Finance Minister Arun Jaitley will be unveiling the Union Budget for the financial year 2016-17 on February 29. The previous two Union Budgets saw the Narendra Modi government, in a bid to boost investment and economic growth, offer incentives to businesses. Implementing the Goods and Services Tax, however, remains one of the promises that the government still has to deliver.
The highlights of last year’s budget were 100% deduction for contribution to Swachh Bharat and Clean Ganga projects, service Tax rate hiked to 14%, from 12.36%, and incentivised use of credit, debit cards.
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- Total recall
Here are the expectations from business leaders on Union Budget 2016-17:
Tata Steel Managing Director T V Narendran: “Just as the government has done a commendable job in improving the ease of doing business, we would like more initiatives to reduce the cost of doing business as well,” Narendran said, adding that he expects the government to further build on its reform agenda.
For the steel sector, which is hit by massive imports, the government could offer a major stimulus by making domestic steel procurement mandatory for smart cities, T V Narendran said.
Debjani Ghosh, Managing Director of Intel South Asia, said, “The Budget needs to walk the talk and show real execution towards the government’s intent of making it easier to do business.”
Ghosh said she hopes that the Budget takes a relook at procurement norms by focusing on quality and cost based procurement, and brings in a single independent authority to ease ‘Digital India’ implementation.
“There is a dire need for a strong and well-structured innovation agenda/policy for ‘Digital India’ and ‘Make in India’ to be a reality,” she said.
Hemant Kanoria, Chairman and Managing Director of Srei Infra Finance, said the Budget should focus on streamlining regulations to reduce tax uncertainties and improve the ‘ease of doing business’. “The finance minister must make provisions to broaden the tax net, and one way to achieve this is to increase PAN registrations, which will result in substantial reduction in black money transactions.
On the infra side, Hemant Kanoria said the government should set up an Infrastructure Dispute Redressal Tribunal, so that the industry can resolve long-pending disputes.
Muthoot Pappachan Group Chairman Thomas John Muthoot: “This will also make the proposed requirement of PAN card for purchases above Rs 1 lakh easy to implement.”
Daksha Baxi of Khaitan & Co said Finance Minister Arun Jaitley should simplify and bring clarity in tax laws, which will undoubtedly improve tax compliance, thereby increasing revenue. “Removal or significant reduction in MAT rate will put significant cash flow in the hands of taxpayers to make much needed investments,” Baxi said.
Yes Bank Managing Director Rana Kapoor said he expects the Budget to do everything to restart capital formation and investment cycle.
The finance minister also needs to restore the confidence of the private sector by furthering the reform process that is already under way to improve ease of doing business and de-stress the capital markets, he said.
“The private sector has subdued animal spirits which need to be revived. We need to get more high-octane energy in the economy, the catalyst for which is good capex spends and an accelerated resolution and reforms process,” Kapoor said.
Vikas Oberoi of Oberoi Realty said the Budget should boost the realty sector by expediting the enactment of the Real Estate Bill, as this can go a long way in protecting consumer interests by curbing fraudulent practices.
“The realty industry expects a specific date for the implementation of GST, which will give the industry a very clear taxation structure and induce a big change for the logistics architecture,” Oberoi said.
He also expects the government to introduce a single-window clearance system covering both Central and state laws, with pre-defined timelines for speedy clearances.
Spicejet Managing Director Ajay Singh called for exempting airlines from the MAT ambit till they wipe off all the accumulated losses, apart from giving exemption from withholding tax on aircraft/engine lease rentals.
“From being a vertical niche, Information Technology has become a horizontal technology, being used in a wide range of sectors – including but not limited to policy priorities like education, healthcare, infrastructure development and financial inclusion. As the country is advancing towards becoming a knowledge economy under the Digital India initiative with technology as the pivot, the upcoming budget is a perfect opportunity to reinstate the blue-print for sustained growth and we hope to see an increase in the annual budget for IT projects.
