Budget 2018: From reduction in income tax to push towards infra, industry lays out its agenda
The Budget should announce measures to upgrade digital infrastructure, especially with regards to the protection of data stored online so that consumer confidence is enhanced.
The Union Budget will be announced on 1 February. Sectors across industry shared their expectations from the Budget with Firstpost. It ranged from a governmental push towards infrastructure to tax holidays for start-ups to ‘affordable’ GST rates.
Following are the expectations from industry captains across sectors:
Vivek Gambhir, Managing Director and CEO, Godrej Consumer Products
We hope this Budget will enable concrete measures to spur growth in jobs, increase disposable income and support the revival of rural and urban consumption with proactive reforms to stimulate demand to stimulate demand and increase the money in the hands of the emerging middle class and rural India. This will help bring FMCG growth back on track. Focused efforts are needed to boost the agrarian economy, improve agricultural productivity and introduce better target subsidies to put more money in the hands of farmers.
We look forward to creation of more productive non-farming jobs in areas such as manufacturing and construction and also improvement in t the ease of doing business, more flexibility in l abour markets and speeding up of infrastructure projects. Reduction in personal income tax slabs would provide relief to the middle and salaried class, increase disposable income and put the cash back in the economy. This will, in turn, help stimulate demand.
Shireesh Sahai, CEO, Wolters Kluwer India, a global information services firm
The government can play a significant role in both improving access to affordable healthcare and in ensuring that our medical education system is world-class. The Health Ministry has launched a number of impactful programs and initiatives in digital health in the last couple of years, but we need greater investment in skill building and the government’s support to institutionalize digital technologies that can be well integrated with our healthcare delivery practices.
Ashwini Hooda, deputy Managing Director, Indiabulls Housing Finance
The expectations from the Union Budget are substantial, as is every year. For affordable housing, as things stand, despite its far reaching scope, the PMAY subsidy is unable to reach a large portion of home buyers who are migrating to the peripheral areas of metros and other big cities in search of jobs. This is largely due to their ownership of pucca houses, in many cases ancestral homes, in their smaller home towns. The affordability of this home buyer thus reduces considerably, as he/she must be a first time home buyer to be eligible for the PMAY. Almost 50-60 percent of the housing demand goes untapped by the subsidy due to this. It would be interesting to see if the government would address this subject and expand the reach of the subsidy, thereby accelerating its mission of Housing for All.
Arvind Hali, Managing Director & CEO, ART Affordable Housing Finance
The I-T Act allows for a deduction on housing loan interest paid for the period during which a house is under construction in 5 equal installments from the financial year in which the house property is completed. Most tax payers lose out on the deduction for pre-construction interest since this amount is included in the overall limit of Rs. 2 lakhs fixed for the interest on housing loan deductible in case of self-occupied property. In affordable segment the loan buyers are the end users and self-occupy the property. Hence, the deduction for the pre-construction interest should be allowed as a separate limits over and above the regular deduction of Rs 2 lakhs per year.
For all loans up to Rs 28 lakhs a greater sop under Sec 24 and Sec 80 must be provided allowing higher deductions of Interest and Principal over and above the allowed limit under each section respectively. This would act as a catalyst and direct tax policy sop to provide impetus to affordable housing.
Avinash Tiwari, Co-founder and Director, pCloudy, a Cloud-based platform for manual and automated testing of mobile application
More impetus should be given on increasing the tax incentives and faster procedure clearances. We are also expecting few tax holidays periods to increase from 3 to 7 years. Considering the slump in valuations in subsequent rounds of funding by the startups, we look forward to the government providing necessary clarity for invoking anti abuse provisions on taxation of issue of shares at higher than FMV.
Amit Munjal, Founder and CEO, Doctor Insta, online consultation for medical help
The telemedicine or virtual healthcare market in India has witnessed significant growth. Though, the industry has garnered good support of both the government (SEHAT Program) and private organizations that are investing religiously in telemedicine industry, infrastructure issues still remain an impediment albeit less than earlier in unleashing the growth of this sector. Even though the market is poised for an upswing, it is still currently constrained by the slower than expected adoption and engagement of users.
