Budget 2015


Union Budget 2015-16 India Expectation : FIIs, FPIs to be exempted from MAT this Union Budget

The countdown to the Union Budget, one of the most critical event for the Modi government, has started. With barely 10 days before the macro event, expectations are sky-high ranging from clarity on goods and services tax (GST), expanding tax base, corporate tax, etc.

In an interview to CNBC-TV18, Sudhir Kapadia, National Tax Leader, EY says he expects the Finance Minister Arun Jaitley to announce the exemption of minimum alternate tax (MAT) from both foreign institutional investors (FIIs) and foreign portfolio investors (FPIs).

“The intent is not to create books of accounts in India and include it in the tax net. So, why should there be a need to set up offshore accounts of these companies if we don’t need their taxable presence,” asks Kapadia.

Furthermore, he believes the corporate tax rate should come down to 30 percent from the existing 33.99 percent.

Sachin Menon, COO-Head Indirect Tax, KPMG and Dinesh Kanabar, CEO, Dhruva Advisors, say a clear roadmap on GST and revision in exemption limits can be expected from the upcoming Budget.


Union Budget 2015-16 India Pre-Update : India to unveil more reforms in Budget 2015: Sushma Swaraj

The new Indian government will unveil more reforms in the coming days, including in the forthcoming Budget this month to woo foreign investment and make India a manufacturing destination, External Affairs Minister Sushma Swaraj has said.
Addressing a gathering of the Indian diaspora here in the Omanese capital, Swaraj said numerous initiatives have been announced starting with Prime Minister’s ‘Make in India’ campaign to make India an investment and manufacturing destination.
Similarly, the last Budget in 2014 had set up an NRI Fund to clean and develop river Ganga and the government has embarked on the Digital India programme.
The Government has invited both foreigners and NRI entrepreneurs to come and join in these efforts, she said while on her first visit to the oil-rich Gulf nation.
She highlighted the government’s 100 Smart Cities project which was open for participation. Further, foreign investment caps have been eased in construction, railways and defence sectors, the minister said.
“The new government is committed to development with transparency and good governance. We are striving to revive growth. The impact is already evident in the green shoots of recovery and a positive, even upbeat, business sentiment in the country,” she said.
The senior BJP leader also said the last general election was a landmark one in which the people gave an absolute majority to a single party after three decades.
“India firmly believes that overseas Indian must be a part of the India growth story,” the minister said while lauding the role of NRIs in boosting India’s economic growth. “Your sustained remittances over the years have contributed to our foreign exchange reserves and are a valuable livelihood source for millions of dependents in India. India is a recipient of the largest global remittances sent by the expatriate populations anywhere in the world and the Gulf region is the largest source of these remittances for us,” she said.
Swaraj’s maiden visit to Oman comes as the two countries are gearing up to celebrate the 60th anniversary of the establishment of diplomatic ties this year. The minister also unveiled a logo to mark the 60th anniversary of bilateral ties with Oman.


Union Budget 2015-16 India Suggestion : What Govt should do to boost India’s travel industry?

This time the travel industry is hopeful of the Narendra Modi government and is anticipating greater support from the Centre in terms of policies. Swaminathan Vedaranyam, CEO of Via.com, an online travel booking site, said, “As far as the travel industry is concerned, I think there is an urgent need for well-defined policies and clear commitments to ensure that all cultural heritage points are given more attention with improved infrastructural facilities”.

Taxation: Killing the golden goose?

Players have often asserted that multiplicity of taxes coupled with a complex taxation policy have marred the travel agents in the country. “Travel as a sector is considerably dependent on foreign transactions and can contribute substantially to the nation’s foreign exchange reserves. The taxation policy for the sector is especially nuanced and has several facets that need to be reviewed,” says Rakshit Desai, managing director India, FCm Travel Solutions and Flight Shop.

He added, “By extending the measures introduced in the previous budget, we look forward to some fundamental changes to simplify tax structures. A case in point is the CENVAT credit for services benefiting from an abated tax rate. Currently applicable to rent-a-cab services and tour operators, this needs to be expanded to cover the complete gamut of travel related services covered by abatement to limit taxation to value addition.”

