UNION BUDGET Industry Expectations
2017 - 18
Credit Analysis & Research Ltd.
Union Budget Industry Expectations 2017-18
Table of Contents Sectors Airline..............................................................................................................2 Airport ............................................................................................................2 Automobile and Auto Ancillary.......................................................................3 Banking & Financial Services Industry (BFSI) .............................................. 3-4 Cement ...........................................................................................................4 Chlor-Alkali......................................................................................................4 Coal .................................................................................................................5 Construction ...................................................................................................5 Education ........................................................................................................5 Engineering and Capital Goods .................................................................. 5-6 Fertilizer ..........................................................................................................6 FMCG and Consumer Durable ........................................................................7 Gems and Jewellery ........................................................................................7 Healthcare ......................................................................................................8 Hotel ...............................................................................................................8 IT & ITES ..........................................................................................................8 Media & Entertainment ..................................................................................9 Mining & Mineral ...........................................................................................9 Non-Ferrous Metal ........................................................................................9 Oil and Gas ...................................................................................................10 Paper ...................................................................................................... 10-11 Petrochemical ...............................................................................................11 Pharmaceutical .............................................................................................11 Port ...............................................................................................................12 Power (including Renewable Power).............................................................12 Real Estate.....................................................................................................13 Retail .............................................................................................................13 Road and Highways ......................................................................................14 SEZ .......................................................................................................... 14-15 Shipping ........................................................................................................15 Steel ..............................................................................................................15 Tea and Coffee...............................................................................................16 Telecom .................................................................................................. 16-17 Textile ...........................................................................................................17 Warehousing/Logistics .................................................................................17
1
Union Budget Industry Expectations 2017-18
Airline Key expectations of Industry
Inclusion of jet fuel in GST ambit/ reduction in excise duty and VAT on jet fuel
Provide tax holiday (covering excise, customs, service tax) to Aerospace manufacturing and MRO sector
Current rate
Expectation
CARE Ratings view
Impact on Industry
18%
This is expected to reduce cost of fuel (which forms ~60% of the cost) for airlines and improve profitability. Partial pass on of the same to the end users to result in growth of passenger traffic.
Positive
NA
This would lead to creation of jobs and provide boost to aerospace manufacturing and MRO sector, which in turn would reduce repair and maintenance costs for airlines.
-
30%
NA
Airport Key expectations of Industry Allow private airport operators to issue tax free infrastructure bonds under section 80CCF of Income Tax Act
Current rate
Expectation
NA
NA
Up gradation of existing airport infrastructure should be made eligible for section 80IA benefits. Further, to include other essential airport infrastructure, such as ground handling, fuel farms, etc. for this benefit
NA
NA
To create an Essential Airport Services Fund (EASF) to provide viability gap funding (VGF) for no frill airports and air connectivity in tier III & tier IV locations
NA
NA
CARE Ratings view
Impact on Industry
This would help boost capital investments in airport infrastructure and lead to interest of private players to provide connectivity to tier III & tier IV locations.
Positive
This is expected to reduce cost of fuel (which forms ~60% of the cost) for airlines and improve profitability. Inclusion of jet fuel in GST ambit/ reduction in excise duty and VAT on jet fuel
30%
18%
Partial pass on of the same to the end users to result in growth of passenger traffic, which in turn would result in increase in both, aeronautical as well as non-aeronautical revenue of airports.
Positive
2
Union Budget Industry Expectations 2017-18
Automobile and Auto Ancillary Key expectations of Industry
Current rate
Expectation
CARE Ratings view
Impact on Industry
Rationalization of Tax rates with expected implementation of GST
NA
NA
Implementation of GST will help in reduction of multiple slabs ranging from 12-30%.
Positive
NA
Auto Component Manufacturers would require to incur expenses in R&D to meet the emission norms and such incentives would help them remain competitive globally.
Positive
NA
This would encourage investing in hybrid/ green technologies. Also, extension of the FAME scheme will help in promoting the electric car segment.
