Budget 2008 – Expectations
--Life may be less taxing after Budget –
--FM may hike STT, says NSDL's Tilak
--Brokerage expectations from 2008/09 budget
--BPO industry seeks separate identity
--Drug cos seek cure for R&D in the forthcoming budget
--Animation & gaming companies want STPI-like tax break for exports
--Textile machinery sector needs a booster dose
--Dismantle tax on house construction: Urban Housing Ministry
--Consumer durable makers for lower indirect taxes
--Plantation cos look for rejuvenation package
--Budget 2008: Govt should allow 100% FDI in retail
--Lotus Mutual CEO expects, at best, mildly positive Budget
--Excise, interest rate cuts to improve manufacturing: FICCI
--Brainstorming with ET: Great minds on Budget
Life may be less taxing after Budget –
NEW DELHI: Finance Minister P Chidambaram might spread cheer all around with Budget 2008-09, the last full-fledged Budget of the UPA government. A hike in the income-tax exemption limit, a higher ceiling for tax-saving investments along with a wider range of products under this category, and a rejig in tax slabs are some of the key proposals being considered by the UPA government. Corporate tax payers can expect some relief in the form of removal of surcharge.
The finance ministry, which is giving final touches to the tax proposals, is likely to raise the income-tax exemption limit from Rs 1,10,000 to Rs 1,25,000. Though there is a strong pitch from all corners to raise the limit to Rs 1,50,000, the fear of a big erosion in the tax base may prompt the government to follow a conservative approach.
A final call on direct taxes will be taken at "the highest political level", since this will be the UPA government's last full Budget, sources said. Budget 2009-10 will be a vote on account, as a new government has to be put in office by May 2009. (Full Story)
FM may hike STT, says NSDL's Tilak
MUMBAI: "The budget will focus more on sustaining a high GDP growth rate of around 9 per cent, while continuing the measures to tame the inflation rate," said Chandrashekhar Tilak, senior vice president, NSDL, giving his expectations from the Union Budget 2008-09.
The Indian economy is growing at about 8.7 per cent, IIP index has risen from 128.4 in 1994-95 to 298.9 in 2006-07, foreign exchange reserves as on Feb 15, 2008 stood at $292,856 million, up from $25,186 million in 1994-95 while exports have shown robust growth to $11,012 million in April 2007 from $3,309 million in April 2001. "We need to concentrate more on the basic developmental sectors such as power and infrastructure, to propel the economy," he said.
This being the last budget of the current UPA government, people look forward to a more populist budget which will focus more on social initiatives like education, employment and public health. Setting up of industry related special economic zones and general SEZs is also likely to get more focus. The construction industry wants lifting the cap on SEZ size which is at present 5,000 hectares. According to Tilak, more SEZs should be constructed as it generates employment opportunity, boosts exports and will generate more foreign exchange reserves. (Full Story)
Brokerage expectations from 2008/09 budget
MUMBAI: Following is a snapshot of analysts' expectations from the Central budget compiled from brokerage reports.
AUTOMOBILES
Uniform excise duty rates of 16 percent for all cars, large and small.
Reduction in excise duty on two wheelers to 12 or 8 per cent from 16 per cent.
Reduction in the excise duty on buses to 16 per cent from 24 per cent.
BANKING
Raising FII/FDI limit in state-run banks to 49 per cent from 20 per cent.
Relaxation in the lock-in period to three years from five years for bank deposits to qualify for tax benefits.
Interest earned on long-term lending to infrastructure industries to be exempted from income tax.
CAPITAL GOODS
Exemption from customs duty.
Reduction in excise duty on air conditioners meeting energy efficiency guidelines to 8 per cent from 16 per cent.
Reduction in excise duty on power equipment to 8 per cent from 16 per cent.
Rationalisation of tax structures with respect to dividend paid by subsidiaries and special purpose vehicles.
CEMENT
Abolish the 5 per cent import duty on coal and pet coke.
Value Added Tax on cement and clinker be reduced and brought in line with similar construction materials, like steel, to 4 per cent from 12.5 per cent.
CONSUMER GOODS
Reduction in excise duty on packaging material to 8 per cent from 16 per cent.
Reduction in effective duties on vegetable oil, palm oil and crude derivatives to soften prices.
Excise exemption on biscuits similar to other food mixes granted exemption in the last budget.
Reduction in excise duty on processed foods to 8 percent from 16 percent.
FERTILISER
Removal or reduction of customs duties on inputs like liquefied natural gas.
Reduction in customs duty on sulphuric acid to 5 per cent from 7.5 per cent.
General sales tax exemption for basic raw materials like natural gas, naphtha, etc.
Reduction in excise duty on pesticides to 8 per cent from 16 per cent.
HEALTHCARE
Infrastructure status for hospitals with certain eligibility norms.
Relaxation of income tax for mergers and acquisitions with conditions.
HOTELS
Raising depreciation on hotel buildings to 20 per cent from 10 per cent.
INFORMATION TECHNOLOGY
Reduction in dividend distribution tax to 12.5 per cent from 15 per cent to encourage Indian IT companies pay higher dividend.