It should be noted that most players have often complained that multiplicity of taxes in India gives an edge to other Southeast Asian countries such as Singapore, Indonesia, Thailand and Malaysia.

Is it an unfair treatment?

Subhash Goyal, chairman of STIC Travel Group and president of Indian Association of Tour Operators (IATO), said, the industry may get some relief on implementation of the Goods & Services Tax (GST).

“The problem is that tourism is not treated at par with other export-based sectors. While sectors that export goods are exempted from service tax, the tourism industry, which is a part of service sector, is made to pay the service tax. We want the government to treat us as other foreign currency earner,” averred Goyal.

Desai of FCm Travel added that a slash in service tax will be a much needed relief to foster the sector’s growth. “This would be especially beneficial for travel operators in case of services rendered to foreign offices of global and multi-national companies, where travel originates outside India and payments are received in foreign exchange,” he noted.

Revitalisation of associate industries

India has a large base of air passengers. However, complex tax structure and lack of infrastructure is not allowing the airline companies to harness this resource to the fullest.

Industry players have asked the government must focus on reducing the taxes on aviation turbine fuel (ATF) as it has made airfare in India expensive, which has adversely impacted the sector.

According to Goyal, since the tax paid on ATF varies in different states, the implementation of GST becomes more imperative. “The government should restrict the tax levied on ATF to a maximum of 5% as anything more than that can make air travel in India expensive, thus benefiting other Southeast Asian destination such as Thailand, Singapore, Indonesia and Malaysia, which are more cost-competitive,” he pointed out.

Also, the lack of infrastructure has adversely impacted the growth of the aviation industry. Vedaranyam said, “There is a recent spurt in domestic travel as well as a higher influx of foreign tourists in India and with dedicated upkeep of the tourist hotspots, we can ensure higher growth for the travel industry. Additionally, I wish that there is an allocation towards revitalising all unused airports in tier II and III cities as these geographies hold immense potential today. There should also be a rationalisation of air travel taxes for competitive pricing to boost travel and tourism”.

In terms of the availability of adequate rooms, the travel industry expects the government to address the issue of shortage of room inventory in the major tourist destinations. DS Rawat, general secretary of ASSOCHAM, said that the government should focus on finding ways to increase the number of budget hotels for more room inventory.

“The government should accord ‘Infrastructure’ status for hotel projects with minimum 50-100 rooms (from current cost-based criteria of Rs 200 crore) and reduce availability constraints by expanding mid-segment hotels of 2-3 star categories,” suggested Rawat.

Innovation: the key to success?

To ward off the fear of cut-throat competition, Rawat recommends “Launch projects to create 50 tourist circuits around themes of Heritage, Culture, Himalayas, Desert, North East Region, Coastal, Sports and Films. Create a Hindu Circuit akin to Buddhist Circuit; explore synergy with North East, SAARC and South East Asian countries which have a strong ‘India’ connect”.

At present, India does not even contribute 1% to the international travel market. Nevertheless, it can be turned around as the country as a tourism destination has a huge potential to woo both foreign and domestic travellers.


Union Budget 2015-16 India Predictions : Up weightage to FMCG, pharma; like TVS, City Union: Ambit

Investors should avoid positioning their portfolio around events like the Budget, because “there is enough money to be made” from stocks and sectors by taking a longer term view, says Saurabh Mukherjea, CEO, Institutional Equities, Ambit Capital.

In an interview to CNBC-TV18, Mukherjea says there will be some degree of optimism in the market ahead of the Union Budget. He recommends investors to increase weightage to defensive sectors like FMCG, pharma and IT.

Mukherjea says he has trimmed exposure to some of the large cap cyclicals because prices have run up quite a bit.
He continues to maintain a bullish view on small private banks, and his top bets include DCB and City Union Bank.

He rates Punjab National Bank as the “highest conviction sell”, and is bullish on TVS Motor, citing it as a natural play on economic recovery.

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