Union Budget 2020-21: Industry expectations

The Union Budget 2020-21 is important on the backdrop of the current economic slowdown. It is expected to play a crucial role in bringing the growth rate back on track. The manufacturing sector especially has high hopes from the Minister of Finance, Nirmala Sitharaman to give it a boost with industry-friendly policies. Some of the expectations that the industry has are:• Continued focus on infrastructure and Make in India• Reforms to boost the auto sector• Increased liquidity in the hands of consumers• Job creations
Read more on the industry leaders’ point of views: 
Should enable collaboration and transformation at scale: Alain Spohr, MD, Alsom India & South Asia
2019 was a significant year in many ways for railways in India. The Government has been focusing on improving finance, safety and technology in the railways mainline as well as urban mobility sectors, resulting in achieving zero casualties last year. The correction in GST has been highly appreciated by global organisations including Alstom as it will promote ‘Make in India’ , localisation and fair play. Additionally, the decision to operate private trains was another step that Indian Railways took to improve multiple aspects like finance, boost participation of private companies and create more avenues for technological collaboration.
The new wave of reforms for the new decade should strengthen and streamline policies for achieving collaboration and transformation at scale. The Finance Minister can address broader aspects in the upcoming budget such as ease of doing business where there are several challenges for manufacturing as well as dealing with project execution.We would also like to bring to the Government’s notice the need for standardisation of rolling stock for metro’s that can enable to speed up manufacturing process and enhance resource optimization leading to more cost-effective solutions and faster project incorporation.We observe that International funding sometimes comes with conditions that are not in line with localisation. ‘Make In India’ is one of the flagship emblematic programs of the country, based on which companies like Alstom have invested and built significant capacity and capability in India. We would enjoy seeing the government push even stronger for those ‘Make In India’ for local content initiatives.

More infrastructure for setting up of Chemical industries in southern and eastern parts of India is needed:  Vijay Sankar, President, Indian Chemical Council

The chemical sector is one of the major contributors towards the economy of India and plays a crucial role in the development of other industries and also the nation. With the current size of approximately USD 163 billion, the Indian chemical industry accounts for ~3% of the global chemical industry and is expected to reach USD 300 billion by 2025.For union budget 2020, we urge the Finance Ministry to allocate enough budget for building better infrastructure along with an adequate amount of power and water supply which can support the industrial growth of chemicals. More infrastructure for setting up of Chemical industries in southern and eastern parts of India is needed to cut down the transportation cost of chemicals that are majorly set up in the western coast.Ample and inexpensive feedstock for the chemical industry has been a problem for a while now, the duty on a lot of raw materials is high and it needs to be brought down to help the chemical manufacturing sector. Also, the government needs to address the issue of inverted duty structure. It has been observed that in some cases that the import duty applicable on the finished product is lower than the import duty on the raw material or intermediate product which discourages domestic value addition. Due to inverted duty structure, the domestic industry gets adversely affected as manufacturers have to pay a higher price for raw material, while the finished product lands at lower duty and cost. The issue has become more definite as India is now a part of Free Trade Agreements with countries like Japan, ASEAN and South Korea etc. Thus in order to overcome this issue, there is a need for a revised duty structure Raw material duty – 0 % to 5; Intermediates – 7.5 % to 12 %; Finished Goods – 15 to 20%. 

Necessary to boost domestic manufacturing by reducing high input costs: K K Pahuja, President, ISSDA

At a time when the government is assessing its trade relations with other countries and trade blocks, it is also necessary to boost domestic manufacturing by reducing high input costs. The Indian stainless steel industry has reached an inflection point where support from the government, for availability of raw materials at zero duty, will help preserve its competitiveness. We urge the government to not see the duty on raw materials as a revenue source; rather, consider the larger vision of higher manufacturing growth resulting in job creation, a push for the ‘Make in India’ drive, and contribution towards the US$ 5 trillion Indian economy target by 2024.”

