The Annual budget exercise of the govt. has increasingly caught the attention of one and all not only in India but also to huge Indian diaspora, who are spread in different parts of the world. Thanks to a large extent the spread of the foot print of both conventional and digital medium.
The Finance Minister in his characteristic way eulogized the budget proposals as a panacea for the all ills in the economy. What is rather strange is the remarks of the congress, the main opposition party that calls it lack luster and anti-farmer but ,the ruling BJP calls it otherwise. The reality to my mind lies somewhere in between.
Business chamber, Assocham, had sought “immediate” reduction in the corporate tax to 25 percent to attract more investment in the country. Neither business chamber had presumably counted on the FM to lower taxes exclusively for MSMEs, specially since he has earlier promised to gradually reduce the headline corporate tax rate while also doing away with exemptions.
A tax expert had pointed out that tangible benefits would accrue to the economy by reduction in corporate taxes – not by lowering personal income tax rates. He had said this single move would mean job creation and incentivizing the manufacturing sector so that the overall economic growth is enhanced. What will lowering personal income tax achieve except conveying the message that the rich will have it easy….already, GST has strengthened the perception that tax inequality will increase since this tax will be equal for the rich and the poor…..income tax rates won’t be tinkered with this time .
According to a post- Budget analysis by ratings agency Crisil, corporate tax, a levy companies pay on their earnings, is expected to grow the fastest in at least three years in the current fiscal to 9 percent versus 5.7 percent and 8.7 percent in the preceding two fiscal years. It is obvious that with central excise collections expected to take a major hit next fiscal due to GST, the finance minister does not want a dip in corporate tax collections.
So Crisil has projected that collections from this levy will keep up this growth trajectory even in the next fiscal at 9.1 percent. This single levy accounted for almost 30 percent of the government’s total tax revenue in the current fiscal at almost Rs 4.94 lakh crore. Or roughly a third of all tax revenues come from this single levy. But it is projected to come down in its share of total tax revenues next fiscal to just 28 percent at almost Rs 5.39 lakh crore. Corporate tax accounted for 35 percent and 31 percent of total tax revenue in the two preceding fiscal years.
Then, even when dealing with the high-octane personal income tax issue, Jaitley played the class tune. He lowered taxes only for the lower middle class, for people earning up to Rs 5 lakh. Crisil’s analysis shows only two crore Indians will benefit from this. That is less than 2 percent of India’s population though this section accounts for almost a fourth of the government’s total income tax revenues. Crisil goes on to say that sectors like transport and affordable housing received a shot in the arm.
This is expected to push demand in sectors such as cement and steel, generating positive multiplier effects in employment and incomes. “This, to an extent, will help alleviate some stress in rural areas which were hit hardest by the demonetisation drive. Also, the reduction in individual income tax rates (brought down to 5 percent from 10 percent for those in the income slab of Rs 0.25-0.5 million) will raise the purchasing power. Nearly, 20 million people who currently declare income in this bracket will benefit from the change.”
Whether Jaitley’s preference for Bharat at the cost of India works towards improving India’s economic growth will be apparent in the next few months. But one thing is sure: the Suit Boot wale have been given short shrift by the government this year.
Industry Leaders responded and applauded the Finance Minister Mr. Arun Jaitley on the Union Budget 2017 … Some of the Reactions :
Antony Jacob, Chief Executive Officer, Apollo Munich
The Union Budget 2017-2018 is garnering a positive sentiment amongst markets as it addressed the needs of the hour in terms of – the farming sector, the rural population, the youth, infrastructure, prudent fiscal management and tax administration for the honest tax payers. The FM also focused his attention on developing Digital India further by providing incentives for digital payments, i.e., allocation of upto Rs. 10,000 crore for the Bharat Net project. This will certainly enable more Indians to choose online payment gateways.”
Mr. Sanjeev Bhatia, CEO of Zopo Mobile India and Managing Director of Adcom.
“The budget 2017 is extremely positive and people friendly. Reduction in direct taxes for SMEs & low income individuals is definitely going to benefit the masses and will really impact the Indian economy in a huge way. The GST is proposed to implement on July 1st, so indirect taxes such as, excise, customs, service tax have not been touched. Manufacturing allocation is good initiative to start off. With such initiatives India can grow on the charts of GDP. In the direction of making India a Digital nation a needful decision was made, with the focus rightly on digital India the budget also gave boost to telecom and manufacturing sector through Digital India. Modernization is good for any nation, for a successful and powerful nation fast growth can only be reached with the help of technology. Those portions of India that are deprived from the fruits of technology will now be able to enjoy it.
Government’s mission to connect 1,50,000 gram panchayats with hotspots and digitization will increase the use of technology and will create a friendly environment for digital payment system. No doubt Smartphone will play a crucial role in strengthening Indian economy. In today’s world technology and smartphones go hand in hand this step will lead to more demand of smartphones and will create the a wide spectrum for smartphones companies to compete for and to deliver.”
Mr. Venkatesh Gopalakrishnan, President – Business Development & Chief Investment Officer – Shapoorji Paloonji Real Estate.
