto components, electrical and

    electronic products, footwear and leather goods, textiles and clothing,

    fish and fish products and gems and jewellery.

    But the US and Japan want more products added to this list.

    What is critical mass approach? In a meeting held last week it was

    decided that they would look at the same approach that was taken for

    the Information Technology Agreement. They feel that countries that

    account for 80 per cent of total global trade in the product will be part

    of the critical mass. Those outside can choose to join or not. India

    may be included in every sector if this approach is accepted.

    Special Provisions for Newly Acceded Countries: China has been

    leading this discussion and has said that newly acceded countries will

    need a completely different coefficient that will have smaller cuts in

    tariffs and longer implementation periods for these cuts.

    Elimination of Low Duties: Most developed countries have

    demanded that all countries must eliminate any low tariff completelyto provide immediate market access opportunities in global trade.

    Most developing countries have rejected this proposal. Kenya

    specifically said that it was important for developing countries to keep

    nuisance tariffs.

    Nonreciprocal Preferences: There have been short discussions on

    this issue. Many countries that do not receive such preferences have

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    said that they need to be removed. However, there is a lot of support

    for such non-reciprocal preferences especially from ACP countries that

    receive such preferences from EU.

    Non-tariff Barriers: Two papers were presented on non-tariff

    barriers. One of the papers was from US on automobiles and another

    from US and New Zealand on wood products.

    India and many other developing countries have called for higher

    attention to this area of negotiations.

    India has submitted a proposal jointly with Brazil and Argentina on

    Tariffs:

    Communication to the Negotiating Group on Non-Agricultural

    Market Access from Argentina, Brazil & India

    1. The Framework contained in Annex B to the July Framework

    Agreement represents the mandate provided for the non-agricultural

    products negotiations in paragraph 16 of the DMD. Accordingly, theformula shall reduce tariff peaks, high tariffs and tariff escalation and

    take fully into account less than full reciprocity in reduction

    commitments and special & differential treatment for developing

    countries.

    2. The concepts of less than full reciprocity in reduction

    commitments and special & differential treatment are different:

    (i) Less than full reciprocity in reduction commitments has to be an

    in-built component of the formula and would be achieved through the

    incorporation of sufficiently higher coefficients for developing

    countries as compared to developed countries, resulting in higher

    percentage reductions for developed countries and taking into

    account the differences in tariff profile amongst members;

    (ii) Special & differential treatment relates to flexibilities in the

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    application of the formula, including longer implementation periods,

    less than formula cuts and the exclusion of some tariff lines. The

    present structure of the S&D provisions in the Framework contained inparagraph 8 of Annex B is the minimum necessary to meet the

    development goals of the developing countries in this regard.

    3. Harmonization of tariffs is not an objective of this Round. It has not

    been envisaged in the Mandate and was not included in the July

    Framework as one of the necessary features of the formula.

    Harmonizing the customs tariffs amongst countries with differing

    industrial/ economic structures and with varying societal needs is notdesirable and would not deliver the development objective of the

    Round.

    4. After consideration of the various formulae proposed for these

    negotiations, a Swiss type formula incorporating each countrys tariff

    average seems best suited to address the mandate in its entirety. This

    could be expressed as:

    where,

    t1 is the final rate, to be bound in ad valorem terms

    t0 is the bound base rate

    ta is the average of the current bound rates

    B is a coefficient, its value(s) to be determined by the participants

    The defining features of this formula are as follows: - The formula

    would apply to bound tariff lines; and - The coefficient B will be

    modulated to reflect the ambition in other areas relevant to market

    access agreed to for this Round;

    5. All non-ad valorem duties shall be converted to ad valorem

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    equivalents before the adoption of the formula, and bound in ad

    valorem terms.

    6. This is an equitable formula as it takes into account the present

    tariff commitments of Members. It improves the tariff profiles by

    compressing the dispersion of tariffs within each Member. It is

    transparent as it uses a well known factor, each Members tariff

    average, as the basis. It seeks to match the ambition level in all areas

    of market access negotiations in the WTO, with the inclusion of a B

    factor. The overall reduction commitment it imposes in percentage

    terms is proportional amongst developed and developing countries,removing the shortcoming in the simple Swiss formula that imposes

    much greater reduction requirements on the participating developing

    countries.

    7. The impact of any tariff reduction formula depends on the numbers

    which are the essence of the formula. At this stage the important

    consideration is whether the formula by its nature complies with the

    mandate, i.e. whether it reduces or eliminates tariff peaks, high

    tariffs, and tariff escalation taking fully into account the special needs

    and interests of developing and least-developed country participants,

    including through less than full reciprocity in reduction commitments.

