What Union Budget 2023 offers for auto industry: A look at key announcements

Union Finance Minister Nirmala Sitharaman presented the Union Budget 2023 in the parliament today. As always, the budget has something for each sector of the economy. Here’s a look at the key announcements for the automobile sector in the last full budget of Modi government 2.0

Customs duty exempted on lithium-ion batteries

The Union Budget 2023 removes custom duty on capital goods/machinery for manufacture of lithium-ion cell for use in batteries of electrically operated vehicles (EVs). The move is said to help in reducing the cost of EVs in the country.

“To further provide impetus to green mobility, customs duty exemption is being extended to import of capital goods and machinery required for manufacture of lithium-ion cells for batteries used in electric vehicles,” Finance Minister Nirmala Sitharaman said in her speech.

Green Hydrogen Mission

The finance minister has reiterated the government’s focus on green mobility by emphasizing on the recently launched National Green Hydrogen Mission. She said that with an outlay of ₹19,700 crores, the National Green Hydrogen Mission will “facilitate transition of the economy to low carbon intensity, reduce dependence on fossil fuel imports, and make the country assume technology and market leadership in this sunrise sector”.

“Our target is to reach an annual production of 5 MMT by 2030,” she added.

Changes in basic custom duty

In the Union Budget 2023, the finance minister proposed to reduce the number of basic customs duty rates on goods, other than textiles and agriculture, from 21 per cent to 13 per cent. As a result, there are minor changes in the basic custom duties, cesses and surcharges on some items including automobiles.

Scrapping old vehicles

Furthering the vehicle scrapping policy mentioned in Budget 2021-22, the minister said that she will allocate funds for scrapping old vehicles of 20 the Central Government. States will also be supported in replacing old vehicles and ambulances, she sadded.

Rebate on personal income tax

The Union Budget 2023 increases the tax rebate limit on personal income from ₹5 lakh to ₹7 lakh. This is likely to offer more disposable income with the salaried citizens to spend on goods like automobiles.

“Currently, those with income up to ₹5 lakh do not pay any income tax in both old and new tax regimes. I propose to increase the rebate limit to ₹7 lakh in the new tax regime. Thus, persons in the new tax regime, with income up to ₹7 lakh will not have to pay any tax,” the minister said.