Expecting to increase the demand by making more liquidity in the hands of consumers: P Srinivasavaradhan, President, TVS Srichakra
Corporate Tax Rate cut along with reduction in GST on electric vehicles were some of the few welcome steps initiated by the government last year. For the coming year we urge the government to address the supply demand gap in natural rubber a critical raw material of the tyre industry. We request the government to reconsider the GST component in tyre pricing, also relook at relaxation in GST for two-wheelers. Steps to curb rising raw material and fuel prices will aid both vehicle manufacturers and auto component makers in the long-term. Some of the other focus areas are to strengthen the required road & transport infrastructure. Reviving the rural economy can help tackle the current slowdown.While the government is taking steps to improve supply of goods & services, we expect the government to take steps to increase the demand by making more liquidity portion available in the hands of consumers.

Expecting the Union Budget to usher in a balanced combination of reforms and regulations:  Kamal Nandi, President, CEAMA and Business Head & Executive Vice President, Godrej Appliances
India’s policy & economic environment is undergoing major changes. The Consumer Electronics and Appliance industry is also facing multi-pronged challenges. The penetration level for durables has traditionally been low in India. Currently, the penetration levels stand at 33% for Refrigerators, 12% for Washing machines, followed by Air Conditioners at 5% and Television (65% in India, while 95% in China). While the low penetration is a growth opportunity, but the slow pace of penetration rise has a direct impact on demand levels for the category. The industry has largely been stagnant this year and with increased customs duties, global economic changes and fluctuations in currency and commodity, the demand levels for next year are difficult to predict. There are also regulatory changes. We welcome the GST, energy guidelines on ACs, QCO’s, plastic ban and other environmental regulations as these will eventually benefit the country. However, regulations also have implications on the investments and operations and sometimes on prices. Initially, large appliances and electronics were in the highest GST tax slab. Post GST revision, the tax rates were reduced for most, barring Air Conditioners and large screen Televisions, which continues to be in the highest tax slab of 28%. Lowering the tax slab to 18% would help offset the price pressure and spur demand for both Air Conditioner (Split and Window) and Television (above 32 inches), as both have a huge opportunity for volume growth. The reduction in tax slab would help in improving affordability among customers and attracting investments in component manufacturing. This will also help in penetrating the market, especially for AC category. Since AC is no more a luxury but an item of basic necessity.Lowering the GST tax slabs for eco-friendly and energy-efficient products like Air Conditioners (4*, 5* Window AC and Split AC inverter models) and Refrigerators (Direct Cool and Frost Free) to 12%, will drive demand and increase the adoption of sustainable appliances by Indian consumers. The upcoming budget should additionally offer incentives for manufacturers to produce these energy-efficient products which will be in line with the governments focus on sustainability. Additionally, Air Cooler; Ceiling Fan; Electric Iron; Household Filter; (Water Purifier) Pedestal Fan, are mass consumption items. With the thrust on affordable housing, these should be made more affordable. This is because there is a very high level of domestic manufacturing available in these categories.Indian component suppliers are facing difficulty in competing with cheap Chinese imports. The government should consider initiating some measures to reduce the input cost to make these components by waiving duty on the inputs imported to make the components. On the laundry list of items which a household require as a necessity, Television positions itself on the top. The basic custom duty on open cells (a key component to the TV) needs to be continued at 0% post September 2020 as well because the open cells are not being manufactured in the country and therefore levying duty on a commodity which is not manufactured in India will only put an additional stress for the TV manufactures. Besides this, the government should also focus on the promotion of R&D and incentivization of local manufacturing. The government should reinstate the reimbursement of R&D expenses to 200%.Additionally, any expenditure incurred for taking professional help in aesthetic designing, prototyping, electronic controls designing etc. from any external design houses/enterprises should also be allowed as R&D expenditures. Also, this benefit must not be counted as a subsidy in the new corporate tax calculation, i.e. companies seeking to pay reduced corporate tax of 22% must not be denied the benefit of claiming the tax benefit behind R&D. Also, to promote domestic manufacturing and Make in India the govt. must a launch scheme where preference should be given to locally manufactured goods over the imported ones.On the front of Direct Taxes, rationalising personal income tax slabs can help in increasing the number of taxpayers and would also assist in increasing disposable income in the hands of consumers. This will equally benefit the domestic savings rate and consumption. We are highly optimistic about the upcoming budget and expect it to usher in a balanced combination of reforms and regulations, which will, in turn, boost the ACE industry, contributing positively to India’s growth story.