    We believe the above formula is still the most appropriate because:

    It is based on the current tariff profile;

    It has an element of progressivity in national tariffs;

    It allows for less than full reciprocity in reduction commitments; and

    Its liberalizing effect can be adjusted by variations in the coefficient

    B.

    8. Having agreed on the basic structure of the formula, Members

    would have to address the part of the mandate related to Special and

    Differential treatment for developing country participants in the

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    application of the formula on current bound tariffs. Particular

    sensitivities of developing countries would be attended by longer

    implementation periods, less than formula cuts for some tariff linesand the exclusion of some tariff lines from any formula cut. The

    figures related to those flexibilities would have to be negotiated after

    an agreement on the formula itself.

    Treatment of Unbound Tariff Lines

    9. Increasing the binding coverage to 100% is a desirable objective

    for this Round. However, it must be recognized that appropriateflexibilities are required by developing countries to achieve this

    objective. The average as on the base date of presently unbound lines

    will be marked up by x times, which shall be negotiated as indicated

    in the framework agreement. Thereafter, the marked up unbound

    tariff lines could be bound at an average level after the application of

    the formula. Developing country Members would then have the

    flexibility to fix individual tariff lines around this average. The formula

    for unbound tariff lines will be slightly modified i.e., the formula would

    apply only on the tariff average and not on a line by line basis. The

    modified formula for unbound tariff lines shall be as follows:

    Where:

    tA1 is the average for newly bound lines

    xtA is the marked up tariff average of MFN applied rates as on the

    base date

    tA is the tariff average of MFN applied rates as on the base date

    B is a coefficient, its value(s) to be determined by the participants

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    Members covered by paragraphs 6&9 of Annex B of the framework

    shall not undertake tariff reductions in this Round. Members shouldalso recognize liberalisation recently undergone by newly acceded

    members.

    1. POLICY OBJECTIVES

    This policy aims to promote integrated, phased, enduring and self-

    sustained growth of the Indian automotive industry. The objectives

    are to:-

    (i) Exalt the sector as a lever of industrial growth and employment

    and to achieve a high degree of value addition in the country;

    (ii) Promote a globally competitive automotive industry and emerge

    as a global source for auto components;

    (iii) Establish an international hub for manufacturing small, affordable

    passenger cars and a key center for manufacturing Tractors and Two-

    wheelers in the world;

    (iv) Ensure a balanced transition to open trade at a minimal risk to the

    Indian economy and local industry;

    (v) Conduce incessant modernization of the industry and facilitate

    indigenous design, research and development;

    (vi) Steer India's software industry into automotive technology;

    (vii) Assist development of vehicles propelled by alternate energy

    sources;

    (viii) Development of domestic safety and environmental standards at

    par with international standards.

    2. BACKGROUND

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    2.1 Automotive industry has universal5ly emerged as an important

    driver in the economy. Although the automotive industry in India is

    nearly six decades old, until 1982, only three manufacturers - M/s.Hindustan Motors, M/s. Premier Automobiles and M/s. Standard Motors

    tenanted the motor car sector. Owing to low volumes, it perpetuated

    obsolete technologies and was out of sync with the world industry. In

    1982, Maruti Udyog Ltd. (MUL) came up as a government initiative in

    collaboration with Suzuki of Japan to establish volume production of

    contemporary models. After the lifting of licensing in 1993, 17 new

    ventures have come up of which 16 are for manufacture of cars. This

    industry currently accounts for nearly 4% of the GNP and 17% 0f theindirect tax revenue.

    3. EXTANT POLICY

    3.1 Before the removal of QRs with effect from 01-04-2001, the policy

    placed import of capital goods and automotive components under

    open general licence, but restricted import of cars and automotivevehicles in Completely Built Unit (CBU) form or in Completely Knocked

    Down (CKD) or in Semi Knocked Down (SKD) condition. Car

    manufacturing units were issued licences to import components in

    CKD or SKD form only on executing a Memorandum of Understanding

    (MOU) with the Director General Foreign Trade (DGFT). 11 companies

    signed MOUs with DGFT under which they agreed to:

    i. Establish actual production of cars and not merely

    assemble vehicles;

    ii. Bring in a minimum foreign equity of US $ 50 Million if a

    joint venture involved majority foreign equity ownership;

    iii. Indigenise components upto a minimum of 50% in the

    third and 70% in the fifth year or earlier from the date of

    clearance of the first lot of imports. Thereafter the MOU

    and import licensing will abate;

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    iv. Neutralise foreign exchange outgo on imports (CIF) by

    export of cars, auto components etc. (FOB). This

    obligation was to commence from the third year of start ofproduction and to be fulfilled during the currency of the

    MOU. From the fourth year imports were to be regulated

    in relation to the exports made in the previous year.