Extension of Software Technology Park scheme, which is set to end by 2008/09.
Reduction in excise duty on personal computers to 8 per cent from 12 per cent.
Abolish excise duty of 8 per cent on packaged software sold over the counter.
LOGISTICS
Infrastructure status for warehousing and shipping industry.
MEDIA
Abolish custom duty on digital exhibition equipment.
Abolish 16 per cent excice duty on set-top boxes.
METALS
Reduce excise duty on long steel products to 8 per cent from 16 per cent.
Abolish 5 per cent customs duty on import of scrap.
Increase in export tax to Rs 2,500 per tonne from Rs 1,500 on key raw materials for steel.
OIL & GAS
Cut in excise duty on petrol and diesel.
Removal of service tax on exploration activities. (Full Story)
BPO industry seeks separate identity
NEW DELHI: Extension of software technology parks of India (STPI) scheme for 20 years, withdrawal of minimum alternate tax (MAT), introduction of advance pricing arrangements for transfer pricing and abolition of FBT on ESOPs are some of the key pre-Budget recommendations made by the Business Process Industry Association of India (BPIAI).
The association said the STPIextension will help offset the losses incurred due to rupee appreciation that have drastically hit the bottom line of BPOs. With STPI scheme coming to an end in March 2009, investors could avoid India as an offshore destination , opting instead for places like China, Sri Lanka and Philippines, BPIAI president Samir Chopra said. "The government stands to lose more in terms of indirect taxes than it will gain from taking away the tax breaks," he said.
The association has also asked for recognition of BPO industry as a separate industry. Mr Chopra said the BPO industry must be decoupled from the IT/ITeS industry . BPIAI said business process outsourcing must be recognised as a separate industry from the IT industry and a special business process outsourcing department or ministry should be set up.
Other recommendations of the association include a proper method of determination of export turnover and optional employees' state insurance (ESI) scheme.
Drug cos seek cure for R&D in the forthcoming budget
MUMBAI: India's pharmaceutical industry, which is troubled by the appreciating rupee and market challenges abroad, is hoping that the finance minister would extend export-related tax benefits and strengthen incentives for research and development in his forthcoming annual Budget.
Revenues and profits of drug makers have shrunk as a result of increasing pricing pressure and competition in key Western markets. A firmer rupee hasn't helped either. Typically, Indian companies earn 50% to 80% revenue from exports, which is not the case anymore. "With the dollar playing havoc, we wish the export incentives to pharma companies are extended for another five years," said Cipla's chief executive officer Amar Lulla. "This should be announced this Budget to allow companies to plan ahead." (Full Story)
Animation & gaming companies want STPI-like tax break for exports
HYDERABAD: The animation and gaming industry in India wants income-tax breaks on a par with software companies to produce cheaper films and compete in the Asian market.
Software companies housed in software technology parks enjoy tax breaks on their export profits. Though the benefit ends in March 2009, it might be extended for 10 years, considering that the surge in the rupee has impacted their bottom lines.
The animation and gaming industry is lobbying for similar tax benefits. "We have given a formal proposal to the information and broadcasting ministry seeking a tax holiday on export profits under Section 10 A of the Income-Tax Act. The finance ministry has also been kept in the loop," said Ficci animation and gaming forum chairman and DQ Entertainment CEO Tapas Chakravarti. (Full Story)
Textile machinery sector needs a booster dose
NEW DELHI: The coming Budget could give support to the capital goods industry with a view to stimulating investments in the economy.
Particularly needed is an incentive package for the domestic textile engineering industry, considering that government's own estimate says the textile sector would place fresh demands for machinery worth Rs 1 lakh crore in the next five years. (Whether this estimate holds true even after the decline in textile exports due to the rupee's rise is another question). Anyway, the government has an obligation to salvage the textile industry from its current morbidity and spur its growth, given that it is highly employment-intensive and potentially, a smashing forex earner). (Full Story)
Dismantle tax on house construction: Urban Housing Ministry
NEW DELHI: The Urban Housing Ministry has proposed that the 12.5% service tax on construction of residential units be scrapped. This would bring down the cost of owning a house by 3-4%. The ministry is of the view that the tax was negating all government initiatives aimed at keeping property prices in check.
Budget 2005 had brought construction of residential complexes having more than 12 residential houses or apartments within the service tax net. This tax covers independent satellite townships that have more than 12 houses spread horizontally, as well as apartment complexes of more than 12 flats. Service tax is not charged on the entire amount charged for the residential unit. Instead, the tax is levied on value addition by the developer based on the cost of land and construction materials.
"It goes without saying that developers pass on any increase in input cost to the consumer," a Nirman Bhawan official told ET. (Full Story)
Consumer durable makers for lower indirect taxes
NEW DELHI: The consumer durables industry has wished for lower indirect taxes and cut in customs duty on inputs in the forthcoming budget, as it seeks to safeguard its profitability against any increase in cheaper imports of finished goods.
The industry has called for reduction in value-added tax (VAT), abolition of central sales tax and cut in excise duty.
