India Inc hopes for strong IT infra, reduction in GST, and increase in tax benefits for growth from union budget 2021
After the wrath of pandemic during last year, the Union Budget 2021 may be focused on sectors such as manufacturing, healthcare, agriculture and infrastructure that are prime drivers of economy. SME Futures provides an account of expectations of some prominent sectors.
Anushruti Singh January 23, 2021
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As the central government is set to present Union Budget 2021, India Inc is banking on finance ministry to come up with measures to revive the dwindling economy. Massively hit industries are pinning high hopes for financial schemes along with provisions in taxations. Experts are of opinion that the budget could be around the self-reliant India initiative.
Hence, the budget 2021 may be focused on sectors such as manufacturing, healthcare, agriculture and infrastructure that are prime drivers of economy. According to sources, the government will focus on Production-Linked Incentive (PLI) scheme to boost manufacturing. It is to attract both foreign and domestic investments and to enhance exports while India is trying to become an integral part of the global supply chain.
ASSOCHAM Secretary General Deepak Sood says, “Infrastructure and housing sectors will have huge implications in terms of jobs as well as will cause a ripple effect on the economy. We should also look at the automatisation of agriculture and penetration of services industry in the rural areas.”
On the taxation front, taxpayers are hoping to get a relief in the form of tax exemption limit for an individual income tax payee from Rs 2.50 lakh to Rs 5 lakh.
Commenting on the budget, Dr. Bijaya Kumar Sahoo, Advisor to The Odisha Adarsha Vidyalaya Sangathan, also advocates the realignment of Income Tax Slabs. Adding to it, he recommends that the housing sector needs a thorough boost which will also improve the employment, steel, and cement industry.
He adds, “The basic income tax exemption limit has remained static at Rs. 2.5 lakhs and it should be enhanced to at least to 5 lakhs. This can be done by increasing tax breaks in standard deduction for increase from 30 per cent to 50 per cent of annual value and deduction for the interest value. The housing loans for self acquired properties should also be of Rs 4 lakh.”
Retail sector seeks National Retail Policy
Retail sector which still has not revived from the shock of the economic loss is seeking an announcement of National Retail Policy by the government. They also wish to get permission for retailers to register as MSME. This will boost the local economy, increase jobs, and help in the revival of the sector.
Speaking about the expectations from the Union Budget 2021-22, Kumar Rajagopalan, CEO, and Retailers Association of India says, “The retail industry was almost squashed during the pandemic. It is slowly getting back on its knees with opening of the economy. To get this crawling industry back to its feet, the budget should address two main things which are freedom from various procedural strangleholds and easy access to funds necessary for growth.”
The Retailers Association of India (RAI) in its recommendations to FM had stated that there is a need to expedite the formulation and implementation of National Policy for Retail Trade. “We believe that such a step would provide a substantial boost to the retail sector and facilitate ease of doing business. We recommend government to announce the policy in Budget 2021.”
Retailers are still not classified under MSME and hence it does not come under the priority sector. “Therefore, if a person is merely running a departmental store or a retail shop and retailing in products, he cannot obtain MSME registration,” it says urging the government to allow retailers to register as MSMEs.
Suggesting measures on taxation, the association urges allowing a refund of accumulated input tax credit accrued on the account of input services and capital goods. The reason is that GST laws do not allow for a refund where the tax rates on inputs services are higher than that on the output and this leads to accumulation of credit with the company and blocking working capital.
Insurance industry demands revised section 80
People’s curiosity in insurance policies has grown significantly during the course of pandemic. The insurance sector is also hopeful that the government will announce measures that may enhance benefits of medical insurance policyholders within the nation. Experts are of opinion that considering the low penetration rate, there is a lot to be done as insurers have their own wish list for the upcoming budget.