Positive
Restore weighted deduction towards expenditure in Research & Development (R&D) Tax benefits to be made available for the adoption of hybrid/green technologies. [extension of “Faster Adoption and Manufacturing of Hybrid & Electronic Vehicles” (FAME) scheme]
NA
NA
Banking & Financial Services Industry (BFSI) Key expectations of Industry
Capital infusion by Government of India (GoI) in Public Sector Banks (PSBs)
Measures to make PSBs stronger and more competitive
Current rate
NA
NA
Expectation
CARE Ratings view
Impact on Industry
NA
As part of “Indradhanush” scheme announced by GoI in August 2015, PSBs are likely to receive capital infusion of Rs.10,000 crore each in FY18 and FY19. However, given the deterioration in capital adequacy and asset quality parameters of PSBs, it is expected that government will increase level of capital infusion for PSBs. The industry is expecting capital infusion of more than Rs.25,000 crore in PSBs for the next fiscal year.
Positive
NA
Government may give some roadmap to make PSBs stronger and more competitive • Roll out of clear roadmap for consolidation of PSBs. • Diluting stake in PSBs to private players. • Higher responsibility to Bank Board Bureau for ensuring better corporate governance of PSBs .
Positive
3
Union Budget Industry Expectations 2017-18
Banking & Financial Services Industry (BFSI) Key expectations of Industry
Measures to transactions
boost
digital
Full tax exemption provisioning of NPAs
on
Tax incentives for home loans
Current rate
(contd)
Expectation
CARE Ratings view
Impact on Industry
NA
The budget is expected to promote cashless transactions by incentivizing digital payments. The move will help to reduce black money generation in the economy.
Neutral
NA
In the light of deterioration in profitability and asset quality parameters of the banks, industry is expecting government to provide full tax exemption on NPA provisioning. The move will improve bank’s profitability.
Positive
NA
This will give immediate boost to real estate sector which is witnessing severe slow down post demonetization. Consequently, it will help increase demand for home loans.
Positive
NA
NA
NA
Cement Key expectations of Industry Increase in the allocation towards infrastructure projects and focus on housing
Current rate
NA
Expectation
CARE Ratings view
Impact on Industry
NA
Increase in investment towards infrastructure sector including roads, smart cities, rural and affordable housing will provide impetus to cement demand.
Positive
Chlor-Alkali Key expectations of Industry Increase customs duties on imports of caustic soda and soda ash: Increase Basic customs duties (BCD) Exempt custom duty on import of power equipment for captive power plants for the power intensive industries
Current rate 7.5%
5%
Expectation
10%
Nil
CARE Ratings view
Impact on Industry
India is facing challenges due to cheap Stable to Positive for imports from low power cost countries Soda Ash manufacturers in South, SE Asia & Middle East. Caustic soda manufacturing is highly power intensive so availability of cost efficient and uninterrupted power supply is important. Hence, players prefer to install power plants for captive consumption.
It would reduce the project cost for captive power plants and provide cost competitiveness to domestic caustic soda manufacturers .
4
Union Budget Industry Expectations 2017-18
Coal Key expectations of Industry
Current rate
Reduction in customs duty on coking coal
2.5% (Coking Coal )
Expectation
CARE Ratings view
Impact on Industry
Nil
Major requirement of coking coal (used in Steel industry) is met through imports. Import duty leads to higher cost of production for domestic steel producers. Therefore, the custom duty on coking coal should be exempted.
Positive
Construction Key expectations of Industry
Current rate
Expectation
CARE Ratings view
Impact on Industry
Increase in allocation towards critical infrastructure schemes/ projects
NA
NA
Increased allocation will provide a much needed boost to the construction industry where growth has slowed down.
Positive
Nil
Companies need to pay MAT on book profit which to a great extent negates the tax benefit under section 80IA. This exemption will help in reducing the cash outflow in the initial years of the project.
Positive
NA
Projects require a number of clearances before execution commencement. Specified timelines for the clearances and a single window for the same will help in faster execution.
Positive
Exemption from MAT under 80IA for Infrastructure projects
18.5%
Simplification of the regulatory approvals process by providing single window clearance and timelines for such approvals
NA
Education Key expectations of Industry Grant of infrastructure status to higher education sector
Current rate NA
Expectation
CARE Ratings view
Impact on Industry
NA
Would enable the players in the higher education sector to garner greater flow of funds at relatively lower cost.