Moreover, from a technology adoption point of view, while mobility and cloud adoption are on the rise, India continues to ranks high both as source and destination of cyberattacks. These risks can impede the potential benefits of ‘Digital India’ programme. Hence, it is imperative to allocate 10% of the IT budgets exclusively for cyber and information security to ensure that the citizens are truly empowered to use the IT infrastructure and e-governance services.” – Shrikant Shitole, Managing Director, India, Symantec
Richard Rekhy, CEO, KPMG in India: While the growth-range forecast of 7 to 7.75 per cent for FY17 is lower than earlier projections, however looking at the current global economic scenario, it is significant. The large growth range given reflects the instability in the Economic environment, which in turn reflects the challenge at hand in navigating the economy through in the coming financial year. Increase in macro-stability, steady growth
forecasts and relenting inflation make for a conducive growth combination. It is crucial to differentiate between what is important and what is urgent. Addressing key problems such as scaling up investment, downsizing subsidies, creating a predictable and clean tax policy environment, and quickening disinvestment might need to be the milestones in the short-term road map for the Indian economy.
Pratibha Advani, Chief Financial Officer, Tata Communications: The corporate world always has very specific asks pertaining to their industries before every budget. Ours is no different. Our expectation from the budget this year is a fervent hope that the government harmonises the definition of “process” in the Indian Income tax Act with that defined in OECD & DTAAs.
In the Finance Bill 2012 the definition of Royalty for the word “process” is identical as in the Income Tax Act as well as the Double Tax avoidance Agreement (DTAA) which reads as, “consideration for the use of, or the right to use, transfer of all or any right in respect of secret formula or process.” To elaborate on this point: by inserting Explanation 6 to Section 9(1)(vi) it was further clarified in the Finance Bill, 2012, that the expression “process” also includes transmission by satellite (including up-linking, amplification, conversion for down-linking of any signal), cable, optic fiber or by any other similar technology, whether or not such process is secret. This amendment enables tax officers to detain the payments to international carriers for connectivity, roaming and interconnect usage charges. These charges are covered within the scope of the word royalty thereby raising huge demands. International carriers do not accept withholding tax since they cannot claim credit for taxes withheld in India since the amendment supersedes the provisions of DTAA.
Our second ask is that, if any benefits are extended to any industry in terms of tax exemption/concessions, such benefits should be extended to the telecom sector as well, not only in terms of direct & indirect taxes but also in providing export concessions/benefits. This is an industry that requires huge investments in developing infrastructure with a long gestation period. Telecom industry should also be entitled to R&D benefits similar to those available in other countries such as UK, Singapore & Canada to encourage companies to conduct their R&D activity within the country, instead of outsourcing the same.
Thirdly, the government should also work on simplifying the administrative procedures to enable ease of doing business such as, expeditious disposal of appeals especially if the issues are repetitive, and an automatic stay of demand by the tax officer till disposal of appeal at ITAT. Similarly, the government needs to expedite its grant of refunds and scaling up of interest on the refunds if they are not granted within the stipulated period of time, from the day it becomes due.
Debjani Ghosh, Vice President, Sales and Marketing Group and Managing Director for South Asia at Intel
This year’s budget needs to walk the talk and show real execution towards the government’s intent of making it “easier to do business in India” as well as towards “developing India as an innovation hub” for India and the world. Towards fulfilling the Digital India vision, we also expect that this year’s budget will address anomalies like differential duty structure for PCs as provided to other compute devices.
We also hope that the budget relooks at procurement norms to focus on quality & cost based procurement and brings in a single independent authority to ease Digital India implementation. There is a dire need for a strong and well-structured innovation agenda/policy for Digital India and Make in India to be a reality. We hope that this budget incentivizes organizations who’ve already set up innovation labs, R&D hubs (including captive R&D) and manufacturing facilities to ‘Innovate for or in India’ while continuing to foster the start-up ecosystem
Rajesh Agarwal, Co-founder, Micromax Informatics:
Growth, Infrastructure development and Employment should be the three big pillars of the upcoming Union Budget 2016. PM Modi’s Make in India and Digital India are well thought out initiatives that can fuel the slackened growth and help India achieve the projected GDP growth rate at 8-8.5%. India has a great potential to become the next global hub for electronic manufacturing to address the needs of both local as well as the global markets in the ICT segment. However to make ‘Make in India’ a success policy amendments with respect to fair, predictable and rational taxation practices have to be implemented. In the budget, the government must do away with extremely cumbersome and complex IGCR processes for availing duty concessions on import of parts, components for manufacture of mobile phones.
