By Paresh Parekh, Tax Partner, EY and Rahul Kakkad, Senior Tax Professional, EY
The electorate has given the new Government a clear mandate towards achieving growth and development through bolder clearer policy measures. The budget was dubbed by many as a perfect, prime and primary opportunity for the new administration to provide impetus. The Finance Minister ('FM') has laid down an ambitious roadmap for infusion of growth, development and fiscal consolidation for the economy at large. So while the FM chose to focus on key sectors for garnering growth and development along with employment like manufacturing, power, infrastructure and agriculture, there have been no specific reforms with regard to direct tax in the form of incentives/sops or investment-linked benefits for the RCP sector.
On the positive side, the FM increased tax slabs for individuals, along with increased 80C deduction from INR 1,00,000 to INR 1,50,000 and increasing deduction on interest on loan for purchase of self-occupied house property from INR 1,50,000 to INR 2,00,000. These moves would go a long way in providing more disposable income in the hands of the individual - increasing the spending power of the consumer, providing an indirect push to the RCP sector. The FM did not attempt to hide his focus of bringing greater tax clarity, predictability, stability and expediting dispute resolution in the tax regime to stir business confidence and garner investor comfort. The FM appreciated challenges which are currently faced by the Indian economy and signalled measures for a stable growth rate in the long term. While already enforced retrospective amendments would continue to apply, the FM assured the formulation of a High Level Committee to review each new dispute on indirect transfer on a case to case basis. Also, there is a proposal for setting up of a High Level Committee to interact with trade and industry on a regular basis, to ascertain areas which require clarity on tax laws.
Additionally, introduction of provisions for advance rulings for residents and rollback of Advance Pricing Agreements ('APA') to apply for international transactions going back upto 4 years, use of multiple year data and range are encouraging signs to reduce disputes and litigation.
As regards indirect taxes, the peak rates of Service tax, Customs and Excise remain unchanged. Excise duty on footwear, specified food processing and packaging machinery and on RO membrane element used in household water filter have been reduced which should lead to a reduction in prices. Further, consumers can expect reduction in price of televisions and personal computers on account of reduction in customs duty on certain products such as LCD, LED TV panels (of below 19 inches), colour picture tubes and inputs / components used in manufacture of personal computers and tablet computers.
Also, with the intention to encourage domestic production of goods, education cess and Secondary and Higher Education Cess (3%) has been levied on all imported electronic products making such products costlier. The Government has also sought to find a solution to GST and has voiced its intention to implement the same in the next fiscal, which should bring some relief to the RCP sector.
On reform side, it is proposed that no additional approval of FIPB is required for manufacturing units to sell its products through retail including E-commerce platforms. Further, the budget proposed to accelerate setting up of a national market and a Farmer's Market, and to encourage State Governments to revamp their respective APMC Acts, to help establish private markets. Also, to allow farmers to sell their produce directly by eliminating middle-men enabling farmers to benefit by drawing better prices for their produce.
To conclude, Budget 2014 has not disappointed, with the FM bringing in a whole host of changes; primarily stressing on tax certainty and allotting a large quantum of funds to high impact sectors such as agriculture, power and infrastructure while highlighting the importance of manufacturing to better employment numbers and the economy. While from an RCP standpoint, there are no big bang changes in the form of specific benefits/sops provided by the FM, the general proposals of the budget seem to bring a sense of favourability to the economy as the whole.
(Views expressed are their personal)
The electorate has given the new Government a clear mandate towards achieving growth and development through bolder clearer policy measures. The budget was dubbed by many as a perfect, prime and primary opportunity for the new administration to provide impetus. The Finance Minister ('FM') has laid down an ambitious roadmap for infusion of growth, development and fiscal consolidation for the economy at large. So while the FM chose to focus on key sectors for garnering growth and development along with employment like manufacturing, power, infrastructure and agriculture, there have been no specific reforms with regard to direct tax in the form of incentives/sops or investment-linked benefits for the RCP sector.
On the positive side, the FM increased tax slabs for individuals, along with increased 80C deduction from INR 1,00,000 to INR 1,50,000 and increasing deduction on interest on loan for purchase of self-occupied house property from INR 1,50,000 to INR 2,00,000. These moves would go a long way in providing more disposable income in the hands of the individual - increasing the spending power of the consumer, providing an indirect push to the RCP sector. The FM did not attempt to hide his focus of bringing greater tax clarity, predictability, stability and expediting dispute resolution in the tax regime to stir business confidence and garner investor comfort. The FM appreciated challenges which are currently faced by the Indian economy and signalled measures for a stable growth rate in the long term. While already enforced retrospective amendments would continue to apply, the FM assured the formulation of a High Level Committee to review each new dispute on indirect transfer on a case to case basis. Also, there is a proposal for setting up of a High Level Committee to interact with trade and industry on a regular basis, to ascertain areas which require clarity on tax laws.
Additionally, introduction of provisions for advance rulings for residents and rollback of Advance Pricing Agreements ('APA') to apply for international transactions going back upto 4 years, use of multiple year data and range are encouraging signs to reduce disputes and litigation.
As regards indirect taxes, the peak rates of Service tax, Customs and Excise remain unchanged. Excise duty on footwear, specified food processing and packaging machinery and on RO membrane element used in household water filter have been reduced which should lead to a reduction in prices. Further, consumers can expect reduction in price of televisions and personal computers on account of reduction in customs duty on certain products such as LCD, LED TV panels (of below 19 inches), colour picture tubes and inputs / components used in manufacture of personal computers and tablet computers.
Also, with the intention to encourage domestic production of goods, education cess and Secondary and Higher Education Cess (3%) has been levied on all imported electronic products making such products costlier. The Government has also sought to find a solution to GST and has voiced its intention to implement the same in the next fiscal, which should bring some relief to the RCP sector.
On reform side, it is proposed that no additional approval of FIPB is required for manufacturing units to sell its products through retail including E-commerce platforms. Further, the budget proposed to accelerate setting up of a national market and a Farmer's Market, and to encourage State Governments to revamp their respective APMC Acts, to help establish private markets. Also, to allow farmers to sell their produce directly by eliminating middle-men enabling farmers to benefit by drawing better prices for their produce.
To conclude, Budget 2014 has not disappointed, with the FM bringing in a whole host of changes; primarily stressing on tax certainty and allotting a large quantum of funds to high impact sectors such as agriculture, power and infrastructure while highlighting the importance of manufacturing to better employment numbers and the economy. While from an RCP standpoint, there are no big bang changes in the form of specific benefits/sops provided by the FM, the general proposals of the budget seem to bring a sense of favourability to the economy as the whole.
(Views expressed are their personal)
