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Indian Auto Industry Seeks Government Support in Budget 2026

  //automotive-transportation.news-articles.net/co .. try-seeks-government-support-in-budget-2026.html
  Published in Automotive and Transportation on Tuesday, January 20th 2026 at 21:15 GMT by moneycontrol.com
      Locale: INDIA

A Sector on the Mend, Yet Seeking Support

The Indian auto industry has weathered considerable storms in recent years. The initial disruption of the pandemic, followed by the complexities of adapting to and implementing GST, presented significant challenges. While the economy has demonstrated resilience, and GST 2.0 has demonstrably helped revitalize sales and production, the industry acknowledges that continued support from the government remains paramount. This is not simply about maintaining current levels of activity; it's about fostering a future-proofed sector capable of embracing technological advancements and meeting increasingly stringent environmental regulations.

Key Industry Demands: A Three-Pronged Approach

The industry's expectations for Budget 2026 are centered around three key areas: EV incentives, GST rate adjustments, and GST clarity. These demands aren't isolated requests; they are interconnected elements vital to the sector's long-term health.

• FAME Scheme Extension & Enhanced Allocation: The Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme has been a vital catalyst for EV adoption in India. The scheme provides subsidies to both manufacturers and buyers of electric vehicles. However, the current iteration of the scheme is nearing its expiration date. Industry leaders are united in their call for an extension, coupled with a substantial increase in the allocated budget. This would allow for wider accessibility of EVs across different income segments and geographic locations, particularly in rural areas where charging infrastructure remains a significant hurdle.
• GST Rate Reduction for EVs and Components: The current GST rates applied to EVs, while lower than those for traditional internal combustion engine (ICE) vehicles, are still considered a barrier to affordability for a wider consumer base. Manufacturers are advocating for further reductions, ideally bringing the rates down to a level that makes EVs genuinely competitive with their petrol and diesel counterparts. This demand extends beyond just the vehicles themselves; components like batteries and electric motors also need to be considered for reduced GST rates to lower overall manufacturing costs.
• GST Clarity and Anomaly Resolution: The implementation of GST, even in its revised 2.0 form, hasn't been entirely smooth. Discrepancies in interpretation and application of the law continue to create confusion and compliance burdens for automotive businesses. Budget 2026 presents an opportunity to address these lingering anomalies and provide clear, unambiguous guidelines on GST treatment for various automotive products and services.

Budget 2026: A Roadmap for Sustainability and Innovation

Industry stakeholders anticipate that Budget 2026 will serve as a roadmap for the future of the automotive sector, with a clear emphasis on sustainability and technological innovation. The government's commitment to reducing carbon emissions and promoting cleaner transportation is expected to be reflected in concrete policy measures. This might include incentives for research and development in EV technologies, support for the development of charging infrastructure across the country, and potential tax breaks for companies investing in electric vehicle manufacturing and component production. Beyond just EVs, the budget is also expected to address the challenges facing other areas of the auto sector, such as promoting the development of alternative fuel technologies and fostering innovation in connected car technologies.

GST 2.0: A Recovery Story with Unfinished Business

The positive impact of GST 2.0 on the auto sector is undeniable. Sales figures have improved, production lines are humming, and consumer confidence is slowly returning. However, the recovery isn't complete. Lingering issues with GST implementation, such as complexities in input tax credit claims and the need for greater clarity on certain classification issues, need to be resolved to ensure the long-term stability and sustained growth of the industry. Budget 2026 offers a crucial platform to address these unresolved issues and pave the way for a brighter, more sustainable future for Indian automotive.