When the budget session was started in the morning, the sensex was over 200 points up. However, at the end of the budget speech, it was in red. Naturally, it can be concluded that the budget 2015 presented by FM Arun Jaitley generated mixed emotions. In this article we will through light on the points that were hot and also the points that were not.
The two major disaapointments from the budget 2015 were in terms of taxation. The personal tax was unchanged, so were the exemption limited for the particular income tax. Thus, the spending capacity of consumers did not receive any boost. The tax breaks introduced by FM were in categories such as pensions and insurance plans, leaving out the basic personal tax. Also, the hikes introduced for rural schemes such as MGNEGA are questionable, as experts believe that they are not really helpful for boosting rural conditions across India Inc.
Most of the sectors expecting exclusions from excise duty, MAT and STT were utterly thwarted. While no exemptions were provided for the above taxes, on the other hand increases in the excise duties is certainly going to burn a hole into the pockets of business entities. Also, no incentives have been announced for domestic manufacturers or exporters.
Overall, it can be said that the Budget took more from the taxpayers that it gave away. The tax proposals, incentives and benefits announced by the FM together amounted to 8,355 crore to the taxpayers. However, increase in numerous indirect taxes is going to being a revenue of 23,383 crore. Naturally, it can be said that the exchequer is the clear winner here.
But there are some sections of India Inc who have won sizeable concessions in this frugal budget and they have reason to cheer.
For one, the promised phased reduction in corporate tax rates from 30 per cent to 25 per cent, starting from next year is a big giveaway and has the potential to lift profits for high tax incidence companies. These are mostly in sectors such as FMCGs, frontline IT, financials and so on. The reduction in taxes on royalty and technical fees from 25 to 10 per cent is likely to save tax outgo for a host of listed multinationals in sectors such as FMCG, pharma, engineering and autos, who pay hefty royalties to their parent.
Two, the promise to iron out contractual glitches in PPP projects and funding of infrastructure projects out of public sector balance sheets can kick-start the investment cycle. This may aid order flow for capital goods and engineering players.
Three, the financial sector has gotten a good deal in the Budget too, with the government promising and independent bank Board to make key hiring decisions at PSBs. This is a great signalling move as it is a precursor to PSBs winning greater autonomy from Government interference. NBFCs have also been granted the ability to launch recovery proceedings from borrowers under SARFAESI act, a long pending demand.
All this, taken with the postponement of GAAR and the confident tone of the budget on growth, may ensure that the stock market doesn’t dwell too much on its disappointments and soon gets back to business as usual.