Ahead of the upcoming Union Budget, the Federation of Automobile Dealers Associations (FADA) recently urged Finance Minister Nirmala Sitharaman to introduce benefits of claiming depreciation on vehicles for income tax-paying individuals and extend the depreciation period for corporates.

In its budget recommendations, FADA also said auto dealers should be kept out of annual TCS (tax collected at source) of 0.1% saying it is a huge financial burden on the automobile retail industry.

"The upcoming 2021 Union Budget should be focused on measures to revive the Indian economy from the pandemic slowdown and boost consumption led demand.

"The Indian automobile industry is a barometer of the Indian economy and its revival will in turn pull up the economy," FADA President Vinkesh Gulati said in a statement.

He further said, "The auto retail industry is one of the key pillars of India's growth trajectory, contributing around 4.5 million jobs. We look forward to a demand-led growth-oriented budget."

Gulati recalled that "Sitharaman has already expressed her intention to revive growth and boost investor confidence".

In its budget recommendations, FADA urged the finance minister to introduce benefits of claiming depreciation on vehicles for individuals paying income tax, and extend the depreciation period for corporates.

"This will boost vehicle demand during these extraordinary times and also increase the number of individuals filing I-T (income tax) returns and promote growth in GST collection for the government," the apex national body of automobile retailers said.

It added that the increase in depreciation rate for all types of vehicles which was valid till March 31, 2020, should also be extended for 2020-21 and it will fuel demand further.

"The Finance Bill 2020 introduced TCS of 0.1% to be charged annually with effect from October 1, 2020.

"This is a huge financial burden on the automobile retail industry, tying up working capital until dealers receive refunds. It will affect demand since vehicle acquisition costs will go up and hence auto dealers should be kept out," FADA said.

FADA also called for reduction of corporate tax for proprietary and partnership firms saying it will boost morale and sentiment of traders, who together employ 5 million people, 2.5 million of whom are on direct employment.

"The government reduced corporate tax to 25% for private limited companies with a turnover of up to Rs 400 crore last year. This benefit should also be extended to all proprietary and partnership firms since most traders in the auto dealership community are in this category," it said.

Reiterating the demand of the auto industry for vehicle scrappage policy, FADA said the government must design a robust inspection and certification (I&C) policy or end of life vehicles (ELV) policy for vehicles in the country.

"However, as both the above policies would take time to be effectively implemented, there is a need for an immediate scheme based on incentive for encouraging voluntary scrapping of old vehicles and replacing them with newer ones. The new vehicles are cleaner and meet stringent emission requirements," it added.

FADA said the scrappage policy implementation should be focused on incentives rather than strict mandates.

"It is more feasible to encourage people than to force them to replace their old vehicles with new ones. We have already witnessed a similar success in the voluntary surrender of gas subsidies by consumers," it said.

All vehicles registered in India until March 31, 2000 should qualify under the modern fleet vehicle replacement scheme, it added.

Similar schemes have been successfully implemented in the US, Canada, the UK and Italy by providing financial incentives and concessions for replacement through a single-window fleet modernisation programme, it added.