It is that time of the year again, when the Union government is in overdrive to churn out the Budget. With the Narendra Modi government already having promised a ‘transformational’ Budget, the midnight oil must be burning thick and fast. Union Budget 2015-16, which will be presented by Finance Minister Arun Jaitley on 28 February 2015 as such has his task cut out.
While the government has its own priorities and must be looking to get that on track, we take the opportunity to present the case for the other side, the industry has gone on record with its own wishlist.
Here is the list of top 10 expectations from the Narendra Modi government’s Union Budget 2015-16:
1. Manufacturing sector:
Manufacturing sector, especially MSMEs, are expecting a boost under Narendra Modi government’s ‘Make in India’ campaign that aims at job creation and investment promotion in key sectors such as automobiles, electronics, mining, pharma among others.
2. Real estate sector:
With smart cities bringing in lots of opportunities for private developers, they are expecting government to further liberalise norms and allow FDI in construction and affordable housing apart from re-introducing tax benefits under section 80 IB (10) of the Income Tax Act.
3. Education sector:
Make education accessible and affordable so that even people living in rural areas can have access to good schools, the lack of which leads to skill-less labour and unemployment. Expectations are for government to take the initiative by offering credit guarantee funds that would allow banks to give loans without collateral. Mahila Bank reach be expanded by financing education loans to girls/women.
Disinvestment has turned out to be one of the government’s bigger success stories with Rs 24,329 crore, highest ever achieved since the process began in FY92, already garnered. The 10% Coal India limited’s stake sale fetched Rs 22,558 crore on January 30. The government would earn another Rs 3,000 crore by selling a stake in Power Finance Corporation and Rural Electrification Corporation in recent days. Expectations are for government to sell further stakes.
5. Technology sector:
With ambitious plans like digital India, Union Budget 2015-16 is expected to deliver on providing investments in India’s technology infrastructure. A substantial amount would be required to develop a robust network infrastructure across the country to build foundation for India’s digital economy.
6. Income-tax slabs:
Exemption in income-tax slabs is on everyone’s wishlist. A hike in taxable amount from 2.5 to 3 lakh for adults under 60 years would leave more money in the hands of general public.
7. Automobile sector:
Automobile industry body SIAM expects a reduction in excise duty on automobiles to help the sector combat demand slowdown and measures towards restarting stalled infra projects to help revive demand. Government must consider proposal to give incentives to manufacturers of hybrid and electric vehicles to make them cheaper.
Kerala has demanded that the tax rate to be hiked to 14.5%, even as VAT on most goods of high currency like mobile phones, computers, clothes and consumer electronics is 5%, to discourage web-based shopping that takes place cutting across state borders. A consumer (other than a registered dealer) based in Bhopal, for instance, could buy a laptop from a dealer in his city but stored by Flipkart in its Bengaluru warehouse and the tax revenue goes to Karnataka. The tax increase will require an amendment in the Central Sales Tax Act.
Clarity on issues related to taxation, GAAR, FDI in various sector to help long-term investors relax.
Bankers expect the government to bring about several changes in the banking space, with focus on asset recovery, roadmap for capital raising among others, apart from concrete steps to revive capital expenditure. The revised GDP figures will allow the Government additional leeway in setting a higher quantum of fiscal deficit in FY16, possibly at 3.8-3.9% of GDP.
11. Real Estate:
Realtors expect government to encourage affordable housing in a planned manner to prevent mushrooming of slums in the big metros where the infrastructure is getting stretched. Lower interest rates and government spending either in PPP model or itself is required. REITS has not taken off as planned and anticipated by the Government. Creation of twin cities can be another way to address the growing demand.
12. Medical Devices:
Rationalization of inverted duty structure: Creating parity between imported devices and domestically manufactured devices by having a rationalized duty structure. Duty structure is currently heavily tilted in favour of imports. India should adopt a preferential purchase policy for domestically manufactured goods in all public healthcare systems in sync with practices followed in China, USA etc.
13. Mutual funds:
The country’s mutual fund industry is seeking tax sops from the forthcoming Union Budget. The industry has asked for separate concession over and above the Rs 1.5 lakh deduction under section 80C for ELSS and National Pension Scheme. The Finance Ministry should also consider tax concessions for unit linked pension plans under section 80CCD of the Income Tax Act.
Programs such as Digital India, smart cities and Skill India require the creation of technological infrastructure that will need budgetary support. A policy framework for industry and SMEs in particular that encourages innovation and adoption of technology can boost the Make in India initiative.
Life Insurance industry had earlier recommended that the tax relief be linked to the term of the policy instead of sum assured. Expectations are that tax relief is given to a proposal where the term of the policy is more than 10 years. This would promote long term savings habit and benefit the persistency ratio of life insurance companies as well. Further, Section 10(10D) provision should be suitably revised in line with the minimum assured death benefit guidelines prescribed by insurance regulator, IRDAI. The government should also look at special tax concessions for long term saving instruments separately and should not be clubbed with the existing tax limits. This will help promote a habit of systematic and consistent long term savings which is the need of the hour – both from an end consumer level as well as from an economic level.
16. Solar Power:
Solar power equipment (like solar invertors, UPS, charge controllers) should be brought under “zero” VAT/CST regime similar to solar panels, all across the country; 80 percent accelerated benefit should be extended to individual taxpayers as well for installing rooftop solar systems and other solar energy equipment; Retail lending facility through commercial banks for buying solar energy equipments, should be made as easy as getting a consumer loan; Interest paid on loans used for solar energy systems should be allowed as deduction from income while arriving (at) income tax for individual taxpayers as well.
As private sector participation is key to developing skilled manpower, expect specific indirect tax rebates in the forthcoming budget, for the companies & partners.