PRE-BUDGET REPORT REPOR

Transcription

1 PRE-BUDGET REPORT

2 EXECUTIVE SUMMARY- PRE-BUDGET REPORT he upcoming union budget would be the third budget of finance minister, Arun Jaitley, since coming to power in May The budget is the most keenly awaited document a time when risks to global Tgrowth may hurt Indian economic growth and at a time when it is difficult to revive private investment. Some of the key points: To simplify the taxes The Narendra Modi-led National Democratic Alliance government promised a stable, fair and predictable tax regime after coming to power. However, till date government did not address the main issue of retrospective amendments to tax laws. Apart from this, the phased reduction of the corporate tax rate from 30% to 25% over a four-year period is going to be the highlight of the budget. Recapitalisation of Public Sector Banks The government has already said in August last year to put about Rs 70,000 crore for recapitalisation into state-run banks through four years to March 2019 and has said that the banks can raise about Rs 1 lakh crore from financial markets. However, due to surge in provisions for bad loans in a central bank-directed balance sheet clean-up exercise, banks would find difficulty to secure external funding. Meanwhile, the government may considering increasing the foreign investment limit in public sector banks to 49 per cent from 20 per cent with a view to attract overseas inflows in the upcoming budget. If the government accepts this proposal, it would not only lead to amendments in various Acts dealing with public sector banks to enable raising foreign investment limit but would result in flow of capital which public sector banks require urgently. OROP and seventh pay commission Recently, government has said that the grant of `One Rank One Pension` to those who took premature retirement from the armed forces could be considered with certain conditions. So, it is largely expected that government may announce some kind of policies for it in the upcoming budget. As per the government, arrears would be paid in four installments in every quarter. The first installment would cost about Rs 3,700 crore in total, which has to be payed before March 31, In the situation when the government has been reeling due to cash crunch now have liability of the OROP scheme and 7th pay commission. As per a report, the wage bill is likely to go up by 0.5 per cent of GDP. Rural schemes In order to give further structural reform to lift growth while putting in place a package that will seek to address rural stress, the government is expected to announce much more such kind of schemes. In the upcoming budget, government is expected to keep the provision under national rural employment scheme stable as a percentage of GDP in FY2017. Government is expected to speak largely on crop insurance, Pradhan Mantri Krishi Sinchayin Yojana and the Rurban Mission. The Rurban Mission is to create non-farm employment for rural youth by creating urban centres, which will act like employment hubs, and many more. The Pradhan Mantri Jan Dhan Yojana financial inclusion platform is expected to be loaded with more initiatives to reach out to the poor. Disinvestment: The year 2016 marks the 25th year since disinvestment first began in 1991 and for the 6 consecutive year India has been missing its budgetary; this time too India is likely to miss its budgetary target Rs. 69,500-crore. Disinvestment is a process where a company or government organization will divest an asset or subsidiary as a strategic move for the company, planning to put the proceeds from the divestiture to better use that garners a higher return on investment. The ongoing volatility in the Global stock market on the back of fear of interest rate hike in the US, China slowdown and Eurozone uncertainties, has derailed the sentiments of the market participant and this has derailed the PSU stake sale programme for the year, which the Finance minister has set target in the last union budget. Out of Rs. 69,500-crore, so far government has been able to mobilized only Rs. 13, crore. Government has so far been able to sell stake in 5 PSUs - Rural Electrification Corp (Rs. 1,608 crore), Power Finance Corp (Rs. 1,671 crore), Dredging Corp of India Ltd (Rs crore), Indian Oil Corp (Rs. 9,369 crore) and Engineers India Ltd (Rs. 640 crore). 1

