JOIN USThe industry welcomed the budget terming it as “positive” and “growth-oriented” and some leaders were pleasantly surprised with the unchanged excise rate in major sectors.
“Overall, the budget is a growth-oriented and a good one and it has not taken the last year’s growth for granted,” CII President Hari Bhartia said. Expressing similar views, Kotak Mahindra Bank Vice-Chairman & Managing Director Uday Kotak said: “Budget is positive for the equity and bond market,” adding the auto sector was expecting a hike in excise, which has been kept unchanged at the existing levels. “Budget has positively surprised us,” he said, adding the “it has done better than normal expectation”.
The budget proposals seek to retain corporate tax at 30 per cent, to be paid by domestic firms earning total income of over Rs 1 crore a year, while it lowered the surcharge tax limit on corporate tax to 5 per cent from the current 7.5 per cent.
In fact, the industry has been clamouring for reduction in corporate tax rate to 25 per cent saying the move will help India Inc to undertake big-ticket investments. However, FM decided to retain the same rates and instead proposed a lower rate of 15 per cent tax on dividends received by an Indian company from its foreign subsidiary.
As a negative, the government has marginally raised Minimum Alternate Tax (MAT) to 18.5 per cent from 18 per cent on book profits. Also, FM proposed to bring developers in Special Economic Zones (SEZs) under MAT.
Taxation Expert H P Ranina says it was not a good idea to increase MAT, though the move may help compensate reduction in surcharge. Echoing similar lines, Jairaj Purandare, Executive Director, PricewaterhouseCoopers (PwC) said “MAT should have been lowered further rather than raising it marginally as it would have enlarged the basket of the same.”
Uday Ved, Head of Tax, KPMG says “....Introduction of MAT at 18.50 per cent on SEZ developers and units is a retro gate step and will have adverse impact on the same. Dividends received from foreign subsidiaries will be taxed at a reduced rate of 15 per cent compared to a normal corporate tax rate(of 33 per cent). This one time relief will help Indian corporates to repatriate dividends from their overseas ventures into India.” Bringing SEZ units as well as LLPs(limited liability partnerships) under MAT would take away a significant attraction of both SEZs and LLPs, says Amit Rathi, MD, Anand Rathi FInancial Services.
Welcome move
Commenting on national mission for hybrid and electric vehicles, Society of Indian Automobile Manufacturers (SIAM) President Pawan Goenka said: “This is a welcome move. It will allow advanced technologies to be developed in India rather than importing technology.”
Although there were no specific measures, such as allowing FDI in multi-brand retail, Future Group Chief Kishore Biyani said the government is showing its recognition through the budget what modern retail has been saying so far. “The announcements to strengthen farm sector, cold chain investments and recommendations to amend Agriculture Produce Marketing Committee (APMC) Act are all indicative of the government’s will,” he said.
Godrej Group Chairman Adi Godrej said: “I think it was a very well balanced Budget and growth oriented. It will be very good for the economy. The decision to formally introduce the constitutional amendment for GST is a very good one.”
Welcoming the reduction in surcharge for companies from 7.5 per cent to 5 per cent, he, however, said: “It is desirable, although I would have liked to see surcharge completely removed.”
HSBC India Country Head Naina Lal Kidwai said: “The finance minister has allowed the growth agenda to stay on track.” She also said it has also set the direction for financial sectors reforms.
Ficci President Rajan Bharti Mittal said it is balanced and will sustain the growth momentum, while giving main emphasis on agriculture and manufacturing. Motilal Oswal Joint MD Ramdeo Agarwal said no increase in excise rates has boosted market. “Auto and banking sectors are clear winners in budget.”