Moreover, non-availability of duty concessions on the import of capital equipment for handset manufacturing is a serious bottleneck. Restrictions imposed by Ministry of Environment and Forest on import of second hand capital goods on grounds of E-Waste should be also be removed. On behalf of the entire handset makers of India, we would expect the government to introduce regulatory restrictions for ETA (Equipment Type Approval) and licensing requirements from DOT to import low powered wireless equipment which are very critical for success of the Digital India and Make in India vision. Government must also focus on having a quicker and predictable time frame to complete CRS (compulsory registration scheme) formalities to comply to nation’s product safety standards. Another important area of focus in the Union Budget 2016 is to bring labour law reforms to boost growth in this sector. There is a dire need for income tax holiday to make it viable and attractive for the industry and investors just the way it is in countries like Vietnam. On the Export front too, it is quintessential that export incentives should be enhanced from the current 2% MEIS to 5% MEIS to attract investments for the exports of mobile handsets.
Koichiro Koide, MD, NEC India: IT sector has seen a tremendous growth in the last fiscal globally. Indian Prime Minister announcing the Smart cities mission, Digital India mission to promote various sectors has been really encouraging. The Government’s step towards developing smart cities is an indication that inclusive growth is the top priority. Most recently, the Indian government has been promoting its urban transformation, putting great emphasis on creating smart cities and security.
Leveraging on the power of ICT and with good governance, I believe that India will be able to achieve its goal of achieving its Smart Cities mission in the long term. We appreciate that the Indian government has taken significant steps in the last one year to promote Smart Cities and the country’s 100 Smart Cities Mission which would be an encouraging boost to companies such as NEC. The union budget 2016 must focus and encourage investment in the IT sector to make the Government’s plan of building smart and cities safe.
Mr Anil Valluri, President, NetApp India & SAARC: To my mind, this budget should see the Government take further steps to accelerate its flagship initiatives which have been structured holistically in the form of JAM to reach the last mile and transform lives of every citizen. Start- Up India was an excellent example of the Government proactively putting it’s might behind India’s up and coming entrepreneurs who are brimming with new ideas. Of particular interest is the further steps to make Digital India a distinct reality coupled with the pace of Infrastructure building as these will propel growth across various sectors. I am optimistic and look forward to India continue its march to be a leading economy on the global map.
CEO K Shankar of Feedback Business Consulting says that fiscal deficit should be contained at 3.5 % as promised in the last budget. It will be a challenge to keep it at 3.5 % levels practically but the government will look at aggressive means around revenue side to keep it at 3.5 %. India can pull another year with a Fiscal deficit of 3.7 % provided there will be an all-round GDP growth of 8-8.5%.
What the education sector expects?
Dr Harivansh Chaturvedi, Director, BIMTECH says higher education will require huge funds to meet manpower needs for Make-in-India. Read more
Ms. Geetha Kannan, Managing Director, The Anita Borg Institute (ABI) India:
Over the past year many of the government’s policies and initiatives have been focused on digitization, technology, entrepreneurship, education, skills-development, sanitation and so on. The government has been riding high on drivers that are imperative to the economic and social growth of the country. We are yet to see deliverables on many fronts, but there is no denying that these steps are positive. In 2016 we expect the government to continue this growth orientation.
With more and more women joining the workforce and increasing their contribution to India’s economic status, we would like to propose ‘gender mainstreaming’ for Budget 2016. It is time we integrate the gender perspective to all relevant policies and initiatives, to promote equality between women and men. For example, the government had recently announced a Rs 10,000 crore fund for entrepreneurs during the release of the action plan for the Startup India campaign. Can the government consider allocating 20% of this fund only for women entrepreneurs? This would definitely help in encouraging and growing the number of women entrepreneurs in our country.
The ‘100 Smart City’ is another much talked about initiative and there are many expectations of increased funds for this project. We would like to see a specific focus on women-friendly facilities and infrastructure in the detailed roadmap of this project. There should also be budget allocations and incentives for creating women-safety mechanisms and devices, to ensure safety of our women in these smart cities at all times.
