The honourable finance minister Nirmala Sitharaman has presented the Union Budget 2022 and there weren’t many key announcements nor much relief for the reeling automotive sector. However, certain announcements are expected to have a direct or indirect impact on the auto industry. The government continues to lay its emphasis on localisation and contributes to the ‘Go Local’ cause. Following are the set of pluses and minuses for the auto sector in the Union Budget 2022.

What’s good?

The finance minister revealed that the government will soon introduce the battery swapping policy in the country, to benefit the EV ecosystem. Sitharaman had also stated that ‘interoperability standards will be formulated’, which indicates that a standard uniform standard might be adhered to by all EV automakers. The government will encourage the private sector to create innovative and sustainable business models for battery and energy as a service.

An additional excise duty of Rs 2 per litre is proposed on unblended fuel from October 2022. The move is aimed at encouraging the production and use of ethanol-blended fuel in the country. Additionally, it would also encourage manufacturers to produce vehicles with flex-fuel engines which can run on blended fuels. It will also help in reducing the overall fuel import bills. Recently, the government had also approved a proposal to achieve 20 per cent ethanol-blending with gasoline by 2025.

The government will strengthen its focus on introducing electric vehicles in the public transport system. Apart from the lower running cost as compared to the ICE version, the electric public transport system will result in a drop in the emission levels. Apart from this, the finance minister has also announced an allocation of Rs 20,000 crore in infrastructure projects. This includes expanding the national highway network by 25,000km in 2022-23.

What’s not so good?

The GST slab for automotive components is unchanged, and key demands like incentives for new electric vehicle adoption as well as revision in duty structure have also not been addressed. Moreover, there was no announcement to help the auto industry overcome the rising input cost, which in turn results in a higher cost for new vehicle buyers. Although the swappable-battery announcement will facilitate relatively easy switching of batteries, it will be helpful to a limited segment such as two-wheelers and three-wheelers.

Conclusion

Like the Budget 2021, the government has left the tax structure for personal income tax slabs untouched this time around as well. It’s a no loss – no gain situation for middle-class consumers. However, a new provision allows taxpayers to file an updated return within two years from the end of the relevant assessment year. That said, a few relaxations in the automotive industry’s tax structure would have also brought in some relief.