The year 2020 witnessed the worst nightmare in the history of the world’s economy and finance; globally as well as in India. The pandemic has crippled various industrial sectors, disrupted the global supply chain, and crippled employment to a larger extent. To boost the Indian economy and escalate the growth of Industry, Finance Minister Nirmala Sitharaman is going to present the toughest and the most imperative budget in the history of India that witnessed a fall of 3.1 percent growth in the fourth quarter of FY 2020, and the largest ever fall of GDP that contracted by 23.9 percent in the April-June quarter.
A week back, the Finance Minister stated that the upcoming union budget will be the pillar for the country’s growth internationally. Amid the serious financial strain, it is the need of the hour to perk-up growth and boosts the economy by augmenting ease of doing business operations in India, resuscitate demand, and escalate consumer spending. In order to bring back on track disposable income in the hands of people to revive demand and to enhance private consumer, the finance ministry may consider uplifting the direct income tax slabs for common people and there could be a reduction in non-corporate income-tax rates.
One of the important criteria in the budget is income tax, which is now extremely intricate Every area, whether in respect of Personal Taxation, Capital Gains Tax, and Corporate Taxation requires the help of Tax Practitioners/Experts. For example, the Capital Gains Tax Laws stipulate a variety of tax rates, holding period, etc for equity shares, debt mutual funds, immovable properties, etc. and it becomes extremely difficult to understand the complexities without the aid of Tax specialists.
When questioned about the upcoming possibilities from the upcoming union budget, Karnika Sheth, senior law consultant, Supreme Court of India, said exclusively to The Electronics, “It is expected that the budget will lay thrust on incentivizing manufacturing and technology industry. Incentivizing the use of Artificial intelligence, blockchain, and new emerging technologies in key sectors are anticipated. It would create a regime that encourages foreign direct investments in manufacturing, tech, education, and healthcare sectors besides other industries. Post-Covid times also necessitate a budget that focuses on building infrastructure, research and development, in medicine, skill development, and creating more opportunities, in the healthcare and manufacturing sector. Thrust will also be on promoting startups and promoting more exports from India.”
The industrial and policy experts somehow feel that in accordance with the qualitative and sustainable industrial growth in the form of “Make in India: Zero Defect and Zero Effect”, there is a strong need to encourage and incentivize the immense transformational capacity of corporates in innovating business models that can synergistically deliver economic and social value simultaneously.
Speaking of transformational capacity and what the budget should focus on Rajiv Bhalla, Managing Director, Barco India said, “There is a need to undertake definite policy measures and provide fiscal stimulus to ensure financial recovery and spur economic growth, specifically across sectors like healthcare, EdTech, Infrastructure, and Manufacturing. We are also hopeful that the budget will address measures essential for an accelerated digital transformation. This includes investment in R&D, automation technologies, skilling and development of a talent pool trained in digital age skills which will help accelerate the pace of development.”
How India’s manufacturing cluster should look like after budget
At this moment, offering momentum to the manufacturing cluster is extremely important to power the slow growth due to coronavirus and also to reinstate the normal state of doing business. The recently unleashed schemes such as Product Linked Incentives (PLI) are positive, but still, there is a requirement for parallel phased manufacturing programmes (similar to previously introduced Phased Manufacturing Programme (PMPs) for mobile phones, electronics) that will be useful is decreasing the dependency on import of basic raw materials, which would ultimately perk-up the domestic economic growth.
For the past few years, most of the R&D linked tax benefits have already been phased out. To incentivise the R&D cluster, a couple of new tax SOPs should be unleashed that will also prove to be vital in making India an attraction among foreign investors to commence their global manufacturing units.
Consumer electronics and appliances
In the domain of consumer electronics and appliances, a global firm such as Panasonic has urged the government to consider rationalization of tax rates on certain consumer durable electronics such as Air Conditioners (ACs) and Television (TVs). These are no longer ‘luxury’ items and have become a common and essential household. The energy efficiency of air-conditioners has steadily increased and they now offer added features such as air-purification which is important in urban areas. Lowering the tax slab to 18% from 28% would help offset the price pressure and spur demand for both Air Conditioner (Split and Window) and Television (above 68 cm), thereby improving affordability among customers, attracting investments in component manufacturing, and help in penetrating deeper into the market, especially for the AC category.
Manish Sharma, president and CEO, Panasonic India, and South Asia said, “For manufacturers, reforms like the reduction of corporate tax and introduction of the Production Linked Incentive (PLI) scheme were welcomed and it displays the government’s intent to promote healthy backward integration and provide impetus to domestic manufacturing while elevating India’s position as a global manufacturing champion. To ease supply chain challenges, I would urge the Govt to consider the ‘One Nation, One Permit, One Tax’ system for a seamless and efficient road transport experience.”
The expectations from electronics manufacturing
To boost electronics manufacturing in the country, the finance minister is looking to unleash more reduction in corporate tax, easier credit access, subsidies, packaged incentives, and many more. Keeping in mind of ‘Make-in-India’ and ‘Aatmanirbhaar’ Bharat scheme, the government has been undertaking important measures to magnetize foreign investments in mobile manufacturing, electronic components such as assembly, testing, marking, and packaging units. The EMC 2.0 scheme would play a larger role if the government offers more relaxation to taxes for enterprises. In fact, the business in EMC will be strengthened more if incentives are offered on grounds of export duty and employment generation.
Rajoo Goel, secretary-general, ELCINA said exclusively to The Electronics, “We hope that the upcoming Union Budget will come out with more budgetary allocations for Components, Assemblies, and finished goods manufacturing. National Policy on Electronics 2019 (NPE 2019) has provided substantial support and urgent impetus to a few of the ESDM players. ELCINA recommends that we go beyond PLI and SPECS Schemes and include more components and their raw materials in the SPECS Scheme and also provide financial support to exports and EMS companies which have huge potential to grow from the current US$ 23.5 Bn to US$ 152 Bn in the next 5 years.”