The Union Price range 2021 guarantees to be distinctive in some ways. Other than the truth that it is going to be a price range amid a full-blown pandemic, it’s going to maybe additionally current challenges that no earlier Finance Minister has encountered within the historical past of the nation. Together with managing the Price range deficit, the federal government should steadiness the asks of a number of sectors, together with well being, tourism and infrastructure. Because the Finance Minister navigates by means of the myriad challenges, revival of demand and funding, tax reliefs and schemes to offer impetus to home manufacture and exports, function prominently on India Inc’s want listing.
Authorities’s revenues have been hit arduous by the pandemic with each direct and oblique taxes struggling. However there may be nonetheless a possibility to assist financial revival by means of export facilitation measures. The pandemic has additionally pressured international locations to revisit their provide chains and shift focus from being import reliant to in-country producers. This outlook favours India and presents a possibility for the federal government to catapult the nation into a world manufacturing hub.
The “Atmanirbhar Bharat Abhiyan” launched by the Prime Minister in 2020 echoes this sentiment and may very well be precisely what India wants to spice up its manufacturing sector and assist the nation play a pivotal position in international provide chains within the close to future. The Product Linked Incentive (PLI) scheme rolled out beneath the Atmanirbhar Bharat Abhiyan in April 2020 coated cellular manufacturing, manufacturing of bulk medicine and medical gadgets.
Following the optimistic response obtained on the scheme, in November 2020, it was expanded to cowl ten new sectors together with digital merchandise, vehicles, telecom and networking merchandise, textiles, meals merchandise and many others. The main points across the schemes for these sectors are nonetheless awaited and it’s hoped that the price range bulletins would supply some readability on this. There are additionally talks about extending the Phased Manufacturing Program (PMP) which initially led to a collection of investments by cell phone producers to different sectors, particularly the buyer durables sector which has been severely impacted by the pandemic.
All these initiatives will assist additional investments in infrastructure and connectivity that are essential if India is to attract extra FDI on the regional degree. The main focus of the Price range is prone to maintain deal with responsibility concessions on capital investments and to broaden advantages offered in key sectors corresponding to electronics, vehicle, telecommunication, and many others., notably within the SME and MSME sectors.
The federal government additionally just lately launched the Remission of Duties and Taxes on Exported Merchandise (RoDTEP) scheme from January 1, 2021, which is about to interchange the Merchandise Exports from India scheme. A committee beneath the chairmanship of the Union Secretary is predicted to provide its report shortly, primarily based on which the ultimate charges for refund can be notified. This scheme is predicted to set the tone for the following decade for exports from India.
Digital ICT merchandise are coated beneath the Data Expertise Settlement (ITA) and appeal to a BCD of 0%. This places home manufacturing at an obstacle and there may be subsequently a necessity to increase advantages provided to the export sector, to home producers of ITA merchandise as effectively. There’s a must evaluation this subject and this Price range may think about offering a degree enjoying area to home producers’ vis-à-vis importers.
Trade has additionally been ready for a scheme to allow manufacturing operations for each home provide in addition to exports from the identical facility, with out foregoing the responsibility exemption claimed on procurement of uncooked supplies/ capital items. The just lately revamped and expanded ‘manufacturing beneath bond’ scheme addresses precisely this. Whereas the federal government has been issuing clarifications on a number of elements of the scheme, it’s anticipated that the upcoming Price range would formalise a few of these to alleviate business apprehensions and popularise the scheme amongst exporters.
One other space that wants consideration is a relook at a few of the current measures geared toward encouraging ease of doing enterprise in India. The adoption of the Faceless Evaluation program by Indian Customs beneath the Turant Customs framework confirmed nice promise in enhancing India’s rating in ease of doing enterprise and was a step ahead within the transfer towards paperless clearances. Nonetheless, opposite to expectation, corporations have been dealing with delays in clearance of products owing to on-ground challenges. There’s a must undertake joint classes for importers in addition to Customs officers to be able to heighten consciousness and assist resolve the problems confronted by importers.
India’s journey in boosting the manufacturing sector has been difficult however the timing coupled with the worldwide state of affairs supply a novel alternative to push ahead coverage reforms that can assist assist the manufacturing sector. It’s hoped that the Price range wouldn’t solely deal with growing manufacturing footprint in India but additionally bolster larger worth addition and an increase in R&D funding.
(The author is Nationwide Chief & Oblique Tax Companion, Deloitte Touche Tohmatsu India LLP)