Positive
Engineering and Capital Goods (including power equipment) Key expectations of Industry
Current rate
Expectation
CARE Ratings view
Impact on Industry Positive
Positive
Reduction in excise duty on copper and aluminum
12.5%
10%
The reduction is likely to improve the cost competitiveness of domestic capital goods players.
Increase in customs duty on motor and transformer laminations
7.5%
10-15%
The increase is likely to protect the interest of domestic lamination players.
5
Union Budget Industry Expectations 2017-18
Engineering and Capital Goods (including power equipment) (contd) Key expectations of Industry
Rebate/refund of excise duty paid by manufacturers on raw materials consumed for duty exempted final goods
Implementation of GST
Current rate
NA
NA
Expectation
CARE Ratings view
Impact on Industry
NA
Excise duty paid on raw materials consumed for production of duty exempted final goods, is accumulated in the form of cenvat credit. This is to be set-off against future sales, which results in an increase in the working capital requirement of the manufacturers. Rebate/refund on such goods as against accumulation of cenvat credit would help improve the liquidity position of the manufacturers, though marginally.
Positive
NA
The implementation of Goods and Service tax is expected to remove economic distortions as the tax will be levied only at the final destination of consumption and not at various points.
Positive
Fertilizer Key expectations of Industry
Increase in customs duty on P&K fertilizer products except DAP
Allocation of supplementary grants for the year 2017-18
5% GST rate on fertilizer & raw material and no tax incidence of GST on subsidy
Expediting the efforts for Direct Benefit Transfer (DBT) for fertilizer subsidy to farmers
Current rate
5%
NA
NA
NA
Expectation
CARE Ratings view
Impact on Industry
10%
P&K fertilizer industry is heavily dependent on imported inputs. It is facing dis-advantage with the industry operating at sub optimal levels due to same level of import duty of 5% on raw materials, intermediates as on finished fertiliser products. This move is likely to encourage value addition in the country.
Positive
NA
There has been under provisioning for the fertilizer subsidy in the past and this move will not just partially clear the impending dues of 2015-16 & previous years but also reduce the additional interest cost on these pending dues.
Positive
NA
5% is the rate recommended for essential goods of mass consumption, and any increase beyond 5-6% will increase the cost of fertilisers which has to be borne by the government or farmers. If GST is levied on subsidy then it shall increase the tax incidence substantially resulting in either higher subsidy or retail prices or both.
Negative
NA
Subsidy continues to be routed through the industry so far, the synchronization of data would require some time period. However, it may be rolled out in a phased manner and progress on this front would be positive for all stakeholders of the industry.
Positive
6
Union Budget Industry Expectations 2017-18
FMCG and Consumer Durable Key expectations of Industry
Rural spending push
Current rate
NA
Expectation
CARE Ratings view
Impact on Industry
Increase in allocation for various rural schemes
FY16 witnessed positive sentiment on back of 7th pay commission. However, on account of demonetization demand was subdued in FMCG and consumer durable industry. We expect higher allocation by government for various rural schemes which will be beneficial for consumption driven sector.
Positive
Gems and Jewellery Key expectations of Industry
Reduction in customs duty on gold and silver
Revise compulsory PAN card requirement to transactions above Rs.5 lakh instead of current limit of Rs.2 lakh
Current rate
10%
NA
VAT of 1% on jewellery across the country GST for gems and jewellery and excise duty of sector should be 1.25% 1% on jewellers with manufacturing turnover of Rs 10 crore.
Expectation
CARE Ratings view
Impact on Industry
NA
Lower tax rate will enhance cost competitiveness of Indian gold jewellery manufacturers in the export market. It will also curb illegal activities like smuggling of precious metals and increase affordability of gold jewellery in the domestic market.
Positive
NA
Rural demand constitutes more than 50% of total consumer demand for gems and jewellery in India. Most of consumers in rural sector do not have a PAN card. Revision in limit back to higher level will result in operational convenience for jewellers in catering to rural demand.
Positive
GST rate of 1.25%
It will generate more tax revenue and the sector will be more tax compliant.