The Digital India initiative needs to have specific plans that will aim to digitally empower more women and girls right from the grass root levels. Year after year our budgets have always included women empowerment and support for the girl child. Our union budget has to get more aggressive on women–specific policies and measures that are lucrative and impactful in encouraging the full-participation of women in all spheres of life.
Dr. Arun Singh – Senior Economist – Dun & Bradstreet India
Higher import duty on steel products, particularly long and flat steel products: Flat and long steel products are some of the largest imported steel products to India. Government, in its upcoming budget is expected to hike import duty on these products.
Reduction in import duty on iron ore imports: Iron ore production in India declined from 218 Mn tonnes in FY10 to 125 Mn tonnes in FY15. The shortfall is normally met through imports. A reduction in the import duty is expected which will help to reduce cost of production.
Reduction in import duty on coking coal: Coking coal is a key input in steel manufacturing and in the absence of domestic resources, steel manufacturers resort to imports for their coking coal needs. A reduction in the import duty is expected which will help to control the input costs.
Sudhir Gharpure, vice president, MP Group: With the union budget scheduled to be announced on February 29, entrepreneurs from the B2B industry have set all new expectations from the government. Sudhir Gharpure, Vice President, M.P. Group, an Integrated support Services company says “For PPP Projects, in Urban City Bus contracts should be pre-approved by banks for which ease of funding is there and implementation starts on time. As per the company’s act the life cycle of bus is Six years whereas it should be considered as Thirteen Years as the new type of buses and its body are sustainable to work over Twelve years.
These projects should not be considered under Commercial Vehicle loan but should be under infrastructure project as urban/public transport is been considered under the smart city development which has a major share. The subsidy given to the bus purchasers should be increased to a viable level. The state / central government should encourage and support such organizations dealing in PPP projects which will enhance the transport industry to grow further. Such transport service providers should also be exempted from service tax and excise duty so that they can do business with ease.
Major Prashant Rai, founder and CEO, OneTimeJobs.com: With Budget 2016 set to be announced on February 29, Startups have their own set of expectations from this year’s Budget. While most of the new age companies are setting up with a strong funding foot, Major Prashant Rai, Founder and CEO, OneTimejobs.com, is expecting more relaxation, possible tax exemptions and incentives with an easy entry into services and exit plans thereafter , along with more clarity on the norms. Prashant says that as the honorable Prime Minister Mr. Narendra Modi unveiled the start- up action plan by announcing excellent measures, now it depends on how the policy takes its shape in the budget 2016! He further opines that it is imperative for Indian ‘on demand service market place start-ups’ to raise funds in a more structured, regulated yet in a stimulating environment and been featured in Indian Exchange.
Dinesh Agarwal, founder and CEO, IndiaMART: With the Union Budget round the corner, startups in India are holding the highest stakes following the Prime Minister’s initiatives around ease of doing business and building a start-up friendly ecosystem. Faster setting up of enterprises, correction to duty structures and streamlining of procurement processes are some of the areas where the industry expects key announcements. The Industry is expecting a quick implementation of GST, streamlining processes for speedier implementation of large infrastructure projects. Development of infrastructure is a prerequisite for growth. Similar to road and rail, creation of Digital Highways is elementary providing high bandwidth network of Internet across India. We’d like to see avenues of PPP in the coming union budget which will give shape to Digital India.
Anurag Jain, Chairman of AccessHealthcare: “With the Government’s thrust on IT, digitisation and technology driven initiatives, we are upbeat about the Union Budget for 2016 – 2017.We hope that the Government will come up with some positive announcements and tax sops to cut through the growth barriers. Any thrust on growth, infrastructure, job creation and skill development is likely to have a positive impact for the IT / BPO sector. The Narendra Modi Government has recognised IT start-ups and the need to address various concerns in order to achieve sustainable growth and employment generation in this sector. Also with the Government’s continued efforts and focus towards positioning India as an investment hub and a business friendly destination, we hope that the upcoming Budget will bring back more investor confidence and positivity for the IT / BPO sector. We also look forward to the Finance Minister announcing some monetary encouragement for companies to focus more on research & development in order to develop products and services that are at par with international standards. More funds allocation for ‘Digital India’ will also fuel economic growth by creating income-generating activities which in turn will boost job creation in this sector.”
