The Union Budget for 2016-2017 has been presented by Finance Minister Arun Jaitely on February 28th, 2016. Indian IT and Electronics industry was all set with the wish list; here is a special report on what was expected and what is achieved.
The NDA Government announced its first full-fledged Union Budget on 28th February, 2015. At long last, the plea of the electronics hardware industry, led by ELCINA, has made an impact on the policy makers. The Finance Minister, recognizing the damage that inverted duties have caused to manufacturing in the country, reduced customs duty on a number of inputs which are detailed later in this document. The Finance Minister has also looked at the Excise duty structure applicable to certain items and carried out rationalization to provide boost to devices like LED drivers, Mobile Handsets, Tablets, Computers, IC Wafers, and some specified raw materials among others. ELCINA sincerely believes that a good beginning has been made to realize the full potential of Electronics hardware in restricting huge foreign exchange outflows and creation of substantial number of jobs. However, the Finance Minister has not been able to meet the expectations with respect to relief to Tax Payers – both Corporate and Individuals. The Budget includes a proposal to reduce Corporate Tax from 30% to 25% over the next four years beginning from next financial year but this will be accompanied with withdrawal of exemptions. The Finance Minister has declared that the Government is committed to a stable taxation policy and a non-adversarial tax administration. Hopefully this will encourage fresh investments. The ‘Make-in-India’ Mission launched by the Prime Minister will lead not only to revival of growth and investment but also to promotion of domestic manufacturing and enormous job creation. As a step to encourage and enthuses ‘Make-in-India’, the Finance Minister has reduced the rate of Income Tax on Royalty and fee for the technical services from 25% to 10% which will facilitate technology inflow. GST which has been a source of dispute between the Centre and State Governments for the last 4-5 years will see the light of the day. Efforts on various fronts to implement this reform measure of considerable importance may be implemented next year. The Finance Minister while presenting the Budget, laid stress on rationalization and removal of various tax exemptions and incentives in order to reduce tax disputes and improve administration. He however, clarified that exemptions to individual tax payers would continue to encourage savings. Fight against the scourge of black money will be taken forward. He expressed his resolve that the generation of black money and its concealment will be dealt with effectively and severely.
Few Pre-Budget Quotes
Bhaskar Pramanik, chairman, Microsoft India said, “I am looking forward to the government presenting a growth-oriented budget that addresses gaps and sets a clear way forward to ensure that the optimism is not short-lived. Key things Microsoft India chairman wants from the Budget 2016, Create the right environment to boost India’s startup ecosystem, Make technology access a reality, Provide a boost to technology adoption for citizen services, Address regulatory and tax issues for the software industry, Rollout of GST and Boost skill development”
“With the enhanced focus on smart cities, this year we expect the Government to continue with the momentum on infrastructure and manufacturing, as we firmly believe that good infrastructure is incomplete without surveillance cameras and solutions. Also with government mandating CCTV cameras and solutions in verticals like transportation and retail, the budget should set aside substantial investment, for video surveillance solutions and quality cameras to make India a safer and smarter country. As the IT industry aspires for a growth oriented budget, we expect the government to simplify tax on niche products like surveillance cameras, especially with the rise of criminal activities in the country.” By Axis Communications “Probably we are not in the best of times in automotive industry as two key segments- passenger vehicles and two-wheelers are not performing up to the mark, especially because of the rural distress. Tractor industry which was doing well has also moved south. M&HCV segment is the only bright spot that too mainly because of the cyclical demand. In such a time there must be high hopes and expectations from Union Budget which will be presented by the union finance minister Mr. Arun Jaitley on 29th February in the Parliament.” ETAuto,
Tweak policy to boost electronics industry growth
Hoping to get an as equal an attention as the software industry does from the government, the electronics industry wants the budget 2016-17 to tweak its hardware policy to spur growth and make more in India. Hoping to get an as equal an attention as the software industry does from the government, the electronics industry wants the budget 2016-17 to tweak its hardware policy to spur growth and make more in India. “We expect the finance minister to address the policy challenges that are holding back high value added electronics manufacturing and restricting fresh investments by new firms, domestic as well as foreign,” Elcina secretary-general Rajoo Goel said ahead of the Union Budget. The government and the industry have drawn a vision to boost domestic manufacturing of electronic products to $400 billion and zero imports by 2020 from around $75 billion in 2015. “As most foreign investors find it challenging to set up manufacturing units due to infrastructural bottlenecks, local rules and regulations, logistics, procedures and the number of clearances required, the budget should pave way for single window clearances and facilitation to attract more FDI,” Goel added.