    4. CURRENT STATUS OF INDIAN AUTOMOTIVE INDUSTRY

    4.1 The industry encompasses commercial vehicles, multi-utilityvehicles, passenger cars, two wheelers, three wheelers, tractors and

    auto components. There are in place 15 manufacturers of cars and

    multi utility vehicles, 9 of commercial vehicles, 14 of Two/Three

    Wheelers and 10 of Tractors besides 5 of engines. With an investment

    of Rs.50,000 crores, the turnover was Rs. 59,500 crores in Automotive

    Sector during 1999-2000. It employs 4,50,000 people directly and

    100,00,000 people indirectly and is now inhabited by global majors in

    keen contention.

    4.2 India manufactures about 38,00,000 2-wheelers, 5,70,000

    passenger cars, 1,25,000 Multi Utility Vehicles, 1,70,000 Commercial

    Vehicles and 2,60,000 tractors annually. India ranks second in the

    production of two wheelers and fifth in commercial vehicles.

    4.3 Indias automotive component industry manufactures the entire

    range of parts required by the domestic automobile industry and

    currently employs about 250,000 persons. Auto component

    manufacturers supply to two kinds of buyers original equipment

    manufacturers (OEM) and the replacement market. The replacement

    market is characterised by the presence of several small-scale

    suppliers who score over the organised players in terms of excise duty

    exemptions and lower overheads. The demand from the OEM market,

    on the other hand, is dependent on the demand for new vehicles.

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    4.4 The auto sector (excluding Tractors) attained a steep cumulative

    annual growth of 22% between 1992 and 1997. The Tractors achieved

    a cumulative annual growth of 16%. Component production grew by28%. There has been a slowdown in the automobile sector in the past

    two years. However, the component industry maintained a low but

    positive growth rate mainly due to its export performance. Over the

    years, the component industry has maintained a 10% - 12% share of

    exports in the total production.

    4.5 Roads occupy an eminent position in transportation as they, as

    per the present estimate, carry nearly 65% of freight and 87% of

    passenger traffic. Although, India has 3.3 million kilometers of road

    network, which is the second largest in the world, the Indian highways

    are getting overpopulated. Traffic management and road sense also

    need attention.

    5. NEED FOR A COMPREHENSIVE AUTOMOTIVE POLICY

    5.1 The extant policy has drawn many overseas companies into India

    but needs to be more investor friendly, address emerging problemsand be WTO compatible. The Indian car market is full of possibilities;

    but present demand profile inhibits volume production, save by a few,

    and conduces contention rather than competition. World over, the

    majors have consolidated to elevate technology, enlarge product

    range, access new markets, cut costs and ingraft versatility. They

    have resorted to common platforms, modular assemblies and systems

    integration by component suppliers and E-Commerce.

    5.2 The automotive industry is in the midst of a major structural

    transformation in today's globalised scenario. "System Supply" of

    integrated components and sub-systems is becoming the order of the

    day, with individual small components being supplied to the system

    integrators instead of the vehicle manufacturers. In this process, most

    of the SSI units manufacturing smaller individual components are on

    their way to become tier 2 and tier 3 suppliers, while the larger

    companies including most MNCs are being transformed into tier 1

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    companies, which purchase from tier 2 & 3, and sell to the auto

    manufacturers.

    5.3 Indian auto sector needs to grow collaterally and in harmony with

    world industry. India has the potential to be a global automotive

    power. However, concerted efforts will be required to take auto

    manufacturing to a self-sustaining level where they shall have

    volumes, generate requisite technology and meet evolving emission

    requirements.

    5.4 Volume is important for any manufacturing enterprise. However, it

    is more important for automobile sector, both for the manufacture of

    vehicles as well as auto components. Lack of volume will not only

    inhibit efficient manufacture but also R&D and introduction of new

    models. The investment and fiscal policies should create an

    environment for volume production and indigenous capability for

    innovation for small cars and auto components.

    5.5 Auto components manufacturers have been slowly gaining global

    recognition and maintaining a certain level of exports despite therecent downturn. It should be possible to achieve an export target of

    US $ 1 billion by 2005 and US $ 2.7 billion by 2010. This would require

    three pronged marketing strategy: exports through OEMs for their

    global sourcing requirements, export to tier I manufacturers as a part

    of their international supply chain and direct exports to aftermarket.

