Find out if 2017 Union Budget is a balanced one, direct from the industry horses mouth
Departing from the colonialera tradition of presenting the Union Budget on the last working day of February, Union Budget 2017 was presented on 1 February. The announcement for the preponed date came a day before the commencement of the month-long Winter Session of Parliament. This will help in getting the legislative approval for annual spending plans and tax proposals to be completed before the beginning of the new financial year of 1 April. The prime minister had urged all states to align their plans with this advancement so that they could take maximum advantage of this move. The advancement of budget announcement date will help the entire budgetary exercise to be over, and the Finance Bill to be passed and implemented from 1 April onwards, instead of June. It’ll help companies and households to finalise their savings, investment and tax plans.
Demonetisation: Post Demonetization, the budget will now have to not only appease the masses but also placate an aggressive opposition in the run up to the upcoming state elections. The economy was growing at a pace of 7.6%, when the demonetization drive slowed down the pace of the economy. Liquidity issues impacted businesses, especially FMCG Sector, Automobiles and Real Estate where the cash transactions were dominant. Demonetisation and the one-time tax amnesty offered in 2016 also ensured that tax collections and the amount of cash held by the public and banks are way off previous trends. Rainfall levels, which affect millions of agricultural families, have varied sharply from previous years, making the agricultural data incomparable too.
GST: The government’s 1 April target for rolling out India’s most far-reaching tax reform is also likely to be pushed back, although the law requires the government to implement the new tax regime by September 2017. The worry about compliance costs of GST coupled by demonetisation makes its execution more vulnerable to political risk. Additionally, accounting changes from one tax regime to another within one year would perhaps aggravate the compliance challenges that are being dreaded.
Will the Budget be Popular or Prudent was the question? While the Supreme Court had warned the government against taking popular measures given the impending elections, the government was pressed to boost rural spending and increase the outlays for social welfare schemes. The budget comes in the backdrop of a rise in the salaries of central government employees and armed services pensions that would perhaps boost consumer spending that has slumped post demonetization. In effect, growth will be pegged directly to a boost in consumer spending, which is good news for retail-facing industries. For the other slower-moving industries such as infrastructure, the government will need to aim stimulus packages directly at them. Overall, the budget has been hailed by the industry and the common man at the backdrop of rising voice of opposition which is trying to find gaps in the budget allocations.
Vivek Krishna Govind
“The budget 2017 will put to rest all claims related to a fiscal windfall accruing on account of the demonetisation exercise. The agenda of the government is to Transform, Energise and Clean India and the budget is a step in the right direction towards sustainable growth for our economy.”
CA Vivek has more than 15 years of experience in various areas of audit, taxation and management consultancy. He is presently serving as the Senior VicePresident of Kerala Management Association. He is also the the Vice President of the Kerala chapter of the Information Systems Audit & Control Association(ISACA) and the treasurer of the Income Tax Appellate Tribunal Association, Kochi. He also works as governing council member of Cancure Foundation, which provides aid for cancer patients. He has also been the Chairman of the Institute of Chartered Accountants of India(ICAI), Ernakulam branch.
The finance minister has presented a comprehensive and balanced budget with some relief for the middle-class post-demonetisation. The budget 2017- 18 was groundbreaking in three ways. First, the presentation of the Union Budget was advanced to 1st February to enable ministries to operationalise all activities from the commencement of the financial year. Second, the rail budget was presented along with the general budget and thirdly, the plan and nonplan classification of expenditure were removed. Considering that the middle class of India was waiting with bated breath for Income Tax sops, the Union Budget brought some relief; however, the FM did not take the populist route. Reducing the small companies’ (turnover under Rs 50 crores) income tax from 30% to 25% and halving the tax rate in the lowest slab for personal taxation, are steps in the right direction. The super rich earning income between 50, 00,000 to 1crore will now have to pay additional 10% tax as a surcharge on tax payable on income. Earlier surcharge was payable on income exceeding a limit of 1crore but now individuals, Hindu Undivided Families (HUFs), Associations of Persons (AOPs) and Bodies of Individuals (BOIs) too will have to pay the surcharge.
To promote affordable housing, carpet area instead of built up area of 30 and 60 sq.meter. will be counted and the holding period for computing long-term capital gains from transfer of immovable property has been reduced from 3 years to 2 years. Another major announcement is the scrapping of Foreign Investment Promotion Board, which makes sense since 90% of FDI gets cleared through the automatic route. For the remaining 10%, the Finance Ministry is expected to introduce an alternative mechanism. The budget 2017 will put to rest all claims related to a fiscal windfall accruing on account of the demonetisation exercise. The budget speech made it clear that net tax revenues grew at 17% in 2016-17, exactly the same rate at which it grew in 2015-16, after taking into consideration the two income disclosure schemes announced this financial year. The government continues to expect growth in indirect taxes, but, from 1st July 2017, the Goods and Services Tax (GST) will come into effect and the complexity of implementation will be a great challenge.