Industry Comments:
Bhavin Turakhia – CEO and Cofounder, Directi “This budget signifies correcting and working towards some basic priorities in terms of providing more power and support to our internal growth engine. The government has shown a clear intent on revitalizing agriculture, infrastructure, skill development and higher education sectors. This bodes well for creating a highly skilled labour force to drive the ‘Make in India’ mission in the country. The deployment of Massive Open Online Courses to promote Entrepreneurship Education and Training will help Indian youth connect with mentors and credit markets. It is an encouraging move aimed at promoting entrepreneurial spirit, especially among youth from rural areas. Amendments in the Companies Act and the ‘Stand up India’ scheme will boost the entrepreneurial ecosystem. Most importantly, the government has indeed offered unique opportunities to Start-ups, categorizing them as critical partners to the ‘Make in India’ programme. The proposed 100% tax deduction for new start-ups for the first 3 years, along with the speedy registration mechanism is quite noteworthy.”
Mr. Sunil Khanna, President and Managing Director of Emerson Network Power India “The Government has tried to keep a healthy balance between inclusive growth and fiscal consolidation amidst global volatility and additional burden on account of the 7th pay commission, OROP. With an important focus on digitations, the government has shown good intent in keeping up the momentum of the Make in India and Digital India Mission. The government has shifted its focus from large cities to rural areas showing a clear intent to uplift those who belong to the bottom of the pyramid, especially the agricultural sector and focus on creating skilled labor. The effort to incentivize the Make in India program by way of domestic value adding in the Electronics Manufacturing Systems segment is a step in the positive direction as is the removing of custom duties. This augurs well for us as majority of the spending in our industry is on imported ESDM Electronic System Design & Manufacturing items. From a taxation standpoint, lowering of Corporate IT Tax for companies not exceeding Rs. 5 crore turnovers to 25% plus surcharge is a positive move as it offers incentives to SMEs and SMBs in the country to focus on their growth. Another proposal that will benefit the country and stimulate start-ups on the growth trajectory is the amendments to the taxation for new manufacturing companies incorporated after are 1ST March 2016 as they will now have the option to be taxed at 25% plus surcharge and cess provided they do not claim profit linked to investment.”
MN Vidyashankar, President, India Electronics and Semiconductor Association
Start-up focus: Reaction on Government’s INR 500 crore initiative for Stand-up India
Government has shown great intent in promoting the start-up ecosystem in India. With Government’s announcement to promote women entrepreneurship, and entrepreneurship in the SC/ST category, we will have an immense role to play along with MSME in making this initiative successful. We are honoured with government’s trust on associations like IESA and look forward to work in tandem to realise this socially important goal. Investment exists in start-ups in two years qualifies as Long Term Capital Gains and this encourages angel/venture capital infusion. Further, the simplification of norms for forming a company along with 3 year tax holiday will spur entrepreneurs to establish start-ups. This reflects the commitment PM Modi made during the Start-up India Action Plan on Jan 16th. We are happy with Government’s initiative to boost local manufacturing and the start-up ecosystem in India, with their decision to allow rebates to the SMEs and also 100% deduction of profits to the start-ups. With Government’s announcement to promote women entrepreneurship and entrepreneurship in the SC/ST category with a propose budget of INR500 crore, we will have a critical role to play along with MSME in making this initiative successful. We are honored with Government’s trust on associations such as ours. We see this initiative as a great way to explore India Innovation Fun, IESA will work in tandem to realize this socially important goal.
Skill development focus: Reaction on Government’s INR 1700 crore investment for skill development in India
Government’s focus in promoting entrepreneurial skills is the right step taken towards the growth of the ecosystem. The Investments made by Govt. to build skilled workforce will help increase employment in the country. This initiative will give impetus to implementation of national programs like Digital India, Make in India, Smart Cities as skilled workforce is at the core of the programs’ success, overall accelerating India’s economic development.
Transportation focus: Reaction on Government’s smart transportation initiative
Glad to see focus on smart transportation from the government. It’s a known fact that the nation struggles with transportation related issues and we are pleased to see focus on implementing smart transportation through startup involvement
Digital literacy in rural India: Reaction on Government’s initiative on digital literacy
Governments’ plan to launch a mission to provide digital literacy in rural India will enable India to transform for a better tomorrow. With the nation is going smart, rural need to be smarter as they hold the nation’s wholesome development. We would like to see an equal dedication from corporate India in order to make this initiative a success.
Excise duty: Amendment on excise duty
Exemption of BCD and SAD for ATMP for semiconductor wafer fabrication / LCD fabrication is a very well planned move and will certainly give a boost to local manufacturing especially to SMEs. Similar exemption extended to parts and components, sub parts for manufacturing of charger, adaptors, mobile phones, routers, modems, set- top boxes etc., will significantly go a long way in encouraging local production. Imposition of BCD on finished products like telecom equipment etc. is a very well thought out to enhance domestic manufacturing and reducing import dependence. Reduction of BCD on specific capital goods for manufacturing of various fuses is a boost to component manufacturing and enriching the supply chain.
