Introduce benefits for claiming depreciation on vehicles: FADA

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Panaji: Ahead of the Union Budget 2021-22, the Federation of Automobile Dealers Associations (FADA), the apex national body of the automobile retail Industry in India is asking for introduction of benefits for claiming depreciation on vehicles for individuals as well as extension of depreciation period for corporates.

“Including individuals in depreciation benefits will boost vehicle demand and also increase the number of individuals filing IT returns and promote growth in GST collection for the government,” believes FADA.

The increase in depreciation rate for all types of vehicles which was valid till March 31, 2020 should also be extended for 2020-21, it said.  In the pre-Budget memorandum to the government, Vinkesh Gulati, president, FADA said, the automobile industry is a barometer of the Indian economy and its revival will in turn pull up the economy.

The auto retail industry is one of the key pillars of India’s growth trajectory, contributing 4.5 million jobs. “We look forward to a demand led growth oriented budget.”

The key recommendations of FADA are that, auto  dealers be kept out of annual tax collected at source of one per cent that came into 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 cost will go up,” said FADA.

The dealers association is also suggested attractive incentive for successful implementation of vehicle scrappage policy across the country.

The government must design a robust inspection & 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,” says the pre-Budget memo.

FADA suggests the 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.

All vehicles registered in India until March 31, 2000 should qualify under the Modern Fleet Vehicle Replacement Scheme. Similar schemes have been successfully implemented in the US, Canada, the UK and Italy by providing fiscal incentives and concessions for replacement through a single-window fleet modernization programme.  

In India, this scheme will have benefits of reducing pollution, reducing fuel consumption and improving safety. We hence request for an attractive incentive to be planned for the success of the Voluntary Scrappage Policy, said FADA.