1. Budget 2016: Industry reacts on FM Arun Jaitley’s 3rd budget

Budget 2016: Industry reacts on FM Arun Jaitley’s 3rd budget

Marginal tax relief of upto Rs 6,600 for small tax payers, a 3 per cent hike in surcharge on super-rich, new levies on cars and SUVs and a compliance window to domestic black money holders...

By: | New Delhi | Published: March 1, 2016 12:39 AM
Finance Minister Arun Jaitley made no changes in the personal or corporate income- tax slabs but made costlier several items including electricity, jewellery, readymade garments, mineral water and aerated drinks, tobacco and cigarettes by raising duties. (PTI)

Finance Minister Arun Jaitley made no changes in the personal or corporate income- tax slabs but made costlier several items including electricity, jewellery, readymade garments, mineral water and aerated drinks, tobacco and cigarettes by raising duties. (PTI)

Marginal tax relief of upto Rs 6,600 for small tax payers, a 3 per cent hike in surcharge on super-rich, new levies on cars and SUVs and a compliance window to domestic black money holders were unveiled in the Budget for 2016-17 that envisages a huge spending of Rs 1.77 lakh crore in rural areas to address the agrarian distress.

Presenting his third Budget, Finance Minister Arun Jaitley made no changes in the personal or corporate income- tax slabs but made costlier several items including electricity, jewellery, readymade garments, mineral water and aerated drinks, tobacco and cigarettes by raising duties.

The Budget brought in a new 0.5 per cent Krishi Kalyan Cess on all taxable services to fund agriculture while proposing a retirement tax on 60 per cent of the pension and provident fund corpus including EPF created after April 1, 2016.

Asked about comments that the Budget was left-of-centre, Jaitley said, “it is neither left nor right but deals with the reality of Indian economy. It addresses sectors which need highest priority and rural areas need most attention.”

Arun Gupta, MD, NTL Group, said, “The budget presented has far reaching implications. We believe that the focus on Infrastructure and Investment, Financial sector reforms, easing the process of doing business in India and financial prudence will have radical effects on the health of the Indian economy. Tax reforms to reduce compliances is a positive step for the businesses.”

FM Arun jaitley also said, “There is a serious challenge, if not distress, in the rural sector and we have given priority to the social sector and infrastructure. This Budget is a combination of several things,” he said.

Arun Nagpal, Co-Founder, Mrida Group, said, “The budget has a very obvious rural development focus. The FM has shared his vision of providing socio economic security for the rural, farming community, poor and vulnerable. We believe that the focus on rural electrification, skill development schemes, farming focused interventions, farm to market connectivity, agriculture and farmer welfare schemes targeted at income generation and security will impact favourably on the rural community. The Government should be congratulated for taking these very aggressive and commendable steps and now the on-ground implementation and monitoring to ensure that targets are met will be the key”.

Ahead of Assembly elections in five states, Jaitley focused on plans for agriculture and farmers welfare by providing Rs 35,984 crore on this alone. A massive Rs 87,765 crore has been allocated for rural sector while Rs 2000 crore will be provided for giving concessional LPG connections to BPL families.

As much as Rs 2.87 lakh crore will be given as grants in aid to panchayats and municipalities while allocation for social sector including education and healthcare has been pegged at Rs 1.51 lakh crore.

A total outlay of Rs 2.21 lakh crore has been made for infrastructure, of which Rs 97,000 crore will be in the road sector including on rural roads.

In a bid to shore up the economy hit by global slowdown, the Budget proposes a 15.3 per cent higher expenditure at Rs 19.78 lakh crore in 2016-17, consisting of Rs 5.50 lakh crore under Plan and Rs 14.28 lakh crore under non-Plan.

The Budget provides an outlay of Rs 162,759 crore for defence in 2016-17, up by 13 per cent from Rs 143,236 crore in the revised estimates for the current year. Capital expenditure on defence has been put at Rs 86,340 crore against Rs 81,400 crore in the current year’s revised estimates.

A Krishi Kalyan Cess of 0.5 per cent would cover all services, proceeds of which will be used for financing incentives for improvement of agriculture and welfare of farmers. The cess will come into effect from June 1.

Referring to concerns over pollution and traffic situation in cities, Jaitley proposed to levy an infrastructure cess of 1 per cent on small petrol, LPG, CNG cars, 2.5 per cent on diesel cars of certain capacity and 4 per cent on higher engine capacity vehicles and SUVs.