Retail sector hopes for introduction of National Trade Policy: Ravi Saxena, MD, Wonderchef

The retail sector is expecting that the government will expedite the process of National Trade Policy which will give a substantial push to the sector.  
Apart from this, it would really be a welcome step if the government eases out the FDI norms. The government should allow the Indian-borne retail enterprises to raise up to 49 percent foreign capital under the automatic route without restriction irrespective of being a single brand or multi-brand. Also, the government should consider allowing the accumulated input tax accrued on account of input services, capital goods, where input tax is higher than output GST.

Recommend bringing in petroleum and petroleum products within the purview of GST : Vilas S Tawde, Managing Director and CEO, Essar Oil & Gas Exploration and Production
Removal of GST on Royalty payments to government – Royalty on minerals or mineral oil is a statutory levy under various Central or State legislations at rates specified on quantity of mineral or mineral oils quarried, mined, recovered, excavated or collected. The royalty payable is value of product extracted from the natural resource which belongs to the Government itself and Operator sells it only as a trustee or an agent of the government. In absence of any specific provision under Service Tax Act, 1994 and under Goods and Service Tax Act, 2017, there is an ambiguity as to “whether royalty payments are consideration for services provided by the Government?” This ambiguity leads to dispute between department and assesse.
Further, it may be noted that of the four factors payments viz. rent for land, wages for labour, interest for capital and dividend for entrepreneur, only royalty is being subjected to Service tax/GST while all others are outside the purview of service tax/GST. In case of royalty, as per Oilfield Development and Regulation Act 1948 read with PNG Rules 1959 as amended from time to time, royalty or dead rent, whichever si higher is payable. Thus royalty is akin to rent and should also be under Service Tax/GST. Therefore, our recommendation is to come up with specific provision or clarification on non-applicability of Service Tax or GST on Royalty payments to Government as royalties are in the nature of compulsory payments and not in the nature of any consideration for service performed or to be performed by the Government. Royalty payments should not be required on payment of Royalty to avoid payment of dual tax.
Implementation of GST under E&P business – Sale of Crude Oil and Natural Gas is outside GST regime but procurement of Goods and services for its production are subject to GST regime. Thus, the Tax Credit of GST paid on inputs are not allowed against the output VAT making the industry burdened with huge indirect tax. This has resulted in a significant increase in the exploration and development costs. We would recommend bringing in petroleum and petroleum products within the purview of GST at the earliest to ensure smooth flow of credit and avoid any stranded taxes for the competitiveness of this critical sector. At the least Gas should be brought under GST.
Removal of Service tax on E&P JVs – The Operator in a joint venture (JV) needs to raise invoice on other partner in the JV and accordingly charge Service Tax on the Manpower Services on the JV partner’s share of Participating Interest. However, the sale of petroleum is not covered under GST. This creates a credit loss for the partners of the JV and an indirect tax burden on the JV partner.Thus, we recommend to exile the service tax on such incidences until the E&P business is included in the purview of GST so that there is proper cascading of tax credits.”