3 BANKING, FINANCIAL SERVICES AND INSURANCE Government plans to recapitalisation of PSU banks. To raise resources for better development. Government plans to hike FDI cap in public sector banks to 49%. Government should raise tax exe m p t i o n l i m i t fo r h e a l t h insurance and introduce fiscal measures to help increase its penetration. Hope that if tax benefits are extended to home insurance, people will be more willing to buy this critical cover. All PSU Banks All PSU Banks All Insurance company. NBFC POWER Minimum Alternate Tax (MAT) to be reduced to 10 per cent. See some more incentives for rooftop solar power this year. All Power Companies All Solar power companies Oil & Gas Customs duty on imported LNG may be reduced if it cannot be exempted altogether in one go. Cut cess on crude oil so as to give relief to domestic oil producers hit by a slump in prices. National Calamity Contingency Duty (NCCD) on Crude Oil should be abolished. Petronet LNG Cairn India, ONGC, Oil India All Oil & Gas Companies 2

4 METAL & MINING Increase in Import duty on aluminum to 10% from 5%. Basic customs duty on copper products be increased from 5% to 10% Secondary metals producers seek import duty exemption on metallic scrap Hindalco, Vedanta and National Aluminum Company All Metal Companies All Metal Companies CAPITAL GOODS long term, stable and rationalized tax and duty structure All capital goods companies such as Larsen and Turbo, BHEL, ABB etc. GST Implementation All capital goods companies such as Larsen and Turbo, BHEL, ABB etc. Allow up to 50% CENVAT credit to manufacturers All Capital goods companies AUTOMOBILE Road map for GST : Used Vehicles should also be covered Luxury goods taxation : moderation in taxes required Regulatory uncertainty : clear road map for diesel vehicles All Automobile companies All Automobile companies Tata Motors, M&M, Bajaj Auto IT,ITES Sectors Lower Minimum Alternate Tax (MAT), incentives for setting up more data centers and digitization of SME's All IT Companies Tax holiday for startups for 3 years All product and software developer companies 10% of IT budgets set aside for cyber security All IT companies 3

5 TELECOMMUNICATION Deduction for spectrum fees as eligibility for depreciation as intangible assets : More Clarity on treatment of Spectrum Fee Distribution margin on Sim cards and prepaid voucher not recognized as commission Reduce excise and customs duties on hardware Royalty on capital gains or spectrum trading need clarity All Telecom companies All Telecom companies All Telecom companies All Telecom companies FMCG More inclusive and less restrictive Cenvat credit rules All FMCG companies GST implementation Roadmap All FMCG Companies Pharmaceuticals Investment-based tax incentives s u c h a s S p e c i a l Z o n e s f o r manufacture and export of APIs and Special Package Schemes similar to Modified Special Incentive Package Scheme (M- SIPS) or Electronics Manufacturing Cluster Scheme could be declared. Enhanced tax incentives for research and development (R&D) activities Rationalization of excise duty rate of APIs Roadmap for the implementation of GST All the pharma companies Sun Pharma, Cipla Lupin, Aurobindo Pharma & Cadila Healthcare, Syngin Technology, All the API manufacturing companies Sun Pharma, Cipla Lupin, Aurobindo Pharma & Cadila Healthcare 4

6 CEMENT Cement should be treated as 'declared goods' for tax purposes All the cement companies Clarity on GST implementation All the cement companies Uniform and Specific rate of excise duty on cement All the cement companies such as ACC, Ambuja Cement & Ultratech Cement TEXTILE Rationalization of duty structure on Man Made Fibre (MMF) Roadmap for the implementation of GST To provide export incentive of three per cent for yarn, five per cent for fabric and seven per cent for garments to extend 3% interest subvention Removal of import duties Withdrawal of anti-dumping duties Reduction of the central excise duty from 12.5% to 6% Removal of the 6% central excise duty on shuttleless looms and 12.5% on other shuttleless looms and spares & accessories. 5

7 REAL ESTATE Sector should be accorded industry status Single window clearance Provide more tax saving on housing loan and house insurance premiums Real Estate Bill passage and implementation Raise house rent deduction limit Provide more incentives to boost development and consumption of sustainable real estate Make additional allocation for infrastructure development in peripheral areas of metros Remove the DDT bottleneck in REITs Clarity on GST implementation 6

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