“The Government believes that the impact of demonetization is transient. The increased liquidity in the banking system and the increase in the net of taxable income for people and corporates, has resulted in the Government stipulating an aggressive fiscal deficit of 3.2% in 2017-18 despite the total increase in expenditure especially in the infrastructure and defence sectors where the outlay has been increased by 10% over the last year. In case the Government is able to follow through on the remonetisation inter-alias as per the plan, it will definitely impact the economic growth positively.Coming to the Real Estate sector, the moves including the reduction in the tenure of long-term capital gain tax from 3 years to 2 years, rationalization of capital gains JDA agreement, infrastructure status to the affordable housing segment and most importantly the SOPS inter-alia, the increase of the size of the affordable housing unit and enhancing the universe for the 60sqm stipulation in the segment, are all positive steps for the real estate sector and will definitely help in giving the much needed push to the affordable housing segment.”
Ms. Jayashree Kurup, Head of Content & Advisory- Magicbricks.com
Affordable housing being given Infrastructure status is a welcome move and will help in the Housing to all by 2022 mission – it is a big and positive move for developers, banks and housing finance companies.Special funds under Pradhanmatri Awas and refinancing by NHB will help more developers to enter the sector and to boost affordable housing for a large number of home buyers.The one year rental tax relaxation for new properties with occupancy certificates will help developers use the year to sell off the stock which can be held as stock in trade. The taxation on vacant residential property is likely to bring down the number of vacant housing units across the country by unlocking them for rental housing.The budget fine print indicates the biggest tax arbitrage via setting off loss from second home has now gone away. However the effect of this is not so positive for the individual buyer. Earlier an individual could buy a second home on mortgage and show a loss via differential between interest paid on mortgage minus rent received from the property. The loss could be adjusted against income from salary or other income. Now the adjustment has been restricted to INR 2 lakh only, which is miniscule for individuals with high income. The provision is negative for real estate sector as it may discourage investment in second property to save tax, especially by salaried class.
Mr. Gobind Ram Chaudhary, Managing Director, Anmol Bakers Pvt. Ltd
Finance Minister, Arun Jaitley has announced the 6% increase in FDI flow; forex reserves at $361 billion, “on allowing foreign investors to invest in India will be very positive for India’s Capital market as it will open up a big opportunity for the global citizens to participate in emerging markets and take advantage of the India growth story.”
Rebate of 10% to 5% on income tax would give a rise to personal disposable income, this is an attractive feature of Union Budget to stimulate investment and boost economy. However, it has failed to abide by the government’s earlier fiscal deficit target. Now the Fiscal Deficit target for next three years has been pegged at 3.2 percent.
He further stated that Infrastructure remains a vital sector for India’s growth story. Total investment Rs 3,96,135 cr for infrastructure in budget 2017 is a right initiative as it will reinforce the industry
Anjani Mandal, CEO and co-founder, Fortigo Network:
“The continuing growth and stability in the economy as reflected by the positive macroeconomic indicators will get a further boost with the infusion of capital in infrastructure, boosting MSMEs post-tax profits (owing to the reduced Income Tax) as well as increased liquidity with the consumer for his spends (owing to reduced Income Tax).As to the Road Transportation industry, with the growth in economy, any facet of infrastructure development or investment by businesses or an increase in consumption, boosts Logistics sector growth.There is no negative element for the Logistics segment and several positives to directly and indirectly boost the Logistics sector through, (a) higher outlay on Highways; (b) support for MSMEs through a reduced income tax and (c) boosting money in hands of individuals through lower income tax will boost consumption.
K. Madhavan, MD, Peps Industries Pvt Ltd.
“The only highlight in the budget is the reduction of income tax for the Micro and Medium manufacturing industry. This will increase the capability of companies to work successfully- a good sign of encouragement and it is welcomed. The previous budget had offered customs excise sops, so there wasn’t much of an expectation there. When GST is implemented, there would be more clarity on this, and we are eagerly awaiting the same
Shishir Baijal, Chairman & Managing Director, Knight Frank India.
“This has been one of the path breaking budgets with far reaching changes especially for the real estate sector. It is positive that the real estate sector has come in the central spectrum on the Union Budget. This has come at a time when the beleaguered sector has been looking at measures to boost the sentiments. The real estate sector which was the hardest hit by demonetisation will be one of the major beneficiaries of this budget. Prudence in fiscal discipline is welcome and will assist RBI to look at a lower interest regime that will provide the much needed fillip to this stressed sector.
Increase in allocation of funds under PMAY (Pradhan Mantri Awas Yojana) shows the focus of government towards making Affordable Housing a reality by 2020. Providing infrastructure status to Affordable Housing, a long standing demand of the real estate industry will not only bring the cost of financing down but will also open up additional avenues for developers to raise funds. We believe that the shift in eligibility criteria for Affordable Housing from built up area to carpet area will increase the unit size by 20-30% and will offer home buyers the benefit of owning larger units. This will also encourage leading real estate players to enter the Affordable Housing segment.
The move to reduce the tenure of the Long Term Capital Gain tax from 3 years to 2 years is s a positive one as it will encourage compliance amongst the real estate stakeholders.Changes in the taxation aspect of JDA (Joint Development Agreement) will encourage more land owners to partner with developers that will effectively bring down the cost of construction.
Focus on new roads, improvement of existing roads and providing coastal connectivity will again boost development within the real estate sector.”