Needs for continued focus on infrastructure, mining, and road development -important pillars for the growth of the economy: Prashanth Achar, CEO, GP PetroleumsWe are currently facing challenging times with economies all over the world witnessing a slowdown. Uncertainty around commodity prices especially that of crude oil, has implications for the fiscal situation of emerging economies. While the government is working on various measures to revive the economy, they also need to work on reducing pollution and greenhouse emission. Although regulations such as implementation of BS VI are in the right direction, favourable government schemes will be welcomed for the adoption of lubricants that help in reducing carbon footprints which can then witness high demand owing to their low emission rates and stable viscosity.The government needs to continue its focus on infrastructure, mining, and road development which are the important pillars for the growth of the economy. This in turn will automatically lead to an increase in demand for lubricants. We hope that the government takes bold measures in the upcoming Union Budget 2020 as the current slowdown in the economy requires regaining its growth momentum.
Hope to see measures aimed at increasing the liquidity in the hands of consumers: Ravi Chawla, Managing Director, Gulf Oil LubricantWe are looking forward to a steady growth-oriented budget from our honourable finance minister to give a positive impetus to the economy. We majorly expect some reforms to boost the Auto sector as it has seen a significant slowdown. We hope to see measures aimed at increasing the liquidity in the hands of consumers (including possible personal income tax benefits) which can stimulate spending in this sector.  We also hope to see a robust implementation of the auto scrappage policy. We hope the govt. continues its thrust on infrastructure to strengthen and propel us forward on the path to higher growth once more.
Need continued focus on ‘Make in India’ and further incentives for investment in manufacturing units:  J.K. Gupta, Chief Financial Officer, Tata Technologies

As a leader in the Engineering Services sector, our company is at the intersection of two key industries – the manufacturing industry on the customer side and the IT services industry from a supplier perspective. Certain recent initiatives by the government such as the Corporate Tax cuts and incentivising the manufacturing of Electric vehicles are great boosters for manufacturing customers. These moves encourage them to invest more in newer products and allow Tata Technologies to leverage its Product Engineering expertise especially for Electric VehiclesHowever, we believe the Government should continue to focus on ‘Make in India’ in the forthcoming Budget and provide further incentives for investment in manufacturing units. Further, GST rationalisation for Automotive products can provide great support to OEMs who have been fighting the continued automobile slowdown, while supporting the transition from BS4 to BS6.”

To boost economy, increase spending on Swachh Bharat Scheme: Akshay Singhal, Founder, Log 9 materials
I think for startups there are already a lot of initiatives in action, improved mechanisms for execution of those schemes is extremely important. However, I am more concerned about the economy as a whole. To boost economy my suggestion would be to increase spending under Swachh Bharat Scheme may be via MNREGA to get Indian cities clean by employing the bottom of the pyramid.

Policies with long term sustainable growth: Yash Rane, Founder, Chizel

With Indian economy on slowdown, we need policy with long term sustainable growth and not just for a few years. We are looking at 9% GDP growth and that is not easy. GST has hampered the cash flow of SMBs thereby affecting their buying power. Government should enable monthly filings and quarterly GST payments. Also, it is the time to accept that manufacturing is and has always been the backbone of India. With China-US relationship getting better, India needs stronger partnerships to bolster exports.

Additional cyber security is need of the hour: Rakesh Kharwal, Managing Director, India/South Asia & ASEAN, Cyberbit

The Digital India initiative has done a remarkable job and as Digital India 2.0 gets contemplated, the focus of the government should be to build superior trust in technology. We hope that this Union Budget will focus more on cybersecurity measures to protect the integrity of critical infrastructure for financial systems, public health, science, safety institutions, defense, aerospace, and intelligence agencies. We are anticipating additional budgetary allocation for the national cybersecurity programmers and at least 10% of the technology budget for cybersecurity initiatives.
The government must also add stimulus to the market segment and the economy at large. Perhaps, a good way of doing it can be to include simulation-based cybersecurity training solutions like Cyber Range in the Skill India campaign. It will help in addressing the gap of 1 million professionals in the Indian cybersecurity industry while also aptly positioning the segment for the ripe global market. Apart from that, we expect that the budget will lay down a few more reforms to boost the service provider ecosystem in India.

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