As the infrastructure sector is being pegged as the biggest growth-oriented sector in the next five years, it is likely that Finance Minister Arun Jaitley will continue with his infrastructure push in the Budget 2018 as well. Arun Jaitley said that the focus of the government next year will be on the momentum of infrastructure creation.
According to Federation of Indian Chambers of Commerce and Industry (FICCI), government’s decision to reduce GST rates on specified works contract pertaining to roads, bridge, tunnel or terminal for road transportation for use by general public and specified schemes is a welcome move. However, the government should also consider reducing rates on ports, airports, metro, monorails as well from 18% to 12%.
The industry body also suggested that the government should address the non-performing assets issue in the banking system to revive the ailing infrastructure sector with fresh capital. On tax methodology on infrastructure creation, FICCI said that the Application of Book Value as the Fair Market Value of infrastructure (except in case of certain assets) leads to severe tax consequences.
“On one hand, the buyer has to pay tax on the difference between book value and purchase consideration, when in fact no gain/benefit has been received by the buyer. On the other hand, the seller has to pay capital gains on the difference between FMV and the sale consideration, when in fact the seller is actually incurring a loss,” FICCI said.
There could be situations where buyer and seller end up paying taxes more than the actual sale consideration… It is suggested that the Rules may appropriately be amended,” it added.
As this is going to be the last full Budget of the present government before the General Elections in 2019, investment in infrastructure is going to serve a dual purpose: development and job creation. The NDA government, in the previous Budgets, has allocated huge sums of funds on the infrastructure sector.
The government had allocated a record Rs. 3.96 lakh crore to the infrastructure sector to spur economic activities and create more jobs in the Budget 2017. However, while the government has upped its funding for the infrastructure sector, the private investments have remained mute.
There are at least 10 big infrastructure projects in the pipeline including Rs 12 lakh crore Sagarmala project and Rs 14,000 crore Bharatmala Project. The government, besides taking projects like these forward, may also allocate a grand sum for the infrastructural development of the Railways. The ambitious Bullet train project, which was announced in partnership with Japan, will need at least Rs 1.1 lakh crore of investment during the 2017-22 period.
Meanwhile, the Railway ministry is also pegging Rs 20 lakh crore investment plan for high-speed corridors and other projects for the modernisation. The goal of affordable housing and smart cities is also going to need big infrastructure investment. Arun Jaitley will present the Budget on February 1.