Odisha News Insight

Union Budget to encourage Growth and Investments: CII

image“Matching the expectations, the Finance Minister delivered an excellent Budget with many proposals to promote growth and investments,” said Mr Ajay S Shriram, President, CII.

“Measures to revive investment in infrastructure include greater investment by the Central government PSEs, the creation of the National Investment and Infrastructure Fund and revival of the PPP model. An excellent suggestion is the implementation of five ultra-mega power projects on a plug-and-play mode meaning that all sovereign clearances will be given before bidding out the project to the private sector. These were recommended by CII and we are delighted that the Hon’ble Finance has taken these on board” said the CII President.

The Budget attempts to kick-start the investment process by investing from public sources. This would have some impact on the path for fiscal consolidation and the Finance Minister has pushed back the year of achieving the 3.0 per cent fiscal deficit by one year.

CII supports such a move as long as the extra money is used for capital expenditure rather than on current revenue spending. It is commendable that the Minister has been able to achieve the target of 4.1 per cent of GDP in the current year. CII is especially impressed with the Finance Minister’s focus on revenue deficit, the press release said.

The reduction of corporate tax rate from 30 per cent to 25 per cent over four years will make Indian companies competitive vis-à-vis their competitors and is a big confidence booster to the industry. This, together with the phased removal of exemptions would usher in a new tax regime with lower level of litigation.

Any concern on losing tax revenue is addressed by the fact that the service tax rate has been increased by 2 per cent. Revenue will also be augmented by the abolition in wealth tax and its replacement by a 2 per cent surcharge on incomes of over Rs 1 crore, according to CII.

The government has announced a roadmap on GST effective April 1, 2016. This will be a major rationalization of indirect taxation and will go a long way in spurring growth in Indian economy to double digit. On indirect taxes, the proposals include exemption of SAD on all Items and reduction of Customs duty on 22 Items to help streamline the inverted duty structure.

There was uncertainty around taxation of domestic Alternate Investment Funds (‘AIFs’) which resulted in players refraining from setting up new funds, as also creating tax uncertainty for existing investors, which does not appear to be aligned with the Government’s stated objective of bringing certainty in tax laws.

What CII had recommended was not to provide any tax exemption or holiday, but merely to continue with the tax pass through status. This is now granted in the Budget and CII has thanked the Finance Minister for this.

The Finance Minister’s proposal to rationalise capital gains regime for Real Estate Investment Trusts (REITs)/InvITs is a welcome step. The Budget 2014-15 had notified the norms where REITs/ InvITs were provided the ‘pass through’ status for the purpose of taxation and later market regulator SEBI had notified norms for listing of new business trust structure REITs that would help attract more funds in a transparent manner into the realty sector. GAAR deferral by 2 years and reduction of Income Tax on Royalty Fees to 10% were recommended by CII and have been granted, the CII release said.

Measures to support ease of doing business include streamlining the payment of indirect taxes, replacement of multiple prior permissions with a pre-existing regulatory mechanism, the introduction of a bankruptcy law and establishment of an electronic trade receivables discounting system for MSMEs. Steps to encourage start-ups include the allocation of Rs 20,000 crore to Micro Units Development Refinance Agency (MUDRA) and Rs 1,000 crore to NITI Aayog to support self-employment in technology driven areas.

The Finance Minister mentioned that disinvestment will include strategic disinvestment as well as disinvestment in loss making units. This is a welcome announcement and CII would await more details on this issue that will help the government achieve the target of RS 69,500 crore in the coming year.

Another noteworthy feature of the budget is the much needed announcement to address the tax burden of the middle class tax payer. Some of the initiatives which would provide succour to individuals relate to enhancing the deduction in health insurance to Rs. 25,000; deduction of up to Rs. 50,000 for contribution to the new pension scheme, raising the deduction in transport allowance, among others.

Such a move would not only help augment the savings of the middle class tax payer which could then be ploughed back to fulfil the development priorities of the country but would also contribute to meeting the prime social security needs of the common man. Similarly, the three gold schemes, namely the gold monetisation scheme, sovereign gold bond and introducing an Indian gold coin would also help to wean individuals away from savings in non-productive gold assets and move towards financial savings, according to CII.

Mr Shriram termed this “a landmark Budget, having beneficial provisions for almost all the segments of the society. Many of the provisions are indeed path-breaking. The announcements on infrastructure are especially welcome and would go a long way to rejuvenate investment and further build on the recovery process currently underway in the economy. The adherence to the path of fiscal consolidation even while attempting to maintain the quality of our deficit would be music to the ears of the rating agencies and would help India emerge on the radar of the international investor.”

In addition to the views from central office , CII Odisha State Council has further added: “Overall a good budget facilitating Ease of Doing Business and I am particularly happy about the focus being laid on infrastructure, rollout of GST, social security measures, micro-finance and a movement towards cash-less transactions”.

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