UNION BUDGET FY

Transcription

1 JULY 06, 2009 UNION BUDGET FY DBS Cholamandalam Securities Limited

2 BUDGET HIGHLIGHTS ECONOMY FY09 GDP growth was projected at 6.7%, volatility in the WPI measuring inflation was high ranging between 13% and 0%. Target for GDP growth in the mid-term has been fixed at 9%. Nominal GDP projected at Rs 59,00,000 crore a rise of 10.1%. Fiscal deficit at 6.0 as against BE of 2.7% and Revenue deficit at 4.4% as against BE of 1.1% FY10 targets - revenue deficit 4.8% and fiscal deficit 6.8%.

3 Direct Tax Highlights TAX PROPOSALS DIRECT TAXES Threshold limit increased by Rs 10,000 to Rs 1,60,000, exemption limit for women increased by Rs 10,000 to Rs 1,90,000 and for senior citizens it has been increased by Rs 15,000 to Rs 2,40,000. Surcharge of 10% on personal income tax (not corporate tax) has been done away with, however, education cess (2% and 1%) has been retained. Fringe benefit tax (FBT) has been abolished, while corporate tax rate has remained unchanged at 30% (10%surcharge on corporate tax stays). Sunset clause on exemption from income tax applicable on export (by software technology parks, electronic hardware technology parks, special economic zone and 100% export oriented units) has been extended by a year until FY11. Rate of minimum alternate tax has been increased from 10% to 15% on book profits with an extended claim period of 10 years as against 7 years. Companies that have just returned to black or on the verge of returning would be subject to a higher rate of tax incidence. example: Tata Steel Effect of the finance bill on direct taxes is estimated to be revenue neutral.

4 Tax structure (Personal income tax) Existing Proposed Tax Slab Rate Tax Slab Rate >5,00,000 30% >5,00,000 30% 3,00, ,000 20% 3,00,000-5,00,000 20% 1,50,000-3,00,000 10% 1,50, ,000 10% <150,000 Nil <160,000 Nil

5 TAX PROPOSALS INDIRECT TAXES Excise duty on several items that were charged at 4% has been raised to 8%. Quite a few items including certain biscuits and footwear, compact fluorescent lamps and certain varieties of paper and paperboard continue to be taxed at 4%. Excise duty on intermediate raw material inputs (PTA, DMT, polyester chips, manmade yarn and fibre) has been raised from 4% to 8%. Excise duty on cars above 2000 cc capacity have been reduced by Rs 5000 to Rs Dual tariff scheme of excise on branded fuel has been replaced by specific rate of Rs on petrol and Rs 4.75 on diesel. Likely beneficiaries would be oil marketing companies BPCL, HPCL and IOC. Tax imposed on services for transport of goods by rail to affect cement, iron ore, steel and coal industries, Gateway Distriparks and Container Corporation. Tax imposed on services for coastal and inland shipping to affect oil and gas companies and auto manufacturers and Shreyas shipping. Effect of the finance bill on indirect taxes is estimated to be an additional of Rs 2,000.

6 Revenue & Expenditure Outlay Total Receipts Total Expenditure Revenue Receipts Capital Receipts Plan Non-Plan Tax Revenue Non Tax Revenue Borrowings Non Debt Receipts 5345 Central Plan A/c State Assistan ce A/c Revenue A/c Capital A/c Interest REVENUE DEFICIT (4.8%) FISCAL DEFICIT (6.8%)

7 SECTORWISE ANALYSIS

8 BANKING AND FINANCIAL SERVICES OVERALL: NEUTRAL EXISTING Budget outlay to APDRP at Rs.800 Crore for and outlay to RGGVY at about Rs.5,500 Crore. Budget outlay to APDRP to Rs.2080 Crore for (160% increase) and outlay to APDRP to Rs.7000 Crore (160% increase) Increased fee income for nodal agency PFC and REC

9 BROKING SERVICES OVERALL: POSITIVE EXISTING Commodity Transaction Tax (CTT) of Rs 17 per Rs 1,00,000. CTT completely abolished Facilitates higher trading volumes in commodities Financial Technologies via its interest in MCX; Positive for broking firms which offer commodity platforms Motilal Oswal, India Infoline and Indiabulls Securities

10 CAPITAL GOODS OVERALL: POSITIVE ISSUE Acceierated Power Development and Reform programme (APDRP) Allocation under APDRP increased by 160 per cent to Rs.2,080 crore in B.E over B.E Positive for Transformer manufacturers Crompton Greaves, Indotech, Voltamp, Areva T&D Increase in defence outlay Outlay for defence up from Rs 1,05,600 Cr in FY09 to Rs 1,41,703 Cr In FY10. Positive for companies involved in manufacturing Defence equipments BEL, BEML Highway Development Programme (NHDP) NHDP increased by 23 per cent over FY09 in FY10 Positive for Engineering companies L&T Allocation for Railways Allocation for Railways increased from Rs.10,800 crore in Interim FY09 to Rs.15,800 crore in FY10 Positive for manufacturers of rail coaches and wagons BEML, Titagarh Wagons, Texmaco Customs Duty Reducing the basic customs duty on permanent magnets from 7.5 per cent to 5 per cent. Will promote investment in Wind energy Suzlon

11 CONSTRUCTION OVERALL: POSITIVE ISSUES Government focus on infrastructure investment Infrastructure investment to exceed 9% of GDP by 2014 Higher infrastructure outlay in coming years Positive for the overall sector Availability of finances for infrastructure projects IIFCL to refinance 60% of commercial banks loans for PPP projects over the next 15 to 18 months Easy availability of finances for infrastructure projects Positive for all infrastructure companies Current Allocation to National Highway Development Programme at Rs.12,966 crores Allocation increased by 23% Positive for infrastructure companies in the road segment IRB, IVRCL, Patel engg and Nagarjuna Const Current Allocation to Bharat Nirman at Rs.31,280 crores Allocation increased by 45%. Positive for companies in rural infrastructure IVRCL, Patel Engg, Nagarjuna Const

