By Sanjay Tolia
The finance minister tabled her second complete Budget amidst unprecedented challenges posed by the novel coronavirus (Covid-19). Government’s calibrated method in tackling the provide and demand-side disruption in the course of the pandemic, coupled with the mega vaccination drive that began final month, is anticipated to invigorate a V-shaped financial recovery–placing hopes on buoyancy with an ambitious GDP development price at 11% for FY22.
The government has introduced considerably-necessary push for the manufacturing sector by committing Rs 1.97 lakh crore, to be spent more than 5 years in the 13 sectors beneath the PLI scheme. This shall incentivise makers to expand production, create more investments and job possibilities. They can concentrate on employing India as a base for the domestic marketplace as nicely as exports. The textile sector is provided a specific impetus with the introduction of Mega Investment Textiles Parks (MITRA) scheme. With a commitment of seven Textile parks, the government intends to create economies of scale and big employment possibilities in labour-intensive sectors. The policy reforms, coupled with one of the lowest corporate tax prices, can enable India grow to be a international player in manufacturing.
Clearly, the budget’s concentrate on building a competitive manufacturing ecosystem to allow new domestic and FDI investments is visible by way of larger outlay for infrastructure investments.
Considering the capital-intensive nature of the infrastructure sector, the government has rightly announced a handful of infrastructure financing associated reforms. Starting with setting up a Development Financial Institution (DFI) with a lending portfolio of `5 lakh crore, boost in the capital expenditure in the ‘future-ready’ railway program, and expanding the urban infrastructure of metro & public bus transport. These will absolutely provide a fillip to the financial recovery and cushion to the manufacturing/ infrastructure sectors. A crucial highlight has been Asset Monetisation Program of the public infrastructure assets–airports, NHAI roads, oil & gas pipelines, and so on.
The infrastructure sector is additional reinforced by enabling FPIs to invest in debt instruments of REIT/ InVIT, and separately delivering tax reliefs by exempting TDS on dividends paid to REITs and InVITs. Additionally, very affordable Housing Projects will be eligible for yet another year of tax vacation. To make compliances much less onerous on get started-ups, appropriate amendments have been proposed in corporate laws, in addition to extending the tax vacation by yet another year.
Rationalising old laws has been a focal point of this government, be it the introduction of GST or the insolvency laws. This year, the FM proposed to introduce a rationalised single Securities Markets Code. In the insurance coverage sector, the government proposed to permit foreign investment up to 74%, with sufficient safeguards. To clean the books of public sector banks, it has also proposed to set up an Asset Reconstruction Company and Asset Management Company, which will take more than and dispose of the stressed debt. To buttress the monetary sector, tax incentives are proposed for re-place of foreign funds in IFSC and setting up of aircraft leasing providers in IFSC.
95% of Indian enterprises are nevertheless micro, and they require to move to the stage of getting compact and ultimately big. MSMEs require the government as an anchor to allow their transition. The Budget announced a doubling of an outlay for MSMEs to the tune of `15,700 crore, which is pretty positive. However, one will require to assessment how the allocations have been worked out. One of the crucial regions exactly where one hopes allocations have been produced is enabling MSMEs to adopt top quality infrastructural, technological and digital interventions to resolve their productivity, financing and demand linked challenges.
Balancing the company sentiments, the FM also proposed reforms to provide certainty in the tax atmosphere by extending the digitised faceless platform to the tax tribunals, overhauling the current alternate dispute resolution forums, like Authority for Advance Ruling for more quickly disposal of instances and delivering for a novel Dispute Resolution Mechanism for compact taxpayers, thereby accelerating the ease of carrying out company. In the continuing efforts of extending ‘ease of doing business and providing certainty’, the time limit for reopening of tax assessments has been rationalised, tax return filing requirement for a particular category of senior citizens has been dispensed with, clarity offered, inter alia, on the applicability of TDS on FPIs availing treaty positive aspects, India’s digital tax provisions introduced final year.
From an indirect tax viewpoint, even though, not quite a few modifications have been proposed, and the concentrate has been on rationalising GST/custom duty laws to enhance neighborhood manufacturing and take away troubles arising from inverted duty structure.
Though, one could usually debate for tax relief for person taxpayers, which could have indirectly resulted in escalating discretionary spending. The fantastic aspect, nevertheless, is that regardless of the higher fiscal deficit at 9.5% of the GDP and escalating debt-to-GDP ratio, the FM did not impose any more taxes, like Covid cess, restructuring corporate taxes, and so on this must be observed in a positive light. To augment finances of the government, the FM announced strategic divestment in providers, privatisation of two PSU banks, and so on, and confirmed the considerably-awaited IPO of Life Insurance Corporation of India.
With the Budget aimed at a balanced allocation of funds, interlaced with development infusion by way of fiscal and non-fiscal policy announcements, the FM has managed to stroll the speak of continuing on the reformist road to financial recovery and provide a holistic method paving the path for a $5-trillion economy.
Tax leader, PwC India, Views are private