Puneet Gupta, Co-Founder & COO, icanstay.com, aggregator for making luxury hotel stay affordable
Startups are very important part of economic growth, innovation and worldwide competitiveness because we provide eccentric service and in doing so, we are producing great employment opportunities. As per the Government new tax slabs now, Hotel rooms of Rs. 7,500 & above will have to submit a luxury tax of 28 percent. It means that for 24-hour hotel stay, one will pay minimum Rs. 2,100 as GST only. We believe that 28 percent GST is high for a single night stay. It should be decreased to 12 percent.
Rahul Garg, Founder, Moglix, e-commerce company
The GST reform has given the essential digital push to the economy transforming sectors of agriculture, manufacturing and more. The government should look at improving the adoption of digital technologies across industries if we need to compete with manufacturing hubs such as China and the US. The government needs to move towards 100 percent digital procurement process where startups can compete effectively and efficiently.
Jose Thattil, CEO, Phi Commerce, payments startup
The year of 2017 has seen a consistent growth of digital payment transaction. However, 30 lakh POS terminal and few lakh QR code for a billion plus says a lot on the scope for building the acceptance infrastructure and the upcoming budget must take steps in this direction. One such step would be creation of acceptance development fund. This is akin to any market development fund set up by new businesses to create awareness, build loyal customer base. On similar lines acceptance development fund will incentivise merchants, banks, payment processor to enable digital payments to the grassroot levels and conduct mass education campaign to promote the awareness and benefits of digital payments.
Akash Bhatia, CEO of Infinite Analytics, a predictive analytics startup
The single window registration remains but a pipe dream. There should be an actual implementation on the ground, of the ease of doing business - beginning with an ease of registering one’s company easily, perhaps even online and without the need for a CA/CS to help navigate the process. The other thing the budget should look at doing is “Bankruptcy protection”. A chapter 11 style of bankruptcy protection code will do a great deal of good for the already nervous entrepreneur. Another area of concern is that of smart cities. It’s been 3.5 years since the initiative has been announced, but we rarely hear of any startups working on smart city infrastructure.
Deepak Sharma, CFO, ShopClues, online shopping site
The most important aspect which would have implications for us would be the levy of 'Tax deduction at source' for online transactions. This does not put it at a level playing field with other transactions and does not factor the aspect of the size/ scale of the biz of the merchant and causes undue compliance cost and also causing working capital to be locked up for small merchants.
Jayanth Sharma, Co-founder& CEO, Toehold, travel and photography platform
Hotels in India have to cater to a variety of demographics at various price points, and determining their tax liability must be done with care. The 28 percent tax on AC hotels levied under GST is not only much higher than other economies like Singapore, but also unfairly clubs high-end luxury resorts with mid-level hotels and lodges. GST has also created a problem for aggregators. While GST effectively reduces the tax rate from 9 percent to 5 percent for package tours, it does not provide them the required input credits. This raises the cost to customers, because aggregators will have to pay the tax even when they source services from smaller providers. The government should be encouraging aggregation, as it increases convenience and access for travellers, domestic and foreign.
Ramki Gaddipati, Co-founder and CTO, Zeta, a fintech startup
In the past two decades, we have not seen an increase in various allowances offered to the salaried population in the country. For example, medical expenditures are exempted only to the tune of Rs. 15,000 per annum and children education expenses to the tune of Rs.100 per month. Also, in line with the government’s vision of promoting digitisation in India, it becomes imperative that it is made easy for people in the lower socio-economic strata to become a part of this revolutionary change. For example, people without a PAN number, still have to rely on paper-based Form-60 to complete the account creation process.
Rajesh Gupta, Founder, Cash Suvidha, online fintech platform
The Budget must provide a push to encourage the usage of digital or e-signatures for document authentication and to create a complete paperless economy. The adoption of fintech products and services for availing credits as well as increasing savings is set to grow 3 to 4 times as compared to last year. We expect the Budget to build a stronger mechanism with a major focus on driving the growth of MSME sector.