12 CONSTRUCTION OVERALL: POSITIVE ISSUES Current allocation to JNNURM at Rs. 6,891 crores Allocation increased by 87% to Rs 12,887 crores Positive for companies focused on urban infrastructure development L&T, NCC and IVRCL Current Allocation to Accelerated Irrigation Programme at Rs.21,000 crores Allocation increased by 75% Positive for players having expertise in irrigation and water projects IVRCL, Jain irrigation Increase deduction for interest payment on home loan No proposal made Neutral

13 CONSTRUCTION OVERALL: POSITIVE ISSUES Multiple level of dividend distribution tax No proposal made Negative for sentiments for infrastructure companies operating through subsidiaries GMR, Jaiprakash, L&T and IVRCL Re-introduction of Section 10(23G) No proposal made Negative for sentiments for infrastructure companies.

14 FERTILISER OVERALL: NEUTRAL ISSUE Subsidy Intends to move to a system of direct transfer of subsidy to the farmers in due course. No Impact - Shift To Nutrient Based Subsidy Mooted. Custom Duty Customs duty on rock phosphate to be reduced from 5% to 2%.

15 FMCG OVERALL POSITIVE ISSUES Increase in threshold limit of exemption from personal income tax. Higher disposable income Increase in FMCG consumption HUL, Godrej Consumer Care, P&G, Marico National Rural Employment Guarantee Scheme Higher allocation under NREGS This could boost rural household income leading to increased consumption Positive for all FMCG companies Excise duty on cigarettes Excise duty on both filter and non-filter cigarettes have been left untouched Neutral impact. ITC, Godfrey Philips

16 INFORMATION TECHNOLOGY OVERALL: POSITIVE ISSUES FBT on ESOPs FBT abolished Positive impact All IT companies with wider impact on mid Tier IT Companies STPI benefits under Section 10A/ 10B for units in STPI/EOU to expire in 31st March 2010 Extension of STPI Tax benefits beyond FY10 Positive as it reduces the tax rate for IT companies Impact mainly for mid Tier IT companies Nation-wide security program as one of the top three priorities of the government Partner with the industry to implement unique identity card for each citizen Positive as it involves govt. expenditure on IT of Rs.120 cr. Tier 1 IT companies and companies in the smart card system Increase government IT budgets on education and other sectors to provide stimulus the economy. No announcement Negative impact due to higher expectations Educomp, NIIT, Aptech

17 MEDIA OVERALL: NEUTRAL ISSUE Stimulus Package Stimulus package for print media comprising waiver of 15 per cent agency commission on DAVP advertisements and 10 per cent increase in DAVP rates to be paid as a special relief subject to documentary proof of loss of revenue in nongovernmental advertisements, extended from 30th June, 2009 to 31st December, Positive All Companies Custom Duty Custom duty of 5% on Set top boxes Negative Dish TV and WWIL

18 METALS OVERALL: MARGINALLY POSITIVE ISSUES National Gas Grid long distance gas pipelines to facilitate transportation of gas. Neutral for Steel makers as excise cut is pass through; positive for pipe makers. Man Industries, Jindal Saw, Welspun Gujarat, PSL Allocation under JNNURM, RGGVY, Rajiv Awas Yojana, Bharat Nirman, AIBP Significant increase in plan allocation Positive for Long steel product makers SAIL, Tata Steel, Jindal Steel and Power and JSW Steel

19 OIL AND GAS OVERALL: POSITIVE ISSUE Tax holiday under section 80-IB(9) of the Income Tax Act To be extended to natural gas. This tax benefit to be available to undertakings in respect of profits derived from the commercial production of mineral oil and natural gas from oil and gas blocks which are awarded under the NELP-VIII round of bidding.

20 PLANTATION OVERALL: POSITIVE ISSUES Concessional customs duty Duty reduced to 5% on specified machinery for tea, coffee and rubber plantations. Positive McLeod Russel, Harrisons Malayalam, Jayshree Tea

21 POWER OVERALL: NEUTRAL EXISTING Sec 80IA Benefit To Extend Benefit till 2011 To benefit all the companies in the Generation,transmission and distribution space NTPC, KEC Intl,Jyothi Structures, Kalpataru Power,TataPower,NLC, GIPCL, Powergrid,Reliance Power, Cesc,Torrent Power,JP Hydro. Allocation of APDRP at Rs.800 crores Increased allocation to APDRP to Rs.2080 Crore for To benefit EPC players in the T&D space Jyoti Structures, KEC International, Kalpataru Power Customs duty on Synchronous generator at 7.5% Customs duty on synchronous generator reduced from 7.5% to 5% above 500KW Positive for wind power equipment manufacturers Positive for Suzlon

22 POWER OVERALL: NEUTRAL ISSUE ECB Limit Relaxation No Change Negative All Companies Exemption on Infrastructure Bonds to be covered under 80C No Change Negative All Companies

23 TELECOM OVERALL: NEUTRAL ISSUE 3G Receipts under Other Communication Services in budget includes a sum of Rs. 35,000 crore as expected revenue from auction of 3G spectrum Positive All companies Multiplicity of Levies No Announcement Negative more from a sentiment perspective All companies BSNL IPO No Announcement Neutral Tax holiday for companies which have started services after 31 March, 2005 No Announcement Neutral

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