India Budget 2023 Expectations Updates: Finance Minister Nirmala Sitharaman will present her fifth Budget on February 1. In view of the global recessionary environment, the Finance Minister has to find the balance between maintaining fiscal deficit and pursuing populist agenda. She is expected to focus on job creation, and improved funding for infrastructure, manufacturing, agriculture and other important sectors. Being the last full Budget of Finance Minister Nirmala Sitharaman before Lok Sabha Elections 2025, Sithraman is also expected to announce various tax relief measures for the common man, including salaried employees and senior citizens. While the finer details of the Budget will be known on February 1, track this space for updates on Budget 2023 expectations on January 29.
Also Read: Budget 2023 Income Tax Changes Live Updates
Varun Gupta, Founder and CEO, of Boult Audio, says “We would like the Government to continue the Aatmanirbhar Bharat expedition by increasing the strategic investment and boosting the companies that are strengthening the most significant campaign of the government. The consumer electronics tech sector has significantly fostered the Indian economy even during the pandemic. To continue doing so, the government needs to rationalize taxes, promote R&D and provide incentives to ramp up manufacturing in line with the Make in India campaign. Another crucial factor that the government must consider in the upcoming budget is the focus on cost management in the logistics industry. Currently, the logistics costs in India are around 14% of its GDP, we are expecting an 8-10% reduction in the same. Also, a reduction in the corporate tax rates will help Indian companies to expand their horizon in the global market as well. The government should also furnish ease in claiming a refund of GST.”
Ranjeet Mahtani, Partner at Dhruva Advisors says that importers and exporters are faced with various EXIM related disputes. These typically involve questions of customs classification, valuation, exemption. Over the last several years hundreds of appeals, if not more, are pending at various appellate fora. Buoyed by the response to the Sabka Vishwas (Legacy Dispute Resolution) Scheme for settlement of excise and service tax cases, and Vivad se Vishwas for income tax matters, trade and industry awaits a similar dispute resolution scheme for Customs and EXIM matters.
“An amnesty scheme for Customs and EXIM cases will also offer solace to parties that obtained licenses for duty-free imports under the EPCG scheme and Advance Authorization scheme but, have failed to meet their export obligations due to Covid-19 pandemic or otherwise. Interest (due to defaults) often exceeds the customs duties liability. An amnesty scheme for Customs will aid businesses clear these disputes, and move forward on a clean slate,” he says
SBI Research says, “Replacing of cross subsidy on power tariffs may be phased out and replaced with Direct Benefit transfer by states to individuals (which is also envisaged under amendments to electricity act). This would improve the viability of the sector and draw in investments in a big way.
GST may be reduced in Coal as input credit is not available for the GST paid in coal.”
“Land acquisition issues continue to impact projects. More projects may be bid out under the solar park model wherein the state Government may acquire land, set up the park and transmission infrastructure and then invite bids for developers to set up projects,” it adds.
Under Section 80TTB interest income from deposits by senior citizen (Savings bank accounts, fixed deposits, recurring deposit accounts) up to Rs 50,000 is exempted from income tax. This threshold may be increased to Rs 75,000 / Rs 1 lakh which still will have much lower fiscal cost.
Aditya Hans, Partner at Dhruva Advisors says the cost of producing aluminium in India has been adversely impacted for some time due to inverted duty structure on raw materials, taxes/cesses such as coal cess and electricity duty, and logistics costs. The burden of taxes and levies is a significant portion of production cost, which puts the domestic industry at a disadvantage compared to global competitors. The textile industry is also facing an inverted duty structure issue. Despite the Government's efforts to resolve it, the measures taken were rolled back. To attract investment and enhance export competitiveness, resolving these inconsistencies in the Budget 2023 is essential.
Amit Vasistha, Founder and CEO, GALF, a wellness-tech platform for corporates says Government should consider the following in the budget
1) Employment compliance : Startups are generally very lean and streamlined organisations with limited budgets. The current labour law or employment compliances end up consuming high costs and time of the startups founders or leadership teams. They end up rather hiring personnel on contracts instead of full time resources. Govt. should consider lean compliance package or requirements for organisations less than 50 Crores in turnover.
2) Certifications and Funding: The Startup India Seed Fund Scheme (SISFS) and other related avenues have clearly given a big boost to the startup ecosystem. Building on the same; government could consider providing proper assurance or ranking certifications to the high performing startups as an option. This will help increase investor confidence in the good startups and open-up funding sources that are on the fence. Banks could also consider providing preferred interest rates using funding models like CCD to such high performing startups
3) Plug and Play Incubators: Clearly there has been a lot of traction in terms of appointment of incubators through the PM Narendra Modi led SISFS. That said, if we are looking for a high velocity growth for startups then we need higher growth in incubator or co-working avenues jointly supported by government. This is one massive avenue for cost and equity management for the founders.
4) Startup Tourism: A low hanging fruit but with massive impact to multiple industries government should propel a massive startup tourism charter plan under the Azaadi Ka Amrit Mahotsav at India level. This will attract a lot of international and domestic investors to consider visiting Startup events and micro-ecosystems in India
Talking about the logistics sector’s expectations from Budget 2023, Malay Shankar, CEO of ProConnect Supply Chain Solutions, says some of the expectations from the Budget are following:
Firstly, the New Labour Code directly impacts the blue collar workers who are the backbone of the logistics and supply chain industry. Bringing in more straightforward means of enforcing it, while ensuring social security and economic benefit to the blue collar workers will fetch long-lasting results. Getting rid of ambiguity and having simpler ways of implementation will help industrial workers.