Gaurav Hinduja, Cofounder, Capital Float, a digital finance company
We hope the government will continue to push digitisation of financial services and encourage consumers to use digital platforms for transactions. Another area of focus should be reducing the cost of capital for the MSMEs by improving lenders access to low cost funding sources such as MUDRA & SIDBI and relaxing securitization norms.
Ravi B Goyal, Chairman & Managing Director, AGS Transact Technologies
As cash continues to be the preferred mode for transactions, especially in semi-rural and rural areas, we strongly believe that the government’s pro-business policies will usher in a new era of prosperity providing stimulus to cash and digital payments alike. The ‘Make in India’ initiative holds huge potential for spurring economic upliftment of the people and enhancing national development. The Budget should announce measures to upgrade digital infrastructure, especially with regards to the protection of data stored online so that consumer confidence is enhanced.
Shailendra Naidu, CEO, Obopay, a mobile payment solutions company
We look forward to the government taking more initiatives to promote digital transactions and provide sizeable incentives to fintech firms in India. Fintech firms that have partnered with banks and the ones who are implementing healthcare projects should be given increased incentives such as tax holiday for initial three years and tax rebate among others. To foster economic growth, we would recommend that the upcoming budget should revise Mudra and other existing credit guarantee schemes to cover fintech firms.
Surendra Kumar Jalan, Founder and CEO, OHMY Technologies, a peer-to-peer lending platform
As P2P industry is in its nascent stage, we expect the government to provide adequate tax incentive to the lenders to encourage large number of investors (lenders) to join in for lending through these platforms to provide financial support (financial inclusions) of the people deprived of credit.
Sanjay Sharma, MD and CEO, Aye Finance, a non-banking financial company
The government should continue its firm stand on not allowing unnecessary loan freebies to the agro or MSME sector. Passing on such freebies destroys the credit discipline and rewards the offenders, and thus indirectly punishes the diligent loan re-payers. Further, the regulatory rules governing the fintech businesses need to be finalized on priority. These had gone through discussions and consensus building in the last year. This year should see the rules formalized into policy pronouncements. The focus of the regulators should be to enlarge the reach of organized lending, especially in bringing the excluded parts of the economy into the fold of organized lending.
Satyam Kumar, Co-Founder and CEO, Loantap, online lending startup
The imposition of Angel Tax is very contradictory to government's push for startup and a matured market place transaction. In a fair transaction, both investor and startups are free to negotiate a price point for investment and the same are guided by demand-supply principal. We see no place for IT Department to penalise a good negotiator. On the other hand, when the economy is crying for capital investment and job creation, startups are doing exactly the same with the help of angel or seed stage investors.
Manish Chaudhari, Co-Founder and CRO, CoinTribe, online lending startup
With demonetisation and GST, the government has given a great boost to digital transactions and availability of financial records for small business. This agenda can be enhanced by encouraging the small businesses with tax benefits for conducting digital transactions. There should be lower I-T rates for businesses and professionals to encourage wider taxation coverage similar to the drive for increasing coverage in indirect taxes. Given the growth in fintech, it will be a welcome move if the government also creates some schemes to encourage budding fintech entrepreneurs e.g. creation of fintech parks where space, high speed internet, basic administration facilities, etc.
Pirojshaw Sarkari, CEO, Mahindra Logistics
The cost of logistics in our country at 13 percent of GDP is higher than 9 to 10 percent in developed nations. One of the major factors for this is high turnaround time for goods at different points. Tthe need of the hour is to reduce these costs and bring down the turnaround time. In order to achieve this, the government must come ahead with the following measures: Currently the Transportation Revenue is subject to TDS at 2 percent. This puts huge pressure on cash flow as TDS today is far more than tax liability.
Though there is a provision for reduced rate of tax, it takes lot of time and administrative burden asking for it. As per current provisions, there is an option for a transporter to either pay GST under Reverse Charge Mechanism (RCM) under which ultimate recipient of services pay the applicable GST, or under Forward Charge Mechanism (FCM).
