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Auto Plan seeks tax sops for fast growth
January, 30th 2007

To attract $ 35-45 billion over the next 10 years, the Automotive Mission Plan (2006-16) has sought a tax holiday for investments over Rs 500 crore made by autocompanies. The Plan released by the Prime Minister on Monday also sought tax deductions of 100% of export proifts and deduction of 50% on forex earnings.

The policy paper aims at making India the destination of choice in the world for design and manufacture of auto components with output reaching a level of $ 145billion, accounting for more than 10% of the GDP and providing additional employment to 25 million peopleby 2016. The current size of the automotive sector is pegged at about $ 34 billion. A draft auto mission plan was released by the minister in September lastyear.

To achieve the ambitious goal, the industry would have to invest $ 35-40 billion over the next 10 years. Bulk of this investment will come from expansion of capacities by existing manufacturers operating in India and remaining from global multinationalcorporations seeking to make India their manufacturingbase. Besides tax holidays, the Plan also calls for a one-stop clearance for FDI proposals in the sector and deduction of 30% of net income for 10 years for newindustrial undertakings.

As in the draft AMP, the final paper also promises to promote manufacturing and export of small cars, multi utility vehicles (MUVs), two-wheelers, tractors and auto components. The paper also seeks to incentivise research and development (R&D) for product rocess and technology. Setting up of virtual special economiczones (SEZs) and auto parks for auto componentindustry has also been proposed in the AMP.To help the domestic auto industry move fast, the government would continuously invest in road, port,railways, and power. The mission plan proposes to creation of specialized port infrastructure for handling vehicle exports. The government will also draw an Auto Fuel Policy road map beyond 2010.

Among other key recommendations in the AMP are rationalization of motor vehicle regulation, , integration of information technology (IT) in manufacturing and promotion of automotive infotronics among others.

Investment of $ 35-45 in domestic auto industry over the next ten years
One stop clearance will be granted to FDI proposals
There will be 100% tax deduction on export profits

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