Positive
7
Union Budget Industry Expectations 2017-18
Healthcare Key expectations of Industry Withdrawal of service tax on health insurance
Exemption of Input service tax on support services
Current rate
15%
NA
Expectation
CARE Ratings view
Impact on Industry
Nil
This would make buying insuarance coverage more affordable and thereby increase the penetration level.
Positive
The clinical establishments are indirectly Range of levied service tax for use of various services. healthcare support The increase in range of support services services to be exempted of input service tax would result expanded in lower cost of medical treatment.
Positive
Hotel Key expectations of Industry
Levy of service tax on renting rooms
Levy of service tax on food and beverages sales by air conditioned restaurants having liquor license
* Abatement 40%
Current rate
15% *
15% #
Expectation
CARE Ratings view
Impact on Industry
Nil
The hotels, apart from it, levy hotel luxury tax on renting rooms. The reduction of levy of service tax is expected to result in lower operating cost. Thus, the service provider(s) could have traction in customer pricing.
Positive
Nil
The hotels and restaurants, apart from it, levy Value Added Tax on sale of food & beverages. The reduction of levy of service tax is expected to result in lower operating cost. Thus, the service provider(s) could have traction in customer pricing. Also, there is an expectation of centralized taxation policy in the industry. Currently, every state has its own tax policy impacting business operations.
Positive
# Abatement 60%
IT & ITES Key expectations of Industry
Exemption of MAT on SEZ
Increase in tax holiday for technology startups
CARE Ratings view
Impact on Industry
Current rate
Expectation
18.5%
Nil
This would help reduce the tax outflow.
Positive
NA
NA
This is expected to ease tax burden and encourage investments in startups.
Positive
8
Union Budget Industry Expectations 2017-18
Media & Entertainment Key expectations of Industry
Rationalization of indirect taxes such as entertainment taxes which range from 30%70%
Depreciation rates on Out of Home’s (OOH) hoarding structures to be at par with rates adopted by CBDT
Expectation
CARE Ratings view
Impact on Industry
30%-70%
-
Currently, the entertainment industry players such as broadcasters, DTH and cable service operators are reeling under the heavy burden of multiple taxation and levies such as license fee, service tax, etc. Moreover, high rates of entertainment tax and lack of uniformity in tax rates across different states, is adding on to their burden. A uniform, simplified and single-point taxation across product categories under the purview of GST will benefit the entertainment sector.
Positive
10%
15%
This would benefit the OOH segment.
Positive
Current rate
Mining & Mineral Key expectations of Industry Reduction in export duty of low grade iron ore
Current rate
10%
Expectation
CARE Ratings view
Impact on Industry
Nil
Domestic demand of Iron ore is subdued. Miners in Orissa are having stock pile up of iron ore. Reducing the export duty will help the merchant miners.
Positive
Non-Ferrous Metal Key expectations of Industry
Current rate
Increase in basic custom duty on Aluminium and Aluminium products
Aluminium-7.5% Aluminium products-10%
Increase in export duty on bauxite
Increase in basic custom duty on copper products
Exemption of basic custom duty on copper concentrate
15%
5%
2.5%
Expectation
CARE Ratings view
Impact on Industry
15%
Higher imports have led to decline in capacity utilization of domestic players. Increasing the duty would augur well for the domestic players.
Positive
20%
While Alumina refineries are importing bauxite, on the other hand merchant miners are exporting bauxite. Therefore, export of Bauxite should be discouraged.
Positive
7.5%
Imports of copper products are increasing affecting the domestic players. Raising the import duty would be positive for the industry.
Positive
Nil
Around 90% of the copper concentrate is imported. Hence it is recommended that the same should attract nil duty.
Positive
9
Union Budget Industry Expectations 2017-18
Oil and Gas Key expectations of Industry
Current rate
Expectation
CARE Ratings view
Impact on Industry
Exemption / reduction from service tax for survey and exploration of oil & gas as granted to other services required for infrastructure development
NA
NA
This move is expected to be positive for industry.
Positive
NA
As large costs are incurred by exploration companies during initial period of exploration and development, the definition of ‘Infrastructure Sector’ in Section 80-IA should be amended to include exploration and such undertakings be allowed deduction for 10 consecutive assessment years.