Using FCM would be an advantage for the service provider (as it entitles it to claim the input tax credit for all the inputs), but it requires that if it is adopted, it needs to be adopted for all its customers. This need to be made customer specific, as it is not necessary for all customer to agree/not agree for FCM. This puts lot of difficulties for a transporter to align with its customers.
Chander Agarwal, Managing Director, TCI Express
Last year we saw about Rs 39.61 lakh crore was announced to be invested in infrastructure development. Hence, we will look forward for more emphasis on improving the infrastructure this year as well as it will be a boon not only for express delivery players but for many industries for carving out a niche for itself globally. We expect efforts from the government on cutting regulatory barriers and offering a seamless, transparent digital platform ensuring easy movement of goods and vehicles across the country. It will be interesting to look forward to more schemes focused on fiscal incentives encouraging investments in SEZ’s allowing the private sector to contribute, consolidate and expand.
V Balasubramaniam, MD & CEO at India INX (India’s first international exchange):
Currently, India’s IFSC mission is mired under several disadvantages which make us a less preferred option when compared to US, London, Singapore and Hong Kong. Short Term Capital Gain Tax needs to be done away with for any transaction that is done through IFSC in both derivatives and debt. The income tax benefit should be extended from the current first 10 years as compared to up to 50 years at Dubai. Long Term Capital Gain Tax should also be done away with for bonds traded at IFSC. This is a pre-requisite to develop a vibrant corporate bond market at IFSC. For an investor ecosystem to develop, the taxation rates for funds (AIFs) need to be brought at par with other types of IFSC units that are being set up for providing financial services.
Rajiv Agarwal, CEO, Essar Ports
We expect the budget will improve capital flows, reduce risk and the cost of capital, and encourage profits to be reinvested by reducing/ removing MAT. This will result in better appetite and avenues for investment in port infrastructure.
Vilas Tawde, Director & CEO, Essar Oil and Gas, Exploration and Production
The Finance Minister earlier clarified that a 7-years tax holiday under section 80IB (9) is available to blocks assigned in NELP-VIII and CBM round IV. However, insertion of this clause may suggest that the income from gas produced from the blocks other than those awarded under NELP VIII /CBM IV is not entitled to the benefit of tax holiday which was earlier available to all the blocks. It should be clarified that the benefit of tax holiday would be available on the gas produced from all the blocks awarded under NELP/CBM or in any other manner by central or state governments.
The section states that the benefit is available to the commencement of commercial production of mineral oil not later than 31 March, 2017. We recommend extension to 31 March, 2022 to provide incentives for the exploration and production of CBM gas and also to be in consonance with the government’s policy for early monetization of CBM gas and the prime minister’s vision to bring down its import dependence on oil and gas by 10 percent per cent by the year 2022.
Alok Dubey, CFO, Acer India
We are optimistic that the Union Budget will focus more on Digital India initiative in order to shape the IT infrastructure and increase adoption of technology to encourage digitization. We are also expecting the government may slash corporate tax for the larger companies as it will help Indian companies to compete globally and attract more investments to the country. We hope the Budget will be centered around lowering personal income tax slabs, and tax savings schemes which would lead to higher disposable income and directly benefit the normal taxpayer.
Rishi Mohan Bhatnagar, President, Aeris India
To bring down capital investments, we need seriously look at lowering tax on hardware from 18 to 5 percent. This will give a fillip to IoT projects in the country. Another area that needs attention is the need to rationalise the spectrum license fees so that more MVNOs can enter and reduce connectivity bottlenecks. Banks should look at relaxing their norms for start-ups (as a subsidy or by offering soft interest rates for loans). This will improve access to working capital for vendors and eco-system participants involved in IoT projects.
In order to provide a steady impetus to initiatives such as Make in India and Digital India, manufacturing sector needs to ramp up. Towards this, tax sops and liberalised norms will ensure greater access to working capital.