Neeraj Prakash, Managing Director, Shriram General Insurance recommends measures such as revision of section 80C, reduction of GST in insurance, and mandatory insurance for house properties. Talking on mandating insurance for Prakash claims that all pucca property should be mandatorily insured according to the law. According to him, an income tax benefit should also be introduced for premiums paid for house property insurance.
“This will improve penetration of insurance, broad-base the premium, and will reduce the risk. Secondly, it will reduce premiums while ensuring people get their claims when natural disasters happen. Relief fund expenditure of the government will also reduce. Similarly, people’s curiosity in health insurance policies has grown significantly during the course of pandemic. This budget may make health and home insurance mandatory,” he adds.
A key requirement for insurance sector is capital. Hence, the government may consider liberalizing India’s FDI norms to bring much-needed liquidity. There also is a need for special focus to provide stimulus for the insurance sector so that citizens can secure themselves. Talking about revising 80C, he points out that all the life and health insurance policies are exempted from section 80C of the Income Tax Act currently.
“The major problem is that 80C comprises of many other products such as ELSS, PPF, NSC SSC, SSSC etc. Hence policyholders don’t get enough benefit. The government may consider a separate deduction section or enhance the limit under section 80C of the Income Tax Act 1961 since the current limit of Rs 1,50,000 is too low to cater to all the contributions. 80D should also introduce new scheme(s) to encourage a self-securing environment,” he elaborates.
Adding to it, Dhirendra Mahyavanshi, Co-founder, Turtlemint, an InsurTech platform recommends considering inclusion of pension plans under Section 80CCD. He says, “The NPS scheme enjoys an additional deduction of Rs. 50,000 under Section 80CCD (1B). This has affected the popularity of life insurance pension plans which are only included in Section 80C limit of Rs. 1.5 lakhs. We hope that the special deduction under Section 80CCD (1B) would be expanded.”
He also advocates increasing limit in Section 80D. “Though the limit was enhanced to Rs. 50,000 in the earlier budget, the enhancement was for senior citizens only. In this budget, we expect the Rs 25000 80D limit for regular individuals to be enhanced,” he adds. Another demand insurance sector seeks is reduction in GST from 18 per cent to 12 per cent or probably lower.
According to Prakash MD, Shriram General Insurance, this will help increase the penetration of life insurance. Life Insurance falls under 18 per cent tax rate of the Goods and Service Tax (GST) which was initially 14 per cent. “Considering insurance as a product which offers social benefits, government may reduce the GST. This would surely help in increasing the insurance penetration in Tier 2 cities and beyond,” says Prakash.
Emphasis on enhancing quality of education
The government has already envisaged a major focus on the education sector by formulating National Education Policy last year. Adding to it, growth of digital education platforms during lockdown has increased funding for educational initiatives. Sahoo who is also founder of SAI International Education Group has bunch of recommendations for the education industry which includes tax break for child education expenses and encouraging investment in edu-tech.
“The exemption for child education expenses should be increased from 1.5 to 2.5 lakhs. Technology blended learning education is the new normal, so tax break for edu-tech will encourage blending of technology in the education of children. Also, education will reach to remote and rural areas of India. Education is a huge CAPEX operation for which there is neither any tax break nor PROPCO (Property Company) and OPCO (Operating Company) models to raise funds and to build quality infrastructure.”
He also suggests introducing a voucher system in school education for better competition. He adds, “While NEP 2020 talks of quality education, the real improvement in quality both in government and private can only happen with comprehensive efforts. The best option is to create a voucher system rather than putting much expenditure into public schools.”
Commenting on the budget, Rohit Manglik, CEO of an ed-tech platform EduGorilla says that the previous year witnessed formulation of the landmark NEP 2020 that proposes futuristic measures to revamp the Indian educational system. The increased allocation of budget for education in the upcoming budget will be a great beginning to realise its benefits.
“Emphasis should also be on teacher’s training, skill development, and improving learning outcomes to cater to diverse industries and employers. The COVID-19 pandemic has also underscored the significance of e-learning in widening the accessibility to education. Rationalizing GST in e-learning will make it more affordable for consumers and fuel democratization of the segment,” he says.