Positive
Nil
Being a clean fuel, increased usage of LNG use likely get impetus with reduction in custom duty in view of deficit in domestic natural gas production. In addition, duty on import of crude oil is already nil.
Positive
Nil
The levy of service tax increases the landed cost of natural gas. However, in order to augment the gas based industry, it is imperative to incentive through exemption of the service tax.
Positive
Inclusion of exploration and refining activities in the definition of Infrastructure facility as per the section 80-IA of Income Tax Act
Zero custom duty on import of LNG (Liquefied Natural Gas)
Service tax exemption on transportation of LNG and on its regasification
NA
5%
15%
Paper Key expectations of Industry
Current rate
Withdrawal of duty concessions Indo- ASEAN FTA : on imports of paper and paper w.e.f. January, 1, 2014, boards under the Free Trade import duty on most paper Agreements (FTA) and paper products has been progressively reduced Require paper and paper from 10% to nil products in negative list in all FTA with S.Korea: FTAs, bilateral and multilateral Progressive cuts in basic agreements to check rising customs duty; it will be nil imports in 2017
Exemption of SAD on import of pulp
4%
Expectation
10%
Nil
CARE Ratings view FTA with the Association of Southeast Asian Nations (ASEAN) and other countries has led to lower or nil import duty on paper supplied from these countries to India. Consequently, there has been an increase in volume of cheap imported paper from ASEAN and other countries leading to pricing pressures on domestic paper manufacturers.
This would lead to lower cost of raw material
Impact on Industry
Positive
Positive
10
Union Budget Industry Expectations 2017-18
Paper (contd) Key expectations of Industry
Current rate
Reduction in excise duty on few grades of paper/paper board where it is 12.5% to bring a uniform rate of 6% on all kinds of paper/paper board
Expectation
CARE Ratings view
Impact on Industry
6%
Uniform lower rates of excise duty on domestic manufacture would lead to higher cost competitiveness for the industry especially in light of the cheaper imports from neighbouring countries.
Positive
12.5%
Petrochemical Key expectations of Industry Increase in import duty on polymers like Polyethylene, Polypropylene and Polystyrene
Reduction in import duty on Naptha
Current rate
Expectation
CARE Ratings view
Impact on Industry
-
The duty increase would enable the utilization of increased domestic capacities of the polymers.
Positive
2.5%
Naptha is one of the key petrochemical feedstocks. Import duty on most of the other feed-stocks was reduced to 2.5%. In addition, for fertilizer production, it is exempt from duty. Therefore, it may be reduced from the existing levels to bring at equivalent levels with other feed-stocks.
Positive
7.5%
5%
Pharmaceutical Key expectations of Industry
Current rate
Proposed to be revised from current 200% to Extension of time line for 150% from April 1, 2017 weighted deductions of and 100% from April 1, R&D expenditure 2020
Extension of the Safe Harbour Rules (SHRs) especially for pharmaceutical companies having multi-country operations through subsidiaries/associates
The rules currently cover certain sectors such as IT & ITeS, contract research in generic pharmaceuticals, core and non-core automobile components
Expectation
CARE Ratings view
Impact on Industry
Continue with 200% for financial year 2017-18 and 150% from April 1, 2018 and 100% from April 1, 2021.
This will lead to lowering of income tax outgo for another one year especially when the industry is facing pricing pressure both in export markets and domestic market.
Positive
The scope of SHRs be extended to other sectors This will bring down the including pharmaceutical litigation cost. sector to make SHR broad based.
Neutral
11
Union Budget Industry Expectations 2017-18
Port Key expectations of Industry
Current rate
Expectation
CARE Ratings view
Impact on Industry
Budget allocation for the Sagarmala project (port modernisation project)
NA
NA
Fixed corpus for the Sagarmala project will entail speedy execution of the Sagarmala Project.
Positive
NA
This is likely to benefit the sector in terms of increased private sector investment in the development/upgradation of the existing port infrastructure.
Positive
NA
This is likely to benefit the major ports of the country in not just increasing their capacity but also modernize the ports infrastructure and become more competitive vis-à-vis the private players. This is also likely to benefit the players in fund raising/monetization of non-core assets etc.