Nikunj Turakhia, President, Steel Users Federation Of India (SUFI)
Individual income tax should be lowered by at least 5 percent to enable more money in the hands of middle class for it drives spending and consumption; provide increased job creation in both organised and unorganized sector; major impetus to infrastructure; a major push to industries related to infrastructure such as steel, cement etc., ; amendment to Negotiable Instruments Act so that non-payment issues especially in SME and MSME sector is addressed; sops to SME and MSME sector for funding from banks; introduction of social security and same can be linked to Aadhaar; make the manufacturing sector efficient by imposing minimum customs duty on raw material, incremental on semi-finished and maximum on finished goods; and provide impetus on technology and efficiency.
Robin Raina, Chairman, President and CEO, Ebix
While the government has already taken right measures by not charging MDR for low sum card payments, additional incentives are required in form of tax benefits over large sum payments (over Rs 50,000). This will encourage people to embrace the digital medium more avidly. Payments in key sectors of education and travel and tourism should also be necessarily digitized. This will resolve a lot of problems associated with unaccounted dealings like donations which is quite rampant in the education sector.
The budget should focus on hand-holding Regional Rural Banks and co-operatives to adopt newer technologies and Point-of-Sale devices besides encouraging merchants to adopt them willingly. The government should remove FDI limit in insurance so as to encourage more deep-pocketed players to enter this huge market with better technology, thereby increasing insurance penetration in India. The country is ready for a Central Financial Exchange that can take care of all payments across sectors like remittances, investments, bill payments and lending besides e-learning, travel and e-commerce transactions among others.
Gayathri Vasudevan, Co-Founder & CEO, LabourNet Services
IT and ITeS sector has been attracting the attention of job seekers in the past few years in India. Today, trends are changing and opportunities are opening up in various other service sectors such as on non-farm service sectors like health and wellness industry, automobile service sector, hospitality & tourism industry and the logistics sector. In fact, logistics sector is a significant job generator after IT, ITeS and Telecom. Fashion industry, too, is fueling jobs in leather, apparel and gems and jewellery sectors. Infrastructure will see exponential growth and will need personnel to fill the ranks. While the government is actively looking at tax amendments, tax incentives could boost employment in these sectors. Tax sops will be a major driver in promoting new generation jobs. Farm equipment sector, alternative farming and contract farming too require to be boosted so that majority of rural youth, associated with farming, will be able to maintain sustainable jobs.
Yogesh Mudras, MD, UBM India, media and events company
In spite of not having been granted industry status yet, exhibitions are important drivers of national economic prosperity. We hope that Budget 2018 will provide for an increase in infra spends. Better infrastructure with a focus on roads, ports, power, IT, aviation and telecom will attract a greater number of professionals from abroad as well as Indian states to trade fairs. An increased allocation will create more job opportunities, besides providing infra boost in the important rural, Tier 2 & 3 towns, with the country requiring close to Rs 3,000 crore investment on infra per day.
At up to 30 percent, the basic rate of corporate tax in India remains higher than most parts of the world, added to the fact that the GST still needs some more clarity. If corporate income tax rate reduction seems unlikely, the government should rationalise the effective corporate tax rate by abolishing the Dividend Distribution Tax.
Santosh Thangavelu, Vice President and Head - IT Staffing, TeamLease, a staffing firm
For India to remain as a top destination for IT / ITeS talent, the government will need to allocate more funds to bridge the employability gap. In fact, outcome should be the criteria to measure the eligibility to avail the funds or benefits. They should incentivize employers to adopt apprenticeships as a mainstream mode of employment. Invest and create an eco-system that enables issuing of qualified online degrees with vocational content and help in overcoming the seemingly impossible trinity of quality, cost and scale.
The government should also earmark funds to promote English as an operating system for work as it will enable people to get wage premiums. Funds to re-imagine and recreate a National Skills Registry for IT/ITES skills with Aadhaar based micro credentials. This will lower the search and match costs.
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The attorney general has said that there is no obligation on the Central government to pay the GST compensation shortfall to the states.
However, July collections are higher than Rs 62,009 crore in May and Rs 32,294 crore in April.