Budget 2006 will Fuel Growth in Automotive Sector - Madhur Bajaj, President SIAM SIAM compliments the Finance Minister for presenting a growth-oriented budget. The key features of the budget in respect to the auto sector are reduction of the excise duty on cars, reduction of the customs duty on key raw materials, modification of the FBT scheme, and the abolition of the one-by-six scheme amongst others. The increase in outlay for the social sector and infrastructure would also promote an environment for growth in mobility and the demand for vehicles. SIAM welcomes the reduction in excise duty for small cars and intention of making India a hub for small and fuel efficient cars, though the Budget definition of small cars and the Auto Policy definition of small cars are at variance and could have been aligned. Further, SIAM has been requesting for an across the board reduction in Excise Duty for Cars & MUVs. SIAM hopes that uniformity would be introduced soon. The abolition of the one-by-six schemes under the Income Tax Act is also a very welcome step and would provide a boost to the car sales across the board. The announcement that GST will be introduced from 1st April 2010 is another very positive step. The changes and modification of provisions of FBT are welcome, although, the industry had asked for its abolition. The reduction of customs duty on inputs and raw materials would benefit the manufacturing sector. In addition, the focus on rural development and infrastructure (particularly roads and urban renewal), as well as the overall focus on employment would create an environment for growth in demand. SIAM is concerned that customs duty on Commercial Vehicles has been reduced to 12.5% from 15%. This will have an adverse impact not only on new vehicles import but also import of used commercial vehicles. SIAM welcomes the higher Plan allocation for projects in roads, specifically setting end dates for the golden quadrilateral and the East West, North South corridors. The outlay of Rs. 9,945 crores for NHDP and the decision to develop 1,000 kms of access-controlled expressways will aid in improving connectivity and provide boost to economic activity. VAT: The announcement that CST would be phased out is welcome and removes the uncertainty on this major reform measure. It would ensure the maximum benefit of the new State level VAT regime. However, we hope that all the States would follow a uniform legislation for VAT implementation and avoid any marked deviations/discrepancies. R&D Incentives: SIAM feels that the incentives for R&D through weighted deduction u/s 35(2AB) of the Income Tax Act available till 31st March 2007 should be extended for further 10 years.