Positive
Amendment in the Model Concessional Agreement (MCA)
Corporatization of Ports
NA
NA
Power (including Renewable Power) Key expectations of Industry Extension of eligibility period under Section 80IA (for concessional income tax rate) for power projects becoming operational beyond March 31, 2017 Continued thrust on renewable energy (solar & wind) with more emphasis on rooftop segment growth, continuation of accelerated depreciation and GBI scheme for wind power projects
Higher allocation for augmenting T&D infra
Current rate
21.34% including surcharges
GBI of Rs.0.5/unit (cap of Rs.1 crore /MW and maximum Rs.100 crore per project) available for projects commissioned till March 31, 2017
NA
Expectation
CARE Ratings view
Impact on Industry
Same
Beneficial for companies whose projects would Neutral come up in the 13th five year plan.
NA
In line with a stated uniform tax rate regime progression, the government may not extend Accelerated Depreciation benefits. Neutral Also, given competitive bidding and falling costs and focus on improving efficiencies, GBI benefits may be discontinued.
NA
Will improve transmission network availability and Positive provide impetus to curtail AT&C losses.
12
Union Budget Industry Expectations 2017-18
Real Estate Key expectations of Industry
Expectation
CARE Ratings view
Impact on Industry
NA
This will protect the buyers, if there is a delay in completion beyond 3 years.
Positive
Rs. 3 lakh
Income tax incentives for first time home buyers will encourage buyers to move from rented place to owned homes. This will increase sales for the developers. Coupled with decline in home loan rates (across financial institution), increase in tax deduction limit for loans would make housing affordable.
Positive
-
This would lead to listing of REITs, thereby improving the liquidity position of the developers.
Positive
Expectation
CARE Ratings view
Impact on Industry
Increase in allocation for various rural schemes and decrease in individual tax
FY16 witnessed positive sentiment on back of 7th pay commission. However, on account of demonetization, demand was subdued in retail industry. The higher allocation by government for various rural schemes will be beneficial for consumption driven sectors. Also, reduction in individual tax is expected to put more money in the hands of individuals.
Positive
Current rate
Rs. 2 Lakh with a cap of Interest deduction to the Rs.30,000 in case of under extent of Rs. 2 lakh in all construction residential cases, without the cap of projects completed after Rs.30,000 3 years
Provide income tax incentives for first time Rs. 2 lakh (tax deduction home buyers and increase limit) tax deduction limit for housing loans
Simplified tax norms for REITS – reduced level of taxation of REIT income and waiver of capital gains for the developer at the time of transfer of property into REIT
-
Retail Key expectations of Industry
Individual spending push
Current rate
NA
13
Union Budget Industry Expectations 2017-18
Road and Highways Key expectations of Industry
Current rate
Expectation
CARE Ratings view
Impact on Industry
Budget allocation for the road sector
Rs. 55,000 crore
Higher budgetary allocation
Increased budgetary allocation shall enhance the pace of award and construction of projects.
Positive
-
Losses/Profit of SPVs should be allowed to be clubbed with the assessable income of holding company for calculation of tax payment.
Positive
75%
Increase in the credit enhancement limit is expected to increase the investor appetite for IDF.
Positive
Abolition or reduction in the MAT rates
Abolishment/reduction in MAT for road developers shall make the tax incentive under Section 80-IA of the Act more meaningful. Also, there should be tax exemption (including MAT) to developers who want to off load their infra assets into an Infrastructure Investment Trusts (INViTs).
Positive
Abolition of DDT/CDT
Abolishment of DDT on dividend payable by infrastructure Special Purpose Vehicles (SPV) and the holding company is expected to reduce the tax burden of the companies.
Positive
Abolition of Section 14A
Abolishment of Section 14A for holding companies for investments in SPV is expected to reduce the tax burden of the companies.