The FM has taken the fight against corruption to its very root by targeting political funding and cases of large economic offenders that flee the country were also addressed. Finally, several restrictions were introduced with respect to cash transactions. Since demonetisation was an attack on black money, these steps were necessary to take it a step further and target its flow in the economy. There were a few other positive announcements in the budget in its move towards digitalization. To strengthen its Digital India push, the government said it will pump Rs 10,000 crore in 2017-18 in its BharatNet project to lay optical fiber cables (OFC).Due to the problem of rising stressed assets, the Budget has allocated 10,000 crores to recapitalise the banks in 2017-18.However, this amount may be too low considering the substantial requirement for banks.
To motivate people to file their returns a simple one-page form will be introduced as income tax return for the category of individuals having taxable income up to 5 lakh other than business income. The FM also announced that people filing returns for the first time will not be brought under scrutiny for one year. However, in the case of exceptionally high-value transactions, they might be called to disclose sources of income. To conclude, the FM had announced that the agenda of the government is to Transform, Energise and Clean India and the budget is a step in the right direction towards sustainable growth for our economy.
G. Krishna Kumar
“MSMEs are the backbone of the Indian industrial sector with 96% of the units falling under the definition and majority of these should be with sales below INR 50 crore.”
Mr. Kumar is the Managing Director at Rubfila International Limited and has also served as the past Chairman of CII Palakkad Zone. Kumar also serves as Director at Ramky Infrastructure Ltd. Rubfila International Limited (RIL) is a Public Limited Company promoted by Rubpro Sdn. Bhd., Malaysia and Kerala State Industrial Development Corporation. The company is the largest manufacture of extruded Round Latex Rubber Thread.
The Good: Overall, the Budget 2017- 18 is a positive and a balanced one. The budget focuses on areas like agriculture, infrastructure, affordable housing, digital economy etc. The huge investments proposed in these areas will definitely kick start growth all around. Agriculture, infrastructure is the engines of high job creation and this can unleash the real potential of the economy. The demonetisation had affected the rural economy maximum and the government appears to be trying to undo the damage from the step. The Budget is positively tilted towards the rural economy with many positives for farmers and agriculture. Attempt to expand farm credit across rural India is a welcome move. ‘Pradhan Mantri Krishi Sinchai Yojana’, a dedicated irrigation fund, augmented access to crop insurance under the ‘Pradhan Mantri Fasal Bima Yojana’ is admirable interventions aimed at doubling farmer income. Farm Credit and Irrigation facilities remain key pillars that will strengthen farm productivity, help in managing risks and boost agriculture sector’s growth. The increase of allocation for Fasal Bima Yojana to INR 13000 crore from INR 5000 crore will augment farmers’ access to crop insurance protecting them from the vagaries of monsoon to some extent. The whole idea appears to be to place more money in the hands of the rural population and this should lead to higher income and better living conditions for the rural sector. When this happens, this is going to drive consumption which will help the industry in general.
Skilling is another area of focus of the budget and when implemented, will help to create a large number of jobs in the country as well as helping our citizens to seek employment abroad. Finance Minister has proposed to limit the budget deficit to 3.2 % for the Financial Year 2018, which should in turn help retain the interest rates at lower levels and is good for the economy in general. Increased investments in infrastructure is another positive aspect of the budget, which generally has got a cascading effect on a number of other sectors like automobile, cement, steel etc. MSMEs are the backbone of the Indian industrial sector with 96% of the units falling under the definition and majority of these should be with sales below INR 50 crore. The 5% income tax rebate for MSME’s below INR 50 Cr will boost the confidence of such companies. MSME’s are another engine of employment growth and the traction created by benefit will boost this sector further. Also, many MSMEs are based in the rural and semi-urban areas.
With the reduction in tax level from 10% to 5%, FM has given a helping hand to taxpayers in the first bracket up to an income of INR 50000 per month which is an admirable move. The idea could be to draw more people into the tax paying circle and increase the tax base of country progressively. The figures quoted by the FM on the number of tax payers in the country shows the kind of underreporting of income by a large section of people and this has to be addressed properly. The government’s increased allocation and incentives in investment schemes like M-SIPS and ETF are also laudable and let us hope that this will channel necessary funds into modern economies like mobile and internet manufacturing sector. Allocating INR 10,000 crore for BharatNet provides will boost Digital India into the rural segment. The abolition of FIBP is a worthy step which will help speed up proposals. This proposal might have been taken as a part of easing the way of doing business further. As of now, India’s ranking in EODB is very low and this should be a catalyst to take it further.