"In 2007, all categories recorded a double digit growth. This year, we expect reduction in VAT and incentives to bring the sector at par with the IT industry. Even reduction in import and excise duty will help in fetching better margins and provide products to the consumers at a cheaper rate," Haier India Director Pranay Dhabai said. (Full Story)
Plantation cos look for rejuvenation package
KOLKATA/KOCHI: Life isn't easy for the plantation sector despite soaring prices of some crops such as rubber, pepper and cardamom. The biggest of them all, India's tea industry, is grappling with rising cost of production. A fall in exports due to production shortfall took the energy out of tea.
Alongside spiralling production costs, the tea industry faces the other challenge of scaling up of orthodox tea output in order to make deeper inroads into the rapidly-growing Russian market. Russia has traditionally been a large importer of Indian tea and the current boom in that country has seen demand drift towards orthodox tea from CTC tea. India's orthodox tea production is 80 million kg out of its total production of 940 million kg.
Budget 2008: Govt should allow 100% FDI in retail
This is seventh in a series of articles in association with Ernst and Young in the run up to the Budget.
Indian economy is booming and so is the retail sector. The growth which the Indian retail segment has witnessed during last one year is stupendous. This is besides the fact that foreign investment in multi-brand retailing is still prohibited.
Initially, many foreign players for example Guess, Esprit, Marks & Spencer etc had come to India through the franchise route. Opening up of 51% FDI ('Foreign Direct Investment') in single brand retail trading has attracted many international players to invest and do business in India.
These guidelines permit 51% foreign investment in retail operations with prior approval from FIPB ('Foreign Investment Promotion Board') provided the products are under a single brand and are sold under the same brand internationally. The guidelines laid down for single brand retail trading aims to attract investment in production and sourcing of goods from India. (Full Story)
Lotus Mutual CEO expects, at best, mildly positive Budget
MUMBAI: Lotus Mutual CEO Ajay Bagga doesn't expect much from the Budget for 2008-09, which will be presented by Finance Minister P Chidambaram on February 29.
"Over the years, the Union Budget has become a non-event, with most policy actions taken outside of it. The coalition nature of the last two central governments has also translated into big-bang structural reforms being put on the backburner. As such we don't expect much more than a mildly positive budget," says Bagga.
Overall the macro economic picture is buoyant, with 8.6 per cent economic growth for the last three years, this year's GDP growth forecast at 8.7 per cent and a forecast of 10 per cent economic growth in the 11th Plan. The tax collections have hit a lifetime high with nearly 40 per cent plus growth. This has given the finance minister the leeway to look at giving individuals and corporate some tax relief. However, populist politics will probably lead to an increase in the cess on taxes to fund some of the measures, Bagga said. (Full Story)
Excise, interest rate cuts to improve manufacturing: FICCI
NEW DELHI: Industry body FICCI has sought a cut in excise duties on consumer products in the coming Budget and a reduction in interest rates, besides implementation of appropriate raw material policies to reverse the current slowdown in the manufacturing sector.
"While the slowdown is not pervasive and has affected only some sectors, it is a cause for concern. The trend may continue for some time, given the current economic scenario," the chamber said in a survey on the Manufacturing Sector.
In its recommendations, FICCI has suggested stimulating consumption and demand, reducing interest rates and corporate tax rate, appropriate raw material policies and improved regulatory environment to arrest the slowdown in the sector. (Full Story)
Brainstorming with ET: Great minds on Budget
Five separate brainstorming sessions in three cities. Twentyseven experts, apart from ET's own resident wise men and women. Over 50,000 words of transcribed text. All this to distil the real concerns of this year's Budget.
On February 29, finance minister P Chidambaram will present the last full Budget of the UPA government. It is only natural to expect measures designed to please the voter — in rupee-hit textile towns, loan-financed new homes, suicide-prone farmlands, small towns bursting at the seams with growth, corner offices looking down on Nariman Point, villages thirsting for education, skills and healthcare as much as for water, IT and BPO campuses that track, eagle-eyed, the health of the US economy, small and medium enterprises and sarkari offices abuzz with Pay Commission speculation.
Pleasing the voter, however, cannot be at the expense of the economy's long-term. Over the past years of fiscal austerity, government dissaving has been brought down from over 6% of GDP to less than 1.5%, releasing resources for soaring corporate investment. The FM must maintain fiscal discipline, and meet deficit targets.
Indirect tax reform must lay the ground for, rather than hamper, the planned transition to a goods and services tax in April 2010. A combined central plus state GST rate of 20% should be the target. Bring all excise duties to 14% plus two additional rates for merit and demerit goods. Inverted import duties — higher rates on inputs as compared to rates on the final goods — are a bane. The best solution is a uniform rate of import duty: someone's finished goods are somebody else's inputs. A rate of 7.5% would be ideal this year, with two additional rates for merit and demerit goods.
Tax collections are booming. The FM can deliver on his promise to ease the tax burden. Scrap the surcharge. Give companies a choice between FBT and a flat 10% surcharge on book profits. Phase out all exemptions as scheduled. Let SEZs pay a minimum alternate tax after five years. (Full Story)
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