Positive
Income Tax structure for holding companies and subsidiaries Credit enhancement limit for Infrastructure Debt Fund (IDF)
Minimum Alternate Tax (MAT)
Dividend Distribution Tax (DDT) /Corporate Dividend Tax (CDT)
Section 14A of Income Tax Act
-
50%
20%
16.99%
-
SEZ Key expectations of Industry
Removal of MAT on SEZ units and developers
Current rate
18.5%
Expectation
Nil
CARE Ratings view SEZs were brought under the purview of MAT with effect from AY 2012-13. Thereafter, many SEZ proposals were either withdrawn or sought cancellation. Removal of MAT would be highly positive for the SEZ units as this would attract huge investments in the sector and also help to grow foreign trade.
Impact on Industry
Positive
14
Union Budget Industry Expectations 2017-18
SEZ (contd) Key expectations of Industry
Reduction of Dividend Distribution Tax (DDT) on SEZ units
Current rate
20%
Expectation
CARE Ratings view 2011, SEZs were burdened with DDT @16.9% (inclusive of surcharge and cess). The finance (No. 2) Bill 2014 changed the method for calculation of DDT taking the effective tax rate to be about 20% which is applicable from October 01, 2014. Reduction in DDT would help encourage more investment in SEZ.
10%
Impact on Industry
Positive
Shipping Key expectations of Industry
Current rate
Expectation
CARE Ratings view
Impact on Industry
Budget allocation for the national waterways (fast track route for crucial projects such as the inland water ways)
Rs. 800 crore
Higher budgetary allocation
Increased budget allocation shall enhance the pace of award and execution of the project.
Positive
NA
Coastal shipping can contribute towards expansion of trade. Minimization of transport cost through coastal shipping will help companies in garnering increased volumes.
Positive
Allocate funds to develop coastal shipping routes
NA
Steel Key expectations of Industry Increase in import duty on Stainless steel
Reduction in duties on stainless steel scrap
Reduction of basic customs duty on metallurgical coke
Current rate
7.5%
2.5%
5%
Expectation
CARE Ratings view
Impact on Industry
15%
The increase in import duty for the stainless steel products shall help in reducing cheap imports from countries such as China.
Positive
Nil
Reduction in duties on metal scarp shall lead to cheaper supply of scrap in the domestic market thereby increasing the competitiveness of the steel industry.
Positive
Nil
Met coke is the key raw material in steel making. Reduction in duty would make the domestic players more competitive.
Positive
15
Union Budget Industry Expectations 2017-18
Tea and Coffee Key expectations of Industry
Current rate
Interest subsidy of 5% on borrowing under activities related to tea plantations (replantation/ rejuvenation)
Expectation
CARE Ratings view
Impact on Industry
NA
Average age of tea bushes in India is over 40 years which hampers productivity of the sector. Interest subsidy will provide financial support to tea growing companies for undertaking replanting, replacement planting and rejuvenation of old aged tea bushes and increase productivity.
Positive
NA
Telecom Key expectations of Current rate Industry
Incentivizing digital payments
Assent for the utilization of balance of CENVAT credit of cess to be set-off against output service tax liability
NA
NA
Expectation
Rebate/ discount
NA
CARE Ratings view
Impact on Industry
After the demonetization and Government’s push towards cashless economy, further impetus is needed to cover all the sectors of the country, especially the small traders and shopkeepers who are accepting digital transactions and plastic money. This can be done through enticing incentives on digital payments. On the other hand, subsidies and rebates should be given to customers who are supporting this mission to make it a win-win step towards cashless economy. Telecom sector will be the backbone of all these initiatives and thus would get benefited because of rise in data consumption.
Positive
Government has allowed service providers to utilize CENVAT credit of cess received on or after June 01, 2015 against liability of output service tax payment. However, the notification provided by the government does not mention about the significant balance of CENVAT credit of cess lying unutilized in the books of telecom service providers as on May 31, 2015. Assent in this regard is expected to curb the cash outlay pertinent to the payment of taxation liability. Further, Availability of these credits on passive infrastructure, which are essential link in the telecom service delivery, will also boost the telecom sector.
Positive
16
Union Budget Industry Expectations 2017-18
Telecom (contd) Key expectations of Current rate Industry
Provisions related to investment linked tax incentives
Expectation
CARE Ratings view
Impact on Industry
NA
Investment linked tax incentives (tax holidays, exemption from minimum alternate tax, differential excise duty structure etc.) are expected to help in attracting investment from foreign players in telecom and its allied sectors. The is expected to provide the impetus to the industry players (telecom service operators, tower infrastructure companies, equipment manufacturers etc.) leading to improvement in the quality of service. Further, this would also help in implementation of Digital India Mission which is banking on the growth of telecom sector and its allied industries.
