Budget 2013: Infra, housing, Bollywood have reason to cheer

By N.C. Hegde and Anoop Kalavath

The FM delivered a budget that brought smiles to investors and consumers alike.

Many industries like Infrastructure, housing, textiles, entertainment and metal processing have reasons to cheer.

Gloom is largely limited to high-end and luxury goods like expensive mobiles, SUVs, and yachts. To get a bird’s eye view of what this budget means to you, see our brief analysis detailed below:

Agriculture:

Agriculture has all reasons to cheer. More services like testing service in relation to agricultural produce have been included in the negative list of services. This would ensure that agriculture is out of bounds for service tax.

Customs duty on export of de-oiled cake is eliminated in order to boost export of agricultural products.

From an income tax perspective, agricultural commodities have been kept out of the net of the proposed commodity transaction tax which is applicable on exchange traded commodity products.

Housing

In order to boost the low-cost housing, the Finance Minister announced an additional income tax break for fresh housing loans not exceeding Rs 25 lakh by first-time home buyers. However the reduction of abatement from 75 percentage to 70 percentage on construction services in respect of housing costing more than Rs 1 core or having a carpet area of 2000 square feet would dampen the spirit of wealthy home buyers.

Overall the budget is neutral for home buyers.

Automobile:

Owning an automobile is going to be more expensive. Be it a motorcycle or SUV, customs and excise duties have gone up, which would make it more expensive for a consumer to own an automobile. This should be a cause of worry for an industry which is already reeling under recession. May be it is the FM’s way of discouraging oil consumption.

Overall, thumbs down to automobile industry.

Film Industry:

Restriction of exemption of service tax on copy right to films screened in theaters would bring in cheers to industry and gloom to audience. The industry can avail Cenvat credit , and this could bring down cost of production. So, the industry would cheer the budget.

Metal and Precious Metal:

Export duty on ores and unprocessed metals has been increased so that metal process and value addition would happen in India.

Similarly semi-precious stones attract a lower customs duty. The objective seems to be scaling up India as a country specializing in metal processing and value addition compared one which is engaged in mining and export of base metals.

Infrastructure:

Infrastructure gets much-awaited boost. Many initiatives like building industrial corridors, new ports and new cities would bring cheers to recession-hit industry.

Customs duty rate on coal import is rationalized so that the industry could focus on power generation and forget about customs duty disputes.

Three cheers to infrastructure.

Aircraft & Ships:

The Finance Minister achieved the twin objective of raising revenue and boosting growth. Yachts are more expensive to own with 25% customs duty on import. Commercial ships become cheaper at nil rate of excise duty. Robbing Peter to pay Paul!

Electronic/Hardware:

The budget would sadden millions of TV viewers in the metro. Few years back they were forced to install set top box in their homes. Now, the customs duty on set-top box is doubled. This would further create further gloom for the TV viewers who were glued to the TV watching Budget.

Textile:

More cheers than gloom. Zero rate for branded ready-made should bring broad smile to aam aadmi. Similarly, import of textile machinery has also been reduced. Let us hope that the leading brands would now pass on this benefit to consumers.

Restaurants and cigarettes:

Small vices like eating food in an air-conditioned restaurants and smoking becomes more expensive. Let us hope it is not a case of causing a coma for “the goose that lays golden eggs”

Education:

Taxing education is taxing human growth. Vocational education is now out of the ambit of service tax . Hope this would enable the country to train millions and equip them to earn a square-meal. FM seems to believe that teaching a man how to fish is much better than providing him with one.

Manufacturing:

Large investors have reasons to cheer. Investment of more than Rs 100 crore will enjoy greater investment allowance. Hope this triggers the pace of industrialisation and brings more jobs.

On the whole, this budget has more reasons to cheer. The FM seems to have achieved the unenviable task of delivering growth, reining inflation and mopping up resource.

N.C. Hegde is a Partner and Anoop Kalavath is a Senior Manager with Deloitte Haskins & Sells