The Budget push to the ‘Make in India’ Campaign!
The Budget 2015 was released by the Finance Minister of India Shri. Arun Jaitley on 28th February to accommodate various schemes that could possibly also improvise the global reputation of the nation. The budget that was released may not have been able to meet the expectations of all the people but it did turn out to be something that could be the need of the hour for India.Make in India -The ‘Hype’
With the ‘Make in India’ Campaign released by the Prime Minister Narendra Modi in the last quarter of 2014, speculation began fuelling towards the Budget that was scheduled for a release in February 2015. This time around the Budget was expected to give a thrust to the ‘Make In India’ Campaign as well besides the other factors. According to various financial analysts and economists, the Budget declared by the Finance Minister was to either increase tax slabs or increase investment limit in the multiple saving schemes while the fiscal deficit was forecast to dive from 4.1% to 3.6%. The success of the much discussed ‘Make in India’ Campaign chiefly depends upon the manufacturing sector. A significant boost received by the manufacturing segment will translate into increased job opportunities for the Indian market leading to a progressive chain of events paving way for a better ‘India’. This year’s financial budget is likely to do just what is so needed.Make In India – The Nucleus
The ‘Make in India’ Campaign is a new innovative, strong and crucial tool that can uplift the Indian Economy, improve the standard of living in India, increase the jobs and make the nation independent by all means. India as a developing country has now embarked on a road that leads to certain progress if the execution turns out to be successful. Having earlier discussed the scheme of the ‘Make in India’ Campaign (http://www.helplinelaw.com/business-law/THERLNI/make-in-india-the-road-leading-to-a-new-india.html), it is equally important to understand the intricacies of the scenario. Given the percentage of labor employed by the foreign countries and that by India, one may realize that India does not have enough job opportunities. Hence a typical industry will experience over supply of labor. In order to resolve this imbalance, the manufacturing sector needs to undergo drastic changes. Instead of outsourcing the manufacturing set ups, it is advisable to establish factories right inside the country. This will certainly give a boost to the job market with increased opportunities. On the other hand, it is essential that the Government of India relaxes on ‘red- tapism’. By reducing the hardcore bureaucracy, the country can invite more people into the business sector – both internationally and nationally. With the necessary influx of funds from outside, important sectors of the nation such as automobile, aviation, biotechnology, chemicals, construction, mining, wellness, renewable energy, railways, oil and gas can change for the better.Incentives post the Budget under the ‘Make in India’ Campaign
- With the aim to boost the job market by increasing the growth rate of the manufacturing sector, the Government of India in its recent Budget revealed that:
- It would defer the applicability of General Anti Avoidance Rule (GAAR) by two years in the wake of representations obtained from several stakeholders along with international business proposals. This will become effective for the revenues of the financial year 2017 – 2018 and the following years. Infact all those investments made until 31st March 2017 will not be subject to GAAR.
- It would offer the status of pass through to AIFs (governed by the SEBI regulations) of category 2 and all the sub categories of category 1 for streamlining the taxation regime of Alternative Investment Funds.
- It would further alter the permanent establishment norms so as to facilitate relocation of fund managers (offshore funds) in India.
- It would offer an additional allowance at the rate of 15% for investments and additional 15% depreciation to manufacturing set ups that have been newly constructed in the duration of 1st April 2015 to 31st of March 2020 in stipulated regions of Andhra Pradesh and Telangana.
- It would offer to sponsor the same treatment on offloading of units during listing as would be available to him during offloading his shareholding of SPVs – Special Purpose Vehicle in case of the Real Estate Investment Trusts and Infrastructure Investment Trusts. Additionally it would allow pass through the rental profit generating from real estate assets directly under the ownership of REIT.
- It would allow passing through the rental profit generating from real estate assets 94LD section of the Income Tax Act so that the duration of applicability of the decreased rate of taxation will be 5% in lieu of income of foreign investors. (FII and QFIs) coming from corporate bonds and the securities of Government for the duration of 31st May 2015 to 30th June 1990.
- It is likely to modify the provisions of section 115 A of the Income Tax Act so that the companies do not have to bear extra burden of taxation on royalty and technical fees. It is likely to reduce the tax from 25% to 10%.
- It will modify the provisions of Income Tax Act so that the benefit (from the tax) shall be directly received by the person making profits from the production of the goods in a factory so as to encourage employment generation. Further the minimum number of workmen is proposed to be reduced from 100 to 50.
- It will offer extra depreciation at 20% on new plant and machinery fitted by a manufacturing unit or a unit involved in developing and distributing power. But if the asset is installed post 30th September of the earlier year then only 10% of the added depreciation will be permissible. The extra depreciation of about 10% can be carried forward in the following year.
- It would also offer cut on the custom duty of raw materials (about 22 items). This is probably why they decided to tie up with Mudra – Micro Units Development Refinance Agency to change the way things function.
While the Budget 2015 has got mixed responses from the audience, analysts, economists, one can only be optimistic to wait and watch when all the proposals discussed turn into a reality and actually function for the betterment of India.