As the Hon’ble Finance Minister presented the Union Budget 2025 in the Lok Sabha, we bring to you a thorough analysis on the tax and policy amendments that were announced on 1 February 2025  pertaining to the Automotive Sector. As FinMin unveiled the Budget 2025, we saw further focus on a greener auto ecosystem through tax incentives, funding, and domestic manufacturing support, aligned with the Viksit Bharat vision and building on past reforms.

The budget showcased crucial initiatives for the automotive sector, such as a budgetary boost for manufacturing, supporting India Inc by exempting various capital goods fostering growth and self-reliance in manufacturing of Lithium-ion batteries for EVs and exemption of Basic Customs Duty on a range of critical minerals and components and.

A Self-reliant Global Leader

“We commend the Finance Minister for coming up with a forward-looking budget and believe that it is focused on driving inclusive growth, giving a boost to India’s burgeoning MSME & Start-up sector. We particularly appreciate the expanded scope and fresh contribution of INR 10,000 CR as part of the “Fund of Funds” for start-ups. This is a huge step, when seen in the context of funding winter for start-ups and will certainly boost the entrepreneurial sentiment in the country. This development, coupled with establishment of Centres of Excellence for Skilling and AI, will further enable the next wave of entrepreneurship in the country. At the same time, the budget also recognised the contributions of MSMEs, enhancing credit access and facilitating tech upgradation. At Droom, we look forward to supporting the government’s key undertaking towards making India a global hub for manufacturing and innovation," said Sandeep Aggarwal, Founder & CEO of Droom.

WIth this let’s delve into some of the noteworthy tax reforms in the automotive sector:

• Outlay of  INR 7000cr for various Central and State Schemes

• Custom Duty Rate Rationalization - Only 8 tariff rates are left in Indian Customs Tariff including zero rate.

• Inclusion of 35 capital goods in the exemption notification to be used in manufacturing of Lithium-ion battery for EVs

• Exemption from SWS on 82 tariff lines covering motor-cycles (CTH 8711), Semi-conductor devices (CTH 8541), laboratory chemicals (CTH 9802), electricity meter (CTH 9028) among others

• Calibration of duties to further steer local production of electronics

“The Union Budget 2025 is well balanced, in terms of supporting India’s aspirations of emerging as a global hub for tech and innovation, while supporting MSMEs – the nation’s backbone, and creating more job opportunities for the nation’s youth. Investments in Clean Tech will certainly give a boost to the EV sector. Exemption of basic customs duty on Cobalt Powder and lithium-ion battery waste, and including 35 additional capital goods for EV manufacturing, will give a significant push to indigenous manufacturing. This will not only ensure easy availability crucial, also boosting domestic manufacturing and creating more job opportunities for the nation’s youth. At the same time, the budget also has key provisions for boosting the next wave of entrepreneurship in the nation, including the New Fund of Funds with a fresh contribution of INR 10,000 crore is a welcomed move, following the funding winter & dry spells that entrepreneurs had to endure in the previous year. Easing credit access to MSMEs is also a crucial move and will lead to better tech upgradation and more employment avenues for the nation's youth. At Oben, we commend these key developments in the Union Budget 2025 and stay committed to helping India’s move towards sustainability and clean energy,”  highlighted Madhumita Agrawal, Founder & CEO of Oben Electric

It is certain that this Union Budget 2025-26 is a strategic catalyst which is set to elevate the drive towards a sustainable and greener automotive sector, going forward.