Union Budget FY15-16: Then & Now For Business Sector
Post the Budget Session, as our Honourable Finance Minister, Arun Jaitely and other officers walked out of the Parliament with pride, for a moment they looked like “The A Team”!
Presenting a full budget for the first time after coming into power, the action Arun team seem to have presented a hopeful, directional and growth oriented budget. Out came many rules and proposals, let’s see if our Vyapari sector is happy with the Union Budget 15-16
How New Budget Will Effect the Business Sector
|The Union Budget 15-16||Old existing rules||Effect on the business sector||Reactions||Ratings|
|GST (Goods and Service Tax) will be implemented by 2016||Various indirect taxes are in existence.||This will be a huge relief to the business sector as indirect taxes like Excise Duty, Service Tax, Sales Tax etc all come under a single tax called GST. So filings and being assessed under different acts will be reduced.||Many countries have been following GST for a long time now. Many entrepreneurs would rather have it earlier than 2016.||4 Stars|
|Corporate Tax down by 5%||Existing slab rate is 30%||To help businesses cut down on tax, the 25% tax rate will apply for the next 4 years.||Many manufacturing concerns seem happy, but for the service sector, it doesn’t make much of a difference by increasing the ST rate to 14% and then reducing the corporate tax rate to 25%.||4 Stars|
|Service Tax increased to 14%||Existing tax rate 12.36%||Surely the cost of services will go up for service providers as well as the service recipients.||Increasing it from 10% to 12.36% by the last government was frowned upon and now standing at 14%, is not an ideal move. The revenue generated from the service sector is almost 60%, hence big money is expected to be collected.||1 Stars|
|EPF and ESI being made optional||Above a particular salary slab, these were compulsory||More dispensable cash in the hands of businesses. Also registering under different labour laws involves tedious paper works which will be reduced.||This is a welcome moves, especially if you are employing blue collared employees.||4 Stars|
|SETU Fund– Rs.1000 crores/ Atal Innovation Mission- Rs.150 Cr||NA||If you’re a tech startup, you can avail funds from the government if your aim is to improve the technological infrastructure in India||Startup entrepreneurs are thrilled at this announcement but we are unaware of the status of the funds allotted last year for this purpose. Implementation must be focused on.||3 Stars|
|SME Fund Rs.20,000 crores||NA||The Small and Medium sector enterprises had been sidelined, but with this corpus, availing funds will be easier.||Those of who deal and own SME’s will know the difficulty of procuring fund, so yes most of them are happy about allotting money specifically for them.||4 Stars|
|DTC scrapped||DTC proposed by the Congress government||It’s a boon that it got scrapped. Many legal experts will tell you how the existing law is more easier in comprehension and application than the DTC||Though many business owners know not much of it, just remember this is a good move.||5 Stars|
|GAAR (General Anti Avoidance Rules)- applicability to to be deferred by 2 years||Proposed by the Congress government.||Evading tax through tax havens will be curbed.||Extra implications on tax havens and tax evasions. Many entrepreneurs will now have more regulations in transferring money apart from RBI monitoring them, but looking at the quantum of tax evasions, this is a good rule.||4 Stars|
|Rate of Income tax on royalty and fees for technical services (FTS) down to 10%||Existing slab rate was 25%||For all of those tech startups, this surely is a thumbs up||Technical growth in India is quite overwhelming so this decrease in royalties and FTS was long awaited.||4 Stars|
|Basic Custom duties on 22 inputs to be 0||Existing basic custom duty- varied rates from 5% to 10%||For electronic products such as organic TV LED panels, ulexite ore etc the basic customs duty will be 0.
For microwave ovens, Magnetron, a raw material will attract no basic CD and such other 20 items.
|To promote “Make in India”, most electronic goods will now attract 0 or reduced basic customs duty.||4 Stars|
As the PM had promised, to uphold his schemes such as “Swachch Bharat Andolan”, “Make in India”, “Jan Dhan Yojna” and “10000 startup warehouse”, this budget is in line with the mentioned schemes. Overall we think that this budget is a four star rated affair for the business sector as a whole. What’s your rating?
Select Budget Reactions from the India Inc.
Mr. Pardeep Jain, MD, Karbonn Mobiles
“By focusing on progressive steps like reducing the rates of basic customs on 22 items including certain inputs, raw material, intermediates and components, the Union Budget 2015 is aimed to strengthen domestic manufacturing. As the role of indirect taxes is very important in boosting domestic manufacturing, the proposal of corporate tax cut from 30% to 25 % and reducing taxes on services from 25% to 10% is going to push forward ‘Make in India’ initiative. This will support the mobile and telecom services eco-system, bringing down manufacturing costs and reduce tax liabilities of companies to help them attract investments and create job opportunities in the country. By proposing the full exemption on all goods and reducing the SAD on imports of certain other inputs and raw materials, the Finance Minster has created a roadway for a robust manufacturing in the country. However, to safeguard the interests of the indigenous mobile handset players, the revisions in excise duty structure should have been unrolled gradually to give optimum time to local handset manufacturers to thrive and strengthen their manufacturing capabilities in the interim.”
Mr. R. Narayan, Founder and CEO, Power2SME
“The MSME sector took centre stage as our FM, Shree Arun Jaitley announced various measures in his speech during Union Budget 2015. The government showcased their keen interest in accelerating the growth of MSME sector and stated policies to address many challenges prevalent in the sector such as taxation, procurement policies and business finance – which is the core challenge of SMEs across industries. Recognizing the lack of credit facilities as dominant challenge in the sector, allocation of Rs. 20,000 crore for Mudra Bank for SMEs will play a vital role by enabling the SMEs to gain access to basic things such as raw materials and other necessary resources important to run their business. Also, the allocation of Rs. 1,000 crore for technology startups showcases government’s trust in young technology businesses.
Various other measures like GST, Public Procurement Policy, Investment in infrastructure, introduction of internationally competitive Direct Taxes, sharp slash on few indirect taxes, and simplification of tax regime and few more measure announced will certainly result in ease of doing business. With government’s focus on making the youth of India job creators and not job seekers, skill development of youth and special focus on self-employment will have very positive impact on our socio-economic scenario and if implemented in right manner this will have a long term impact.”
Arvind Pani, Co-founder and CEO, Reverie Language Technologies
The Union Budget 2015 is a balanced budget with focus on giving social security to the poor, job creation opportunities for the young and investment to create better physical infrastructure for the companies to grow. The FM has announced a corpus of Rs 20,000 crore for lending to dalit entrepreneurs on priority. Such steps will encourage a large number of SC/ST entrepreneurs to access funds to grow their businesses and make a contribution to ‘Make in India’ scheme as well.
The Atal Innovation fund with a corpus of RS 150 crore will ensure fostering of talent and focus on research by entrepreneurs who aim to develop cutting edge technology and be globally competitive. Such initiatives by the government will go a long way to make startups a global force to reckon with. Apart from providing financial support, government keenness to connect the talent here with the international resources will encourage us to launch new business with unique business focus.
India has emerged as the fourth largest hub for startups in the World, according to the Economic Survey 2015. Thus announcement of setting up SETU with a corpus of Rs 1,000 crore will help companies like ours working in tech space to scale up our business faster and attract good talent in the ecosystem.
Overall, the Budget this year has provided directions to many important steps like implementation of GST, Gaar put out for 2 years, insurance and pension plans for old and poor segment of the population. The FM has presented a bold budget with the aim to bring the economy back on track.