Budget 2018 - Tax Relief For Different Sectors in India

Agriculture sector

Two successive droughts, falling agri-prices...farmers have not had it easy in the past few years. According to Ashok Gulati, economist and professor at the Indian Council for Research on International Economic Relations (ICRIER), in the first four years of the Modi government, agri-GDP is set to register an average annual growth rate of around 2%, almost half of what was achieved during the 10 years of UPA rule. Moreover, with last year's Gujarat election verdict revealing waning support for the BJP in the rural areas, speculation is rife that Budget 2018 will be a landmark one in terms of agrarian policies and rural initiatives. It's not pointless appeasement either-the sector, after all, provides employment to 48.9% of the total workforce in India and contributes around 17-18% to the country's GDP.

Apart from more budgetary outlays, the sector is hoping that the Budget not only packs strong agricultural regulations but also promotes rural employment schemes. According to M.K. Dhanuka, Managing Director, Dhanuka Agritech, the fact that farmers were not able to sell their produce at the Minimum Support Price (MSP) assured by the government contributed significantly to their distress last year. "Ultimately the produce were sold at much lower rates in local mandis and some remained even unsold in the cold storage. This year we expect the government to make provisions to purchase the total output from farmers on fixed MSP," he said, adding that special emphasis should also be paid to issues like proper storage facilities, available at low cost, and micro-irrigation technique for agriculture. This will, in turn, help in enhancing the livelihood of farmers.

Education sector

If you look at government expenditure on education as a percentage of the GDP, and compare it to our BRICS peers, one thing becomes abundantly clear-India needs to pull up her socks. Where Brazil spent 5.99% cent of its GDP in education (2013-14) and South Africa spent over 6%, India trailed far behind at just 4.13%. Stakeholders now want the education expenditure to be pushed up to at least 6% of GDP.

Says Dr P. Venkat Rangan, Vice Chancellor, Amrita Vishwa Vidyapeetham, "Education sector definitely needs a steep increase in the budget allocation in order to comprehend the long-term vision to impart skills to 50 crore youth by 2022 and increase the employability and acceptability of Indian youth on global platforms."

Infrastructure sector

This sector, in a nutshell, expects continued thrust from the government towards revival of investment cycle through an increase in budgetary allocations, with emphasis on roads, railways and urban infrastructure.

Last year's Budget had proposed a specific mechanism to streamline institutional arrangements for resolution of disputes in public utility contracts, construction contracts and PPPs. This time round, the sector hopes that the Budget will provide more clarity on its implementation. This will be a major overhaul given that many projects are mired in legal and financial disputes.

"To promote private sector investment in infrastructure, incentives like extension of tax holiday for infrastructure projects, relief on applicability of MAT during tax holiday, coverage of projects involving upgrading existing infrastructure under 80IA or 35-AD, and clarification on pending taxation issues with respect to InvITs can be provided," says Shubham Jain, Vice President and Sector Head - Corporate ratings, ICRA Limited. His wishlist also includes a higher allocation towards National Investment and Infrastructure Fund (NIIF) along with other steps taken to improve long term funding availability for the sector. "Also, the deduction under section 80CCF for infrastructure bonds which was discontinued can be reintroduced for select infrastructure companies/finance companies," he adds.

Telecom sector

The bleeding sector hopes for some much-needed relief in the Budget tomorrow.  The Cellular Operators Association of India's (COAI) wishlist includes reduction in GST applicable on telecom services and a reduction in the tax withholding rate to 1% over the discount that telecom companies provide to distributors for the sale of prepaid SIM cards.

The association's  Director General, Rajan S Mathews, further hopes for customs duty exemption on equipment required for 4G network and telecom devices. "The next stage of evolution for the telecom industry is dependent on high speed Broadband powered by 4G technology. It is further needed for the success of programmes like 'Digital India', Smart Cities' etc," he explains. So far, penetration of telecom network was aided by customs duty exemptions given to 2G and 4G network equipment, which helped in reducing cost for the consumers but the government has since withdrawn customs duty exemptions on telecom equipment in order to encourage local telecom equipment manufacturing. "However, the scale and quality of equipment needed by the sector is not yet available in the country and the telecom companies have to pay the higher price to import the equipment...till such time, as quality products at a competitive price are available in the country, at the scale that they are needed, the government needs to rethink its stand regarding customs duty on equipment, to ensure timely roll-out of networks," he adds.

Retail sector

The Indian organised retail sector, as a whole, is poised for exponential growth. A recent report by Edelweiss Securities says that India's organised retail sector is all set to grow in the region of 13% CAGR to become a $166 billion industry in FY 2025. The major relaxations in FDI policy for single brand retail trading announce earlier this month can help things along.

According to a pre-budget note by Deloitte, "The Budget should spell out measures for use of technology and to encourage digital transactions for e-commerce which can also help in dealing with steep rentals." It adds that the government needs to increase spending and create quality infrastructure to help expansion of modern and organized retail sector in rural areas and Tier II/III cities, and reduction of GST rates for consumer goods and services and clarifications on transitional credit and anti-profiteering can achieve price reduction.

Real Estate

With demonetisation, Real Estate (Regulation and Development) Act, and Goods and Services Tax delivering one shock after the other, this sector desperately hopes that it is at the receiving end of the benevolence implied in a populist budget. To begin with, there is a growing clamour to be accorded industry status. "This would enable developers to raise funds at lower rates and cut down their cost of capital which would eventually have a bearing on overall project costs. The move would be an ideal fillip for the stress-stricken sector amid the reforms-driven new order," says Shishir Baijal, Chairman and Managing Director, Knight Frank India.

Stakeholders are also asking for single window clearance since the approval process for residential real estate projects has been an impediment for a long time. If implemented, single-window clearance can significantly reduce the overall projects cycle time and developers will be able to focus on their core business of project execution. Post-RERA, it has become all the more important to facilitate smooth clearances and approvals so that there are no execution delays due to procedural hindrances.

Last but not the least, the Finance Minister is expected to announce launch of first REIT in 2018-19. Despite the regulatory approval being in place for quite some time, REITs, a potent instrument of change in the real estate industry, have been held back. "REITs have the potential to enhance the supply of commercial real estate-an enabler for the employment ecosystem. For unit holders, the long term capital gains holding period for REIT units should be brought down from 3 years to 1 year (at par with equity investments). This shall make REITs more attractive for the investors," adds Baijal.