Positive
NA
Textile Key expectations of Industry
Current rate
Expectation
CARE Ratings view
Impact on Industry
Reduction in excise duty on Man-Made Fibre (MMF)
12%
NA
Cotton (MMF substitute) attracts 0% duty. Lowering MMF duty would bring in parity and aid growth in the sector.
Positive
Continuation of Amended Technology Upgradation Fund Scheme (ATUFS)
NA
NA
Continuation of ATUFS will encourage further investments in the textile sector.
Positive
Warehousing / Logistics Key expectations of Industry
Current rate
Expectation
CARE Ratings view
Impact on Industry
Roll out of the much awaited GST
NA
NA
GST is expected to cut logistics cost and lead to enormous savings in terms of time and money for delivery of goods and services.
Positive
Focus on infrastructure development – rail freight corridors, roads and fuel efficient transport equipment
NA
NA
Pace of development of good roads infrastructure has been satisfactory however, it needs to be enhanced.
Positive
An appropriate tax system for rental costs which is currently subject to Service Tax and TDS at higher rates
NA
NA
This will streamline costs and bring about efficiencies in warehousing.
Positive
17
Disclaimer: This report is prepared by Credit Analysis & Research Limited [CARE Ratings]. CARE Ratings has taken utmost care to ensure accuracy and objectivity while developing this report based on information available in public domain. However, neither the accuracy nor completeness of information contained in this report is guaranteed. CARE Ratings is not responsible for any errors or omissions in analysis/inferences/views or for results obtained from the use of information contained in this report and especially states that CARE Ratings has no financial liability whatsoever to the user of this report
CONTACT
Head Office Mumbai CREDIT ANALYSIS & RESEARCH LIMITED 4th Floor, Godrej Coliseum, Somaiya Hospital Road, Off Eastern Express Highway, Sion (East), Mumbai - 400 022. Tel: +91-22-6754 3456 | Fax: +91-22-6754 3457 | E-mail:
[email protected] | Website: www.careratings.com
REGIONAL OFFICE AHMEDABAD 32, Titanium, Prahaladnagar Corporate Road, Satellite, Ahmedabad - 380 015 Tel: +91-79-4026 5656
HYDERABAD 401, Ashoka Scintilla, 3-6-502, Himayat Nagar, Hyderabad - 500 029. Tel: +91-40-4010 2030
BENGALURU Unit No. 1101-1102, 11th Floor, Prestige Meridian II, No. 30, M.G. Road, Bengaluru - 560 001. Tel: +91-80-46625566/5555
JAIPUR 304, PashupatiAkshatHeights, Plot No. D-91, Madho Singh Road, Near Collectorate Circle, Bani Park, Jaipur - 302 016. Tel: +91-141-402 0213 / 14
CHANDIGARH SCF No. 54-55, First Floor, Phase 11, Sector 65, Mohali 160062 Tel: +91-172-5171100/02
KOLKATA 3rd Floor, Prasad Chambers, (Shagun Mall Bldg.) 10A, Shakespeare Sarani, Kolkata - 700 071. Tel: +91-33- 40181600/22831803
CHENNAI Unit No. O-509/C, Spencer Plaza, 5th Floor, No. 769, Anna Salai, Chennai - 600 002. Tel: +91-44-2849 7812 / 0811
NEW DELHI 13th Floor, E-1 Block, Videocon Tower, Jhandewalan Extension, New Delhi - 110 055. Tel: +91-11-4533 3200
COIMBATORE T-3, 3rd Floor, Manchester Square Puliakulam Road, Coimbatore - 641 037. Tel: +91-422-4332399 / 4502399
www.careratings.com
PUNE 9th Floor, Pride Kumar Senate, Plot No. 970, Bhamburda, Senapati Bapat Road, Shivaji Nagar, Pune - 411 015. Tel: +91-20- 4000 9000
|
Follow us on
