India’s automobile retail sector has called on the federal government to prioritise aggressive public infrastructure spending and targeted tax reductions in the upcoming Union Budget 2026–27 to stimulate consumer demand and bolster market liquidity.

C.S. Vigneshwar, President of the Federation of Automobile Dealers Associations (FADA), stated that while tax relief is a perennial request, the industry’s primary focus this year is on a surge in government expenditure to re-energise the economy.

“In the budget, as usual, we would expect a cut in taxes, but more importantly, we would really expect an increase in spending,” Vigneshwar told PTI. “If there is an increase in spending, whether it is small projects or large ones, it will improve the flow of money in the system, and customers would come out and shop.”

He emphasised that increased government outlays would create a "multiplier effect" on consumption. He also noted that recent interest rate cuts by the Reserve Bank of India have already begun to improve the climate for vehicle financing.

Supreme Court Battle Over GST Cess

A critical concern for the Federation remains a legal battle over ₹2,500 crore in stranded GST compensation cess credits. FADA has petitioned the Supreme Court after the credits lapsed on Sept. 22, 2025, following the implementation of new GST 2.0 norms. The court has since issued a notice to the Union government, with a response expected by March.

“We have gone to the Supreme Court and the Supreme Court has accepted our appeal. We are quite confident that, with its immense wisdom, the court will give us a favourable and fair judgement,” Vigneshwar said.

Electric Vehicle Transition

Discussing the shift toward sustainable mobility, Vigneshwar noted that while electric vehicle (EV) penetration in the passenger segment rose to approximately 4% in 2025, up from 2.4% the previous year, infrastructure remains a significant hurdle for inter-city travel.

“Even in developed markets like America, Europe and Australia, EV infrastructure is a challenge," he said. "Government subsidies and push are important, but this is not a short-term problem; it is a medium-term challenge which the industry and government need to solve together.”

Vigneshwar added that a diverse mix of fuels, including hybrids and CNG, now accounts for roughly 35% of the market. He asserted that while the share of traditional petrol and diesel engines is expected to contract, consumers must retain the "freedom to choose" their preferred fuel type.

With inputs from PTI