Bhaskar Pramanik, Chairman, Microsoft India: “We have much to celebrate in what the country has achieved in the last one year. The Government of India has ably implemented the contours of the country’s growth framework through its all-encompassing vision to boost digital inclusion, local manufacturing, and entrepreneurial spirit. As we step into the new fiscal year, I am looking forward to the Government presenting a growth oriented budget that addresses gaps and sets a clear way forward to ensure that the optimism is not short-lived.”
Tarun Wig, co-founder of Innefu Labs: “Present scenario is quite threatening as we can see recently website of Kerala as well as the Orissa Government came under cyber attack. The government should allocate a specific amount in budget for ensuring that these types of cyber attacks can be prevented.”
Govind Bansal, co-founder of Aqua Mobiles: “Government is promoting the local manufacturing and we hope that it will be continued. We also expect the introduction of the GST as early as possible. Furthermore, mobile industry is a good contributor to GDP, so it should be rewarded with some much needed incentives like relaxation in the corporate taxes for the benefit of the industry as well as consumers.”
Anurav Rane, CEO of PlanMyMedicalTrip.com: “We are looking forward to a positive turn out from the Union Budget for start-ups and emerging entrepreneurs. Being a startup, the amount of direct and indirect taxes we pay, handicaps us from expanding at our true potential. We are hoping for an exemption from all these taxes in the upcoming budget. As per the government guidelines, we are also overburdened by the tremendous amount of paperwork every month. We expect the centre to undo the tedious documentation process so that we can save on precious time and expend our energies on building the business in stead. The government should also strategies on improving the purchasing power of customer-enabling organisations like ours to allow us in improving the overall quality of service.”
Saurav Kumar, CEO & Co-founder, Cube26: “This Union Budget, we expect the government to make patents simpler, and offer schemes and incentives that encourage startups to take risks. We also expect government to approach India’s smart devices market through supportive and encouraging regulations to expedite the ecosystem for smart device manufacturing. To promote Make in India, we believe that the government should offer subsidies on investments and incentives for Indian device manufacturers. This will help them to build a price advantage over the increasing international competition from brands. Also, reduction of import duties with an option to allow businesses to Make in India will be a welcome move. Digital literacy and mobile internet penetration in tier 2, tier 3 cities are other areas onto which we would like to see the Union Budget’s focus. Substantial funds should be allocated to develop a robust network infrastructure and realise the government’s ‘Digital India’ mission.”
Shailesh Jain, Co-founder , Mirraw.com: “We are a fast growing eCommerce company and government should make this industry very flexible to operate in. They should bring in number of laws like No capital gains tax for first time entrepreneurs & esop holders, lower interest rates for business loans and easy long term repayments of turn around companies. Special package for companies revival under hand-loom & ethnic wear market For the benefits of the employees the budget should have tax exemption limit increment for women employees earning upto Rs. 5 lacs, reduce housing loan deduction limit to Rs. 3lacs on Interest paid.
Anupam Tulsyan, Co-founder & MD, Peachmode.com: “As an e-commerce company we are expecting easy taxation across states. For eg: we cannot ship COD shipments to kerala because of kerala govt rules. Now on unstitch material in Bihar they are putting sales tax above Rs 2000. For e-commerce companies which sells across states. Delhi has introduced DVAT for e-comm companies as compulsion. it creates lot of problems. Either GST comes soon or taxation improves.”
Vipin Pathak, Co-Founder & CEO, Care24: “Budget 2016 is highly awaited where everyone is expecting policy level changes to promote growth. At the juncture where global growth is not so promising, everyone is eying on Indian Growth story and we have to leverage this situation. Government has started great initiatives like “Make in India”, “Startup India Initiative”, the budget has to support at monitory, infrastructure and policy level to realise these dreams. Some of the expectation we have is further easy FDI investment norms, licensing and startup support (tax, documentation, licensing, legal). Entrepreneurs should feel protected and supported on ground level to make actual difference.