Secondly, we really hope the government will strengthen the foundation of National Logistics Policy (NLP) and implement it to ease bottlenecks and reduce costs. Along with that, an improved road network will decongest roads, facilitate seamless transportation of goods and get better land value for the warehousing hubs. The sector is keenly looking at adopting greener practices. Offering tax benefits and incentives to the warehousing industry for deploying solar-enabled solutions and other green practices will go a long way in reducing the carbon footprint of the sector as a whole.
Sameer Kanodia – Managing Director and CEO of Lumina Datamatics says the the global economic outlook is not very favourable. A recession and hence slowdown appears to be in the cards. The Indian current account is in deficit. “Hence, we need to encourage exports. The government ought to lower the interest rate relating to exports. Consumers are absorbing content more rapidly than in the past. While print, the traditional method, of content consumption is mature, the digital format is growing exponentially. This trend is expected to continue.The world of eCommerce is growing very rapidly. Thanks to digital technology, one is able to purchase goods and services remotely. Online is the future because it is a more efficient supply chain. The budget should not discourage eRetail.”
SBI Research says that the Government should focus on agriculture and rural economy development alongside infrastructure development. Some of the key sector wise reforms that should be addressed in the forthcoming budget are given below.
“This Budget would have the daunting task of progressing towards consolidation after the covid related fiscal push. On the other hand, an eye needs to be kept on the economic growth in an atmosphere of slowing global growth and tightening domestic financial conditions. On a strategic level, the broad reforms process should continue with outlays earmarked for rural development, boosting manufacturing, employment generation, and capacity building through infrastructure,” Yes bank says in its Pre-Budget report.
“Despite this being the last Budget before general elections, we do not anticipate much in terms of tax dole outs for the masses. For FY24E we anticipate the Budget deficit to increase to INR 17.8 tn, GFD/GDP to print at 5.9% (after attaining the 6.4% target for FY23BE). Net and gross borrowings are likely to increase in FY24E to INR 11.7 tn and 15.4 tn respectively. Despite RBI pausing after another 25bps hike in February 2023, we see a scope for yields to rise in H1FY24 towards 7.60-7.75% as centre targets to front-load borrowings in H1,” it adds.
Pranav Maheshwari, Co-Founder of StayVista, “Staycations have become one of the biggest holiday trends post-pandemic. Private villa rentals are now the go-to choice for large friends and family groups, looking to take a quick break and with more affluent Indians buying second homes, the category is poised to hit revenues of $1.8 billion in 2023. Following the two brutal pandemic years, the hospitality and travel industries need support and attention. Therefore this year, in particular, we anticipate provisions and initiatives focusing on homestay villa regulations and tax procedures.”
Amit Gossain, Managing Director of KONE Elevator India says while GST and RERA have had a positive impact on the Indian real estate sector, the sole responsibility of collecting the current 18% GST rate on brokerage services lies with an estimated 1 million real estate brokers in the country. As such, there is a need to bring real estate brokerage services at par with other service providers by reducing the GST rate to a more tenable 5%. According to Gossain, some other expectations of the sector from upcoming Budget are:
Chetan Walunj, Founder and CEO of Repos Energy says, “We are expecting two major updates in this budget. The previous year’s budget allocated good sums towards research and development. Multiple successful prototypes got the benefits of such budgets. This year, we expect funds to be allocated for prototyping and proof of concepts, which will enable many more successful innovations to see the light of day. Our second expectation is that fossil fuels, i.e. petrol and diesel, will be brought under GST. Today, petrol and diesel are in the ambit of VAT, which comes under states and hence, causes a lot of price variations across the country. With a unified pricing and taxation structure, the consumer will largely be benefitted.”
An expert writes that the biggest issues on the wish list of the country’s millennials include simplifying the income tax filing process, boosting the standard deduction limit, tax benefits for the new economy, and enhancing the benefits on college loans. Read more
Talking about tax expectations from Budget 2023, Jyoti Bhandari, Founder and CEO of Lovak Capital says that the salaried class is expecting for exemptions in tax slabs and increasing their take home income. “Several tax experts have proposed that the government raise the basic exemption limit under the Income Tax Act to Rs 5 lakh. The basic income tax exemption limit is currently set at Rs 2.5 lakhs per year under both the new and old income tax regimes. Individuals earning up to Rs. 2.5 lakh are exempt from paying taxes. Changes in previous budgets effectively made annual income up to Rs 5 lakh tax-free. The basic exemption limit, however, has not been revised since fiscal year 2014-15.”
Ahead of the Budget Speech 2023, Ranjeet Mahtani, Partner at Dhruva Advisors, says the real estate sector is hoping for a reduction in GST rates for construction materials in the upcoming Budget 2023 to combat inflation and control raw material costs. “Lowering GST on materials like cement and steel could lower input costs for developers and ultimately the cost of construction, making it more affordable for buyers and increasing demand for real estate. The inability to claim input tax credit increases expenses, and a decrease in GST rate on inputs will have a beneficial effect on the economy by decreasing the cost of housing.”