The not so good: For those above this band and up to INR 50 lakhs income, there is a rebate of INR 12500 per annum, which is not much a big relief. And at the same time, the surcharge on tax above the INR 50 lakh income level has been increased and an out go off about INR 1.50 lakhs. On the banking side, I feel that the money allocated for the recapitalization of banks at INR 10000 crores is minuscule considering the fact the NPA levels are estimated to be above INR 10 lakh crores. More announcements on the manufacturing sector was expected which has not been delivered.
Jose Dominic
Mr. Dominic is the Managing Director of CGH Earth, Casino Hotel. He has served on several National and State advisory panels on tourism of the Government and industry bodies. He is the Founder President of Kerala Travel Mart and founder member of the Eco Tourism Society of India. He is the past President of TiE – Kerala Chapter and was the President of the Cochin Chamber of Commerce. He is the immediate past Chairman of CII, Kerala region and presently member of National Tourism Advisory Council.
On Tourism: Budget 2017-18 did not see any drastic changes to spur economic growth and there is nothing much for the tourism industry. Although the government has announced to set up five special tourism zones, no clarity has been given on the same. We hope that the number of tourists will rapidly increase and India will be more accessible for global travellers. The increased focus on infrastructure development is very much welcome and will benefit the travel industry tremendously. Though the cash crunch during the past quarter led to lower footfalls at tourist destinations and offline activities and purchases, Kerala saw a 10 to 20% growth in the tourism industry, which was made possible because of the economic & political situations in other touristy destinations both in India and internationally. Although there is very little to offer to the tourism industry in this budget, we are looking forward to the positive impact from the launch Incredible India 2.0 and its contribution to the tourism industry. Government’s initiative in stepping up the allocation for national highways, the announcement to launch dedicated trains for pilgrimage and also the service charge withdrawal on booking of rail tickets are very welcoming moves for the Tourism industry. And Others: Tax reforms made by the government are likely to aid real estate sector. I feel a more stringent regime by which people who do not pay taxes should have been brought in. It’s a very positive Budget for farmers and Kerala is surely going to reap the benefits. If farming becomes profitable that would stop migration and the challenge of job creation.
BR Ajit
Architect Ajit is an Architect by profession. He is the Chairman of Asian School of Architecture and Design Innovations (ASADI). Adopting a Gurukula system of education, ASADI proposes to provide a totally different approach to architectural education in achieving the above goal for preparing graduates in architecture who are ready and responsible architects committed to doing good for the society.
Housing & Education: The government’s some of the initiatives for the Education sector will boost the education industry. The restructuring of University Grants Commission and to grant colleges and institutions autonomous status based on the accreditation and affiliation is a positive move. The focus on educational reforms and skill development to push job creation and provide vocational training for livelihood programme are all bold moves in the right direction. I am happy that the Government is working seriously on “Housing for All” mission. The major thrust to affordable housing segment by granting infrastructure status will transform the sector. 100 million houses across India will be now a reality. The announcement of taking carpet area into consideration rather than built – up area is another good move to boost affordable housing projects. Affordable housing of 30 and 60 sq. mt will broadly increase housing sizes by 30%. This will effectively increase the number of projects falling under this segment. The concept of housing would change with the concessions being extended to affordable housing. When it comes to housing for the poor, these families are never consulted on the design of the houses that are being built for them. As Chairman of an Architectural College, I am proud to say that my students are working on a cost-effective housing project for the needy with 30 sq. m carpet area already. A survey is being conducted to do a detailed research on the project and with the families falling in the lower-income bracket to understand their housing requirements. I hope that the government will also take such initiatives while implementing the cost-effective Housing scheme.
Navas M Meeran
Mr. Meeran serves as the Chairman of Eastern Group Inc. He is also the Managing Director of Eastern Condiments Pvt Ltd. Meeran has been the Director of Eastern Treads Ltd. He also serves as Director of Kerala State Industrial Development Corporation, Ltd. Established in 1983, today Eastern has the finest grip on the Indian spice market. The company was started by Navas’s father ME Meeran.
In total Budget, 2017-18 is balanced and growth oriented. The plans put forward in the Budget will boost the rural and agricultural sector. Infrastructure development, Railways reforms, Empowering startups and SMEs are some of the highlights of the Budget. The income tax reforms and slashing slab from 10% to 5% will encourage tax compliance. The budget has also paved way for generating more employment by giving more attention to youth through various skill development initiatives and boosting up the education sector. The Budget proposal to reduce the basic import duty on liquefied natural gas (LNG) is positive move for Kerala. By reducing the import duty to 2.5 percent from the current 5 percent will make the fuel cheaper by Rs 12 to 14 per unit, providing a much-needed boost to LNG-based industries in the state. This Budget will also spur the digital payments ecosystem in India and will transform the country into a cashless economy. The proposal of introducing 20 lakh Aadhar-based Point of Sale (POS) machines will strengthen the digital payments ecosystem in semi-urban and rural areas. The decision to relax the income tax liabilities applied on startups is also a positive move to be highlighted in the Budget. Government’s initiative to introduce Aadhar – based health records for senior citizens to enable them to access healthcare facilities in aneasier manner is also laudable.
