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The Union Budget 2017 is likely to arrive soon, and many are expecting it to give a good boost to the Indian automotive sector. Many are hoping that the auto budget 2017 will give a nice boost to the used car sector, which has been largely ignored so far despite seeing double-digit growth rates for years. In fact, the Indian used car industry has seen more stable growth than the new car industry, and unit sales have risen from 1.6 million worth INR 38,500 crore in 2011 to around 3.3 million units worth INR 96,000 crore in 2016. Industry experts suggest that sales volumes could rise by 15 percent to around 6 million units sold worth INR 2,50,000 crore by 2021. Meanwhile, the new car market has been hit by the diesel ban, higher taxes and consumer uncertaintly due to demonetisation. Also Read: Auto Budget 2017: What to expect for the automobile industry
The new auto budget 2017 could simply bring in changes to improve new car sales and leave the used car sector unaffected. However, efforts to boost the used car industry could result in more inclusive growth for the larger Indian automotive market. What could these efforts be? For one, the government could reduce cess and taxes in order to drive demand for cars. At the very least, the government should not further raise taxes on the industry. The used car segment could also be benefited if the government subsidised new car purchases for buyers who scrap their old ones or extend subsidies to other exchanges. Also Read: Budget 2017: Road sector needs higher allocation to boost construction and complete pending projects
Simplification of policy and tax regulations across states could also be a huge boon for the Indian used car industry. At present, there are significant differences in policy and tax norms between states, causing confusion and disconcerting prospective buyers. Reducing these differences could not only reduce confusion and boost buyer interest, but also lower car prices and improve tax compliance according to certain experts. The implementation of GST on the used car segment could be a huge asset in the simplification process. The GST bill right now is silent on used cars, but a lower rate for the segment could help boost demand. A lower GST for used cars would also be feasibly, since tax would have already been collected when the car was first sold. If implemented smartly, the GST could actually boost used car sales within cities and indirectly resolve shortage of supplies to smaller-tier cities and towns.
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