    The main challenges are lower volume low scale, fragmentation,

    inadequate R&D/technology support, lower productivity levels, limited

    resources for international marketing and establishment of an

    efficient supply chain.

    6. MEASURES TO REALIZE THE POLICY OBJECTIVES

    6.1 Initiatives relating to investment, tariffs, duties and imposts will

    be the instruments to achieve the Policy objectives. These path

    governments economic reform and are in harmony with the

    commitments made to WTO.

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    6.2 Increased resource allocation to the highways sector to ensure

    collateral upgradation and development of road infrastructure in step

    with the increase in the population of vehicles.

    6.3 An appropriate regulatory framework for smooth movement of

    traffic, safety and environmental aspects.

    7. FOREIGN DIRECT INVESTMENT

    7.1 Automatic approval for foreign equity investment upto 100% of

    manufacture of automobiles and component is permitted.

    8. IMPORT TARIFF

    8.1 The incidence of import tariff will be fixed in a manner so as to

    facilitate development of manufacturing capabilities as opposed to

    mere assembly without giving undue protection; ensure balanced

    transition to open trade; promote increased competition in the market

    and enlarge purchase options to the Indian customer.

    8.2 The Government will review the automotive tariff structure

    periodically to encourage demand, promote the growth of the

    industry and prevent India from becoming a dumping ground for

    international rejects.

    8.3 In respect of items with bound rates viz. Buses, Trucks, Tractors,

    CBUs and Auto components, Government will give adequate

    accommodation to indigenous industry to attain global standards.

    8.4 In consonance with Auto Policy objectives, in respect of unbound

    items i.e., Motor Cars, MUVs, Motorcycles, Mopeds, Scooters and Auto

    Rickshaws, the import tariff shall be so designed as to give maximum

    fillip to manufacturing in the country without extending undue

    protection to domestic industry.

    8.5 The conditions for import of new Completely Built Units (CBUs),

    will be as per Public Notice issued by the Director General Foreign

    Trade (DGFT) having regard to environment and safety regulations.

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    8.6 Used vehicles imported into the country would have to meet

    CMVR, environmental requirements as per Public Notice issued by

    DGFT laying down specific standards and other criteria for suchimports.

    8.7 Appropriate measures including anti dumping duties will be put in

    place to check dumping and unfair trade practices.

    9. EXCISE DUTY

    9.1 Motor Cars

    9.1.1 The ownership of cars in India is just 6 per thousand

    of population as against 500 in the developed economies.

    The contribution of the auto sector to the GDP and

    employment is likewise low. Expansion of local demand

    holds great potential and is vital to install scale volumes

    of production.

    9.1.2 Domestic demand mainly devolves around small

    cars not exceeding 3.80 meters in length. Small cars

    occupy less of road space and save on fuel. These capture

    more than 85% of the market. India can build export

    capability and become an Asian hub for export of small

    cars. The growth of this segment needs to be spurred.

    9.2 Multi Utility Vehicles

    9.2.1 MUVs are an important mode of economical mass

    transport in rural India due to poor road infrastructure and

    lack of good State transport system. They are the first

    vehicle purchased by a number of farmers, traders, small

    businessmen in rural and semi-urban markets. The

    Government will endeavour to provide fiscal incentives to

    this sector.

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    9.3 Commercial Vehicles

    9.3.1 Presently excise duty on commercial vehicles soldby a manufacturer whether as a chassis or with a

    complete body is 16%. However, no duty is levied on the

    body that is built by an independent body builder on

    chassis bought from a manufacturer. This dispensation

    inveigles production of the complete trucks and buses by

    the chassis manufacturer and is detrimental to safety

    standards. The duty imposed on the construction of

    bodies by an independent body builder, small or

    organised sector, shall be equal to that of bodies built by

    a chassis manufacturer.

    9.3.2 The Government will encourage fabrication of bus

    body on bus chassis designed for better passenger

    comfort instead of truck chassis as is the current practice.

    9.3.3 The Government will promote the use of multi-axle

    vehicles for carriage of goods as they cause reducedenvironmental pollution and lesser wear and tear on road

    surface in comparison to the existing 2-axle trucks.

    10. IMPROVING ROAD INFRASTRUCTURE

    10.1 Traffic on roads is growing at a rate of 7 to 10% per annum while

    the vehicle population growth for the past few years is of the order of

    12% per annum. Poor road infrastructure and traffic congestion can

    be a bottleneck in the growth of vehicle industry. A balanced and

    coordinated approach will be undertaken for proper maintenance,

    upgradation and development of roads by encouraging private sector

    participation besides public investment and incorporating latest

    technologies and management practices to take care of increase in

    vehicular traffic.

