1 Statement from Girish Vanvari National Head Tax KPMG in India
Announced in the backdrop of a robust global economy, a recovering Indian economy and a soaring stock market, Union Budget 2018-19 is along expected lines. The Budget embodies inclusiveness through enhanced expenditure outlays in several socio-economic schemes and rural programmes and several infrastructure initiatives. On a taxation front, there is slight cheer for salaried class wherein standard deduction has been reintroduced. Further, the popular expectation for corporate tax rate reduction has been met for companies below a turnover of INR250 crore wherein the rate has been reduced to 25 per cent. As feared, long-term capital gains tax has been reintroduced though a calibrated way, the silver lining being the grandfathering of gains upto 31 January 2018 and a reduced without indexation taxation rate of 10 per cent. Further, dividend distribution tax of 10 per cent has been introduced on equity oriented funds. A big relief being non introduction of inheritance tax. Introducing measures to support the VCF/Angel investors coupled with the recognition of hybrid instruments would encourage the industry. As expected, the revised fiscal deficit estimate is enhanced to 3.5 per cent with a FY18-19 estimate of 3.3 per cent. To sum it all, the proposals are around expected lines with the highlight being the much anticipated introduction of long-term capital gains albeit in a calibrated and responsible way.
2 Manish Aggarwal, Partner, Head- Corporate Finance – M&A, Debt Advisory – Infrastructure, Head – Energy and Natural Resources, KPMG in India
Quote 1 A cornerstone of the Budget 2018 is to further the access to energy agenda to the marginal section of the population. Enhancement of the ‘Ujjawala’ scheme to provide free LPG gas connections to 80 million women, reiteration of commitment under ‘Saubhagya’ scheme to electrify 40 million households and facilitation of farmers to set up distributed solar projects holds a greater promise for the currently unserved energy consumers. These schemes hold a potential to enhance energy demand greatly and thus may help bring the stranded capacity on-line. Access to financial markets for energy sector companies is likely to be kick-started by facilitating investment by long term savings based institutional investors through measures announced for kick starting the bond markets in India. Smaller companies particularly in distributed energy space with turnover below INR 250 Crore will benefit by a lower tax rate. Mention of CPSE InvITs increase the hopes of power sector PSUs being able to access market to raise equity capital in innovative manner.
Quote 2 Addressing the infrastructure deficit in India continues to be a key focus area for Government in Budget 2018. The modal shift is reflected not only in infrastructure creation, but access to infrastructure for making ‘ease of living’ a reality. A 20% increased outlay for overall Infrastructure; providing ease of connectivity through multi-modal approach and an integrated Transportation strategy gets a renewed thrust. Expanding Airports capacity by 5X, focus on Bharatmala initiative to provide seamless connectivity was also highlighted. New Innovative structures to raise resources through Toll Operate Transfer (TOT), Infrastructure Investments Trusts would be paced up. Railways gets increased allocation to focus on capacity augmentation, more electrification, and safety initiatives. Station Development Programme will be accelerated further to get private sector involvement enhanced. Focus continues to be on providing electricity to all through schemes already launched. Key feature of this year’s Budget has been huge push towards healthcare and education infrastructure. To this end, Indian Infrastructure Finance Corporation Limited (IIFCL) will help finance education and health infrastructure. Debottlenecking of institutional capital to bond markets has also been addressed by allowing ‘A’ rated bonds to access such capital. Overall a very positive Budget for Infrastructure space, though uptick on private sector investments still remains a big question mark.
3 Comment from Dr. Waman Parkhi, Partner, Indirect Tax, KPMG in India
Prudent Union Budget despite election knocking on the door
Union Budget 2018-19 was expected to have lot of sops, however no such sops were announced which means that economic rationale has been preserved even in the last Budget before election. The speech highlights what Government has done and would do for the rural economy, infrastructure, and employment generation, MSME, backward castes, health and education. The Budget speech has shown the rural thrust – allocation for affordable rural housing, electricity connectivity, special thrust for rural infrastructure including roads, increased allocation for bamboo and special thrust on rural employment, Swatchh Bharat including conversion of human and animal waste in bio energy/fertilisers.
Health Protection Scheme to cover 10 crore poor and vulnerable families (approximately 100 crore people) with upto INR5 lakh per family per year is perhaps the hallmark of the Union Budget which can revolutionise healthcare in the country if implemented well.
Mass formalisation after demonetisation and GST which gives database which would be used for the benefit of MSME sector. Schemes for easier and quicker financing of MSMEs, reduced corporate income tax rate for reported turnover of less than INR250 crore augurs well for the sector and would help in employment generation.
4 From Dr. Jaijit Bhattacharya, Partner and Head, Economics and Regulatory, KPMG in India
Union Budget 2018-19 demonstrates significant push for infrastructure, including rural infrastructure, immediate job creation as well as supporting long- term employability through education and skill development is very encouraging. In addition, significant support to agriculture and rural industries will go a long way in lowering rural stress.