Food Processing & Agriculture: There were not many proposals put forward as expected for the food processing companies except MSMEs. This Union Budget does offer a solution for the long-standing issue of postharvest losses. The Budget has proposed to integrate farmers with agro-processing units by availing benefits of better price realisation and reduction of post-harvest losses. A model law on contract farming would, therefore, be prepared and circulated among the states for adoption.
MSA Kumar
Mr. Kumar is the Chief Catalyst at Catalyst 360 – Executive Coach & Business Advisor. The talent management company “Catalyst 360” offers the full spectrum of services in CEO Coaching, OD Interventions and training in the areas of Leadership, Collaboration and Change Management. Kumar has been the Managing Director of AVT Natural Products Ltd and AVT McCormick Ingredients Pvt Ltd.
The Sensex saw a 1% rise soon after Finance Minister Arun Jaitley presented the Budget. The Sensex started climbing and closed higher by 485.68 points, or 1.76%, at 28,141.64. This is its highest closing since 24 October last year. Additionally, the Arun Jaitley’s silence of much feared long-term capital gains tax and announcement that Category I and II foreign portfolio investors (FPIs) should be exempted from taxation on indirect transfers made investors happy. The agriculture sector has received a record-breaking credit allocation of 10 lakh crore and with Rural Development and Agriculture & Allied sectors getting an outlay of Rs 1, 87,223 Crores, and an increase of 24%. As the states would be urged to identify perishables from APMC, farmers will be given an opportunity to sell their produce and get better prices. The government’s move to integrate farmers who grow fruits and vegetables with agro-processing units for better price realisation and reduction of postharvest losses is also laudable. Thus, a model law on contract farming would be prepared and circulated among the states for adoption. Allocating Rs 8,000 crore for Dairy processing unit is also a positive step for the sector.
In a common man’s standpoint the steps taken by the government is in the right direction. The tax relief given by the government for the middle class tax payers will definitely boost the purchasing power, thereby aiding the overall growth of the economy. The government’s target to bring down the fiscal deficit to 3.2% of the GDP in the fiscal 2017-18 will result in lower Government borrowing than 2016/17. Higher revenue expectations during 2017/18 would enable a higher spend on infrastructure, housing, the social sector and other flagship schemes of the government. Rs 4, 00,000 Crores are allocated for infrastructure. This is a record 20% of the total government expenditure of Rs 21, 47,000 Crores.
Paul Raj
Mr. Raj is the President of CREDAI Kochi and Director of Alpha Ventures (P) Ltd. The Confederation of Real Estate Developer’s Associations of India (CREDAI) is the apex body of organized Real Estate Developers Associations, representing over 9000 Developers, spread across 20 states of the country. CREDAI has also formulated guidelines in the form of code of conduct to promote integrity and transparency among Developers and provide confidence and comfort to the customers.
The real estate sector got a major boost fter the finance Minister announced to grant infrastructure status to affordable housing. This move will actually propel the real estate market as the cheaper funds will be available. This has lowered the holding period for gains to qualify as long-term in the case of immovable property to two years from three years currently. This will significantly reduce the tax burden of people selling properties after two years and promote investment in the real estate sector. The government also changed the base year to which acquisition cost of an immovable asset is indexed to. The new base year is now 2001, against the earlier year of 1981. This will give an advantage in working out the standard deduction of capital gain. Considering 30 and 60 sq m carpet area instead of built up area of 30 and 60 sq m was a good decision made by the government. So, more projects can come up and the mission “Housing for all” will be a reality very soon.
The changes made in the applicability of taxes for joint development programme is also a welcome move, as now the department has been given directions to avail tax from the person only if the he/she has owned the possession. The government’s decision to double the loan amount for interest subsidy is also a good move. Now, loans of up to Rs 9 lakh taken in 2017, will receive interest subvention of 4 per cent. Loans of up to Rs 12 lakh taken in 2017, will receive interest subvention of 3 per cent. Government’s move to make future transactions digital will help collect tax from those who are not paying it now. With aim to expand the tax base in the country, the Finance Minister announced a relief of 5% for assesses in the lower tax brackets. This is likely to result in greater tax inclusion and widening of the tax base, besides increasing the in hand disposable income of individuals. This will be a positive change, leading to an increased consumption and boosting demand for real estate as well.
Text : Madhulika Ra Chauhan Photo Credits : FWD Media