Better digital infrastructure expected in service sector
The service sector has also been impacted among others in 2020. The on-ground events and marketing services were closed completely. Further, the prevailing circumstances hint that it may continue for the first quarter of 2021. While many firms innovated and switched their services digitally, there is still a lot of scope for improvement in this segment. This will help to truly accrue benefits of this digital shift, says Piyush Gupta, President, Kestone.
He further comments, “This will ameliorate the brutal impact it had on the industry. To become a land of digital power, government should allocate some budgetary focus on improving the telecom and internet infrastructure with set goals and measurement criteria. The event industry will soon be transiting into hybrid world and both forms will stand and prosper together.”
Reforms to boost growth of co-working sector
Co-working has changed the primary idea behind a workplace and market scenario of the real estate industry. Meanwhile, work from home mode pushed many co-working spaces to shut down and also caused heavy losses to others during the lockdown. However, players in the segment are in favour that post-lockdown scenario to bring in a wave of new opportunities for the co-working players.
Medium-to-long-term fundamentals remain sound as companies seek other alternatives. As companies look to resume businesses, re-designing and restructuring of existing real estate will pose yet another challenge. Co-working players believe that the sector will be able to adapt to the design changes after COVID-19 quicker than their traditional counterparts. Hence, they expect some imperative provision for them in the upcoming budget.
Commenting on the budget, Manas Mehrotra, Founder, 315Work Avenue strongly recommends that the government should recognise co-working space under special schemes like REIT. It should also provide tax benefits to handhold the industry for better growth. Financial support to start-ups would also create greater demand for co-working spaces.
He further tells, “This will also give a fillip to both start-ups and co-working spaces. Presently, the rate of TDS applicable on co-working services is 10 per cent as co-working companies provide renting of both movable and immovable assets. As the industry is going competitive, it will be good if the rate of TDS on co-working services is reduced.”
Co-working players also hope that government reduces GST to the lowest slab for startups. Currently, co-working spaces charge a GST of 18 per cent to all clients and this is a big impact for startups. It can provide a big relief for startups by reducing it.
Startup sector needs concrete policies on various fronts
The Indian startup ecosystem has played a pivotal role in the country’s economic growth especially after a tumultuous year. Most startups are hopeful for provisions in two key areas namely availability of working capital and heightened prioritisation for homegrown brands.
Co-founder and CEO of a bootstrapped fitness rewards platform, StepSetGo, Shivjeet Ghatge claims, “In terms of the availability of working capital, a mobilized framework for funding which increases the ease of inflow for potential investors would be a great start. Further, initiatives like Make in India will help in putting Indian tech companies at the forefront. Hence, we are hopeful to see policies that will help in accelerating business growth of startups.”
Rajiv Kumar, Founder & CEO, StoreHippo, an e-commerce solutions provider expect government to focus on helping businesses cope with the challenges and effects of the pandemic. He opines. “Since offline businesses are hit badly and every business owner is planning to go online, we expect the policies that make it easy for businesses to go online. Not all businesses have resources to meet the tedious compliance requirements.”
Entrepreneurs also expect the government to enhance the IT infrastructure in industries such as agriculture to help growth. Sanjay Borkar, CEO and Co-founder of Farm ERP, an agri-tech company opines that the technology component in agriculture needs to be increased and enhanced, as it is a significant aspect in daily dealings of farmers.
“Technology not in terms of farm equipment or farm machinery, but in terms of Artificial Intelligence, Satellite Image Analysis, ERP Softwares, Deep Learning and Computer Vision. The focus should be shifted towards an increase in the technology component in agriculture along with these aspects and the government should make appropriate provisions, arrangements, and funds for these tech-based requirements within the budget. The government should also make a provision in market linkages for farmers,” concludes Kumar further.