Recalling his last year’s promise of reducing corporate tax from 30 to 25 per cent over a period accompanied by rationalisation and removal of exemptions and incentives, Jaitley today limited accelerated depreciation provided under I-T Act to a maximum of 40 per cent from April 1, 2017.

The benefit of deduction for research would be limited to 150 per cent from April 1, 2017 and 100 per cent from April 2020.

To boost domestic manufacturing and job creation, he allowed new units incorporated on or after March 1, 2016 an option of being taxed at 25 per cent plus surcharge and cess provided they do not claim profit linked or investment linked deductions.

He also proposed lower corporate income tax rate for next financial year of relatively small enterprises with a turnover not exceeding Rs 5 crore in fiscal 2016 to 29 per cent plus surcharge and cess. At present they pay 30 per cent plus surcharge and cess.

Minimum Alternate Tax will apply in such cases. Capital gains will not be invested in regulated/ notified fund or funds and by individuals in notified startups in which they hold majority shares.

As part of an attempt to incentivise domestic value addition in the Make in India campaign, he proposed to suitable changes in customs and excise duty rates on certain inputs, raw material, intermediaries and components to reduce cost and improve competitiveness of domestic industry in various sectors including IT, IT hardware, capital goods, defence production, MRO of aircrafts and ships, and textiles.

David Walker, Managing Director, SARE Homes, “Union Budget 2016-17 is a mixed bag for the real estate sector. We are pleased to see that the government has stuck to the 3.5 per cent fiscal target as this will give head room for the reduction in interest rates which will benefit all sectors of the economy and particularly the housing sector. The Finance Minister’s proposal that any distribution out of SPV income to REITs and INVITs with specified shareholding not being subject to Dividend Distribution Tax (DDT) will spur investments in REITs. The additional exemption of Rs 50,000 for housing loans up to Rs 35 lakh – provided the house cost does not exceed Rs 50 lakh – is welcome too.  Excise duty exemption on ready-mix concrete used in construction sites augurs well for the construction industry. While plans to meet the fiscal deficit targets are a good move, some of the key issues in the real estate sector have been given a skip. The real estate sector’s expectations of being accorded Industry and Infrastructure status have not been accepted. Furthermore, the fact that there was no mention about action being taken to expedite GST and the Real Estate Development Bill is disappointing.”

Jaitley proposed Rs 25,000 crore for bank recapitalisation and said the government will also consider the option of reducing its stake to below 50 per cent. For skill development, a pet theme of Prime Minister Narendra Modi, Jaitley allocated Rs 1,804 crore. 1,500 multi training skilled institutes will be set up.

As part of reforms, FDI policy will be liberalised in areas of insurance and pension, asset reconstruction companies and stock exchanges. 100 per cent FDI will be allowed through FIPB route in food products produced and manufactured in India. Fiscal deficit in the revised estimates of 2015-16 and the budget for coming year has been retained at 3.9 per cent and 3.5 per cent to ensure fiscal discipline.

VP Mahendru, Chairman, Eon Electric, said, “It is pleasing to see the Government sticking to its fiscal deficit target as it will give a boost to the overall economy. Changes in customs and excise duty rates for capital goods sector is an encouraging sign for industrial growth as it will help reduce costs and improve competitiveness of domestic industry. The proposal to provide 100% village electrification by May 1, 2018, is indeed very welcome as it in line with the Nation’s overall vision to provide 24X7 electricity. This will also create headroom for energy efficiency such as  use of LED will be vital in achieving the Nation’s vision.”

Govt’s total expenditure has been projected at Rs 19.78 lakh crore, with planned expenditure pegged at Rs 5.50 lakh crore and non-plan at Rs 14.28 lakh crore.

Ratul Puri, Chairman, Hindustan Powerprojects, said, “A welcome budget wherein the Government has addressed challenges being faced by the industry. The Government’s plans to meet the fiscal target is a welcome move as this will allow reduction in interest rates which will benefit all sectors of the economy. The focus on infrastructure spending through Deendayal Upadhayaya Gram Jyoti Yojna and the Integrated Power Development Schemes is clearly visible with a massive outlay of Rs 221,246 crore for 2016-17. The thrust on connecting the unconnected by May 1, 2018, augurs well for the Country and the sector along with the ‘ease of business’ will catch the attention of the investors for the sectors. This would be another significant goal post that government would have scaled, once UDAY is successfully implemented. The Government has also set itself a target that could be difficult to achieve – double farmers’ income in the next five years and they should have also addressed the skilling issue that is likely to face in the near term with 10 million joining the employment market every year. One must applaud the Government for sticking by its vision and commitment and not get carried away”.

  1. No Comments.

Go to Top