Budget 2019 Expectations for the Indian Corporate Sector

With the Union Budget 2019-20 slated for July 5, we look at critical areas that corporate India would like solutions to.

The upcoming Union Budget 2019-20 has got corporate India looking forward to a slew of reforms and tax cuts. The financial budget, set to be presented by Finance Minister Nirmala Sitharaman today, will have her maiden budget tackle issues ranging from stressed assets, liquidity problems faced by non-banking financial companies (NBFCs), industry demands for corporate tax cuts, dwindling investments, and declining GDP growth.

In an effort to boost consumption, investment, and spending, here are key focus points that corporate India may expect from the general budget this year:

According to data, India has one of the highest tax rates for corporates, largely affecting its score in the World Bank Group’s ‘Ease of Doing Business index. In an attempt to tackle this issue, the government proposed lower corporate tax rules in 2015 and a withdrawal of exemptions for the next four years.

However, the lower tax rates were only applicable to specific sectors and corporates that operate within certain criteria. This was highly limiting and with the upcoming budget, the industry is hoping to see a 5 percent cut in corporate tax rates to drive economic growth rates. Specific segments like real estate, NBFCs, infrastructure companies, aviation, and export houses are facing headwinds due to a variety of factors and this demands stable fiscal and policy measures.

Along with providing ample support, industries also aim for the GST Council to rationalize taxes across critical sectors like housing, finance, and automobiles - largely to spur demand and consumption. For sectors like jewelry, lower import duties will provide significant support, particularly at a time when prices for the metal are increasing across the globe.

“We are hoping for a reduction in the import duty on gold from 10 percent to 4-5 percent. This would help buoy up positive business sentiments, and a cut in the duty structure will ultimately benefit the consumer. A step in this direction will also promote the import of gold through legalized channels resulting in increased revenue for the government,” said TS Kalyanaraman, Chairman, of Kalyan Jewellers.

“Jewelry purchase through EMIs is another option that we would like the government to look into,” he remarked.

The growing Indian startup community has emerged as the third biggest hub for startups across the world, with total funding raised for startups in the country pitched at $4.3 billion last year. The startup space has also been instrumental to job creation - over 40,000 employment opportunities were created last year, and it only continues to grow.

At a time when India is aiming to grow into an innovation powerhouse, the Union Budget 2019 will need to address the problem of angel tax. Earlier, in an effort to motivate and promote entrepreneurship, the government tagged startups with sales of up to ₹100 crores (from a previous exemption limit of ₹25 crores) eligible for angel tax relief.

With the upcoming Union Budget 2019-20, the startup community is hoping to gain a complete exemption.

Currently, a large portion of tax refunds are made through cheques - a method the business community is hoping will change to direct fund transfers through online channels. Besides addressing several grievances, this would also mitigate corruption and manipulative practices.

“The industry is very optimistic that a single authority for sanctioning and processing GST refunds, which is expected to get implemented soon will help eradicate current complexities in the system and benefit all the small and mid-sized companies in the industry. We hope more of such pro-industry measures that may further help small businesses in overcoming their challenges,” said Nidhi Yadav, founder of AKS Clothings.

NBFCs have fallen victim to several liquidity issues, and recently, the government has taken to curtail this by rushing them into National Company Law Tribunal (NCLT). However, this isn’t going to be the fix - the industry would need relief in terms of securitization norms, and relaxation of rules on working capital loans.

It is imperative that the government take steps to provide relief to the country’s biggest sectors - the agricultural and rural segments. With recapitalization and incentives provided to the finance, housing, and manufacturing sectors, the industry is hopeful that the policies will provide enough impetus to revive the economy.

You can also read about the other budget expectations for various sectors of the Indian economy. How will the Union Budget of 2019 affect various sectors of our economy? For the latest budget highlights and news, read more at Bajaj Markets.