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    10.2 For the convenience of traveling public the Government shall

    also promote multi-modal transportation and the implementation of

    mass rapid transport systems.

    11. INCENTIVE FOR RESEARCH AND DEVELOPMENT

    11.1 The Government shall promote Research & Development in

    automotive industry by strengthening the efforts of industry in this

    direction by providing suitable fiscal and financial incentives.

    11.2 The current policy allows Weighted Tax Deduction under I.T. Act,

    1961 for sponsored research and in-house R&D expenditure. This willbe improved further for research and development activities of

    vehicle and component manufacturers from the current level of 125%.

    11.3 In addition, Vehicle manufacturers will also be considered for a

    rebate on the applicable excise duty for every 1% of the gross

    turnover of the company expended during the year on Research and

    Development carried either in-house under a distinct dedicated entity,

    faculty or division within the company assessed as competent and

    qualified for the purpose or in any other R&D institution in the

    country. This would include R & D leading to adoption of low emission

    technologies and energy saving devices.

    11.4 Government will encourage setting up of independent auto

    design firms by providing them tax breaks, concessional duty on

    plant/equipment imports and granting automatic approval.

    11.5 Allocations to automotive cess fund created for R&D ofautomotive industry shall be increased and the scope of activities

    covered under it enlarged.

    12. BUILDING BYE LAWS FOR RESIDENTIAL, COMMERCIAL AND

    OTHER USES

    12.1 With the growth of vehicles, smooth traffic movement has come

    under severe strain. The problem has been aggravated because of

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    inadequate provision of parking facilities generally. Starting with

    metropolitan and important towns, the Government will pursue with

    State Governments and Local bodies amendments to bye laws forupward revision of the parking norms for new residential buildings,

    construction of common parking for existing residential areas besides

    parking upgradation in all commercial areas. Multi-storied parking

    shall also be encouraged.

    13. ENVIRONMENTAL ASPECTS

    13.1 The automotive and oil industry have to heave together to

    constantly fulfill environment imperatives. The Government will

    continue to promote the use of low emission fuel auto technology.

    13.2 The Government after considering the recommendations of the

    Expert Committee on Auto Fuel Policy headed by Dr. R.A. Mashelkar,

    have approved a road map for implementation for the auto fuel

    quality consistent with the required levels of vehicular emissions

    norms and environmental quality. The Government will formulate a

    comprehensive auto fuel policy covering the other related aspectsand ensure availability of appropriate auto fuel/fuel mixes at minimum

    social costs across the country. Suitable institutional mechanism will

    be put in place for certification, monitoring and enforcement of

    different technologies/fuel mixes. Appropriate fiscal measures will be

    devised to achieve milestones in the roadmap for implementation of

    auto fuel policy.

    13.3 In the short run, the Government will encourage the use of short

    chain hydrocarbons along with other auto fuels of the quality

    necessary to meet the vehicular emissions norms.

    13.4 There is prime need to support the development and

    introduction of vehicles propelled by energy sources other than

    hydrocarbons by promoting appropriate automotive technology.

    Hybrid vehicles and vehicles operating with batteries and fuel cells

    are alternatives to the conventional automobile, which in their early

    beginnings, lie intreasured. As an impetus for the development of

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    such vehicles, an appropriate long-term fiscal structure shall be put in

    place to facilitate their acceptance vis--vis vehicles based on

    conventional fuels.

    13.5 Internationally, the practice is to levy higher road tax on older

    vehicles in order to discourage their use. In India, the road tax on

    vehicles varies in nature and quantum among the states. Lifetime

    road tax is also in vogue. The endeavour will be to move to the

    international model.

    13.6 In order to facilitate faster upgradation of environmental quality,

    the Govt. will consider having a terminal life policy for commercial

    vehicles alongwith incentives for replacement for such vehicles.

    14. SAFETY

    14.1 Government will duly amend the Central Motor Vehicles Rules,

    Bureau of Indian Standards (BIS) and other relevant provisions and

    introduce safety regulations that conform to global standards.

    14.2 Testing and certification facilities need to be revised and

    strengthened in accordance with safety standards of global order.

    Government, in partnership with industry, will tend to this

    requirement.

    15. HARMONISATION OF STANDARDS:

    15.1 Government recognises the need for harmonisation of standards

    in a global economy and will work towards it.