Ankur Bhatia, Executive Director, Bird Group on aviation industry:
“The Indian aviation industry is on a high growth trajectory and is poised to become the third largest travel market by 2026. The draft aviation policy as well as airport development in tier-I and Tier-II cities is a welcome move in identifying certain relevant aspects affecting the aviation sector. Yet there are several challenges related to complex policies, aggressive price cuts, multi-tiered tax system and infrastructure deterring the true potential of the Indian aviation industry. I look forward these challenges to be addressed in the upcoming union budget. There is an immense growth potential for Indian civil aviation and with the right infrastructure and policies will serve as a key enabler for economic growth, employment creation and tax revenues. It is imperative that success of civil aviation is seen as a national priority, a goal shared by different ministries, government agencies and the industry.”
“Tourism has been a key contributor to the Indian economy with immense possibilities of growth. While the government’s initiatives to strengthen domestic connectivity as well as international accessibility have borne positive results, there is a huge gap in terms of travel facilities, infrastructure, hotels, recreational outlets, high taxes and tourist safety that still needs to be addressed. A thriving tourism industry not only reinforces the hospitality sector but contributes significantly to the economic growth and drives direct and indirect employment. This union budget we are hopeful that the government will focus on the overall environment of the tourism industry and help drive the industry towards its projected growth. It is time to showcase brand India globally and provide sufficient impetus to put India firmly on the international tourist radar and we are hopeful that the government will consider effective solutions for the same.”
Sunil Jose, Managing Director, Teradata India on IT/BPO industry
“India has developed a world-class IT industry that has contributed significantly to its economic growth, technology exports and employment generation. The Modi government is doing a great job in projecting India as a capital investment hub and business-friendly destination and the focus on bringing back investor confidence has worked well for the IT/BPO industry since the last budget announcement. We expect this to have a cascading effect in terms of continued business growth when the new budget is announced. New initiatives announced in the budget to further complement previous initiatives are eagerly awaited. Continued measures and policies to support and enhance India’s competitiveness for Make in India will be a huge enabler for the manufacturing sector. Greater support for Digital India initiatives and enhancing access to internet connectivity in rural India should be a priority to boost economic growth and income-generating activities which in turn will boost domestic spending. The government should also consider reducing excise duty on hardware so that better technology becomes more accessible to a wider market. This would be a huge enabler to the IT industry including us and help provide superior technology to a wider audience at more competitive rates.”
Anuj Puri, Chairman & Country Head, JLL India on real estate:
Offer financial protection from project delays to home buyers
The Union Budget should pay specific heed to this pressing need. On purchase into an under-construction property, buyers can only claim tax benefits of Rs. 2 lakh after possession if construction is completed within three years. The benefits reduce to Rs. 30,000 if the builder delays construction beyond this – and they pay higher interest. First-time home buyers purchasing properties for self-use additionally pay rent.
Instead of allowing home buyers tax benefits post-possession, the Union Budget should make a provision that allows these from the time they start paying interest on housing loans. This will ease their monetary burden considerably and make increase the velocity of home loan disbursements. Similarly, if an under-construction property is purchased from capital gains, its construction must be completed within three years of its sale to avail exemption. There can be delays by developer in such cases too. These deductions should be brought at par and the construction timeline should be extended from the current three years to five years.
Provide more tax saving on housing loan and house insurance premiums
The government should increase the tax deduction limit for housing loans, especially for buyers in metropolitan cities. The current limit of Rs 2 lakh is insignificant given the ticket sizes in cities like Mumbai, where most houses are priced at Rs 1 crore and above. Also, tax concessions on house insurance premiums could be introduced to encourage end users to insure their homes. Similarly, the tax exemption limit should be increased by about Rs 1 lakh and be auto-set to match inflationary trends in a financial year.
Raise house rent deduction limit
Salaried persons get house rent allowance (HRA) as a component of their total salary, and can therefore claim a deduction. This deduction can be substantial in cases where the salary and its HRA component are higher. However, self-employed persons and those who draw lump sum pays without an HRA component can only claim a maximum deduction of Rs 2,000 a month under Section 80GG. The Budget can and should address this anomaly.