The Union Budget is to be presented in Pariliament on 1 February 2022. Here are some industry-wise expecatations from the Budget put together by experts at Deloitte.

Overall Expectations

Expectation #1: Focus on infrastructure and asset monetisation

There is an expectation that the government will focus on implementing the policies announced so far and expedite the projects underway. To begin with, the government will likely focus on increasing the share of capital investment, including infrastructure, and frontload spending in the coming quarters. This is something the finance minister has already reinforced in her statements earlier. The other expectation would be that on raising capital for investments through asset monetisation. 

Expectation  #2:  Demand  and  employment  by  stimulating  MSMEs

The other focus must be to enable the ecosystem around job, income, and demand creation. India is a domestic-demand-driven economy, and a strong recovery will require a sustainable pickup in demand. That will require more jobs and employment opportunities  to  fatten  consumers’  wallets. Since micro, small, and medium scale enterprises (MSMEs) are the biggest job creators of India, the government will have to emphasise reviving the sector by enabling the ecosystem that supports these enterprises. Identifying their pain areas and devising a solution to help them become a part of ‘Atmanirbhar Bharat’ will aid in their recovery. In addition, access to credit is critical, and providing targeted credit support to these enterprises should be considered. The government may choose fewer segments to start with and revive opportunities for those selected MSMEs.

Expectation  #3:  Support  to  the  disproportionately  impacted  sectors

The government will have to support the sectors that have been disproportionately impacted by the pandemic and where recovery is likely to be gradual as uncertainties linger. Support to the travel and hospitality sector should be considered as they significantly contribute to GDP. The government must try a few out-of-the-box ideas or experiment with initiatives followed  in  the  other  parts  of  the  world.  One  such  experiment  could  be  of  tourism  “sandboxes”  (followed  in  Thailand  and Indonesia), and invite fully vaccinated foreign tourists to travel a limited area. Improvised service offerings could boost the hospitality sector. The government must look into short-term revival plans as well as long-term plans to address the structural  changes  these  industries  are  going  through  and  have  contingency  plans  to  deal  with  uncertainties.

Expectation #4: Boost to exports

Exports have done well, and we expect the government to emphasise cross-border trade and investments. With several FTAs queued up in the near term, the focus must be on short-term as well as long-term measures to boost exports from and encourage FDI in sectors where India has a competitive advantage. Competitiveness will require efficient import and export regulations, and the government must address issues that hinder trade growth.

Expectation #5: Focus on social sectors (education and health)

Finally, there has to be more allocation towards building the health infrastructure and preparing the workforce for the future  through  training  and  skill  developments.  COVID-19  has  certainly  highlighted  the  gaps  in  health  infrastructure  that need to be filled. Similarly, students from underprivileged families have been impacted by several education institutes closing down. The government must plan a way forward to bring these impacted kids back into the education system.

Direct Tax 

In the recent past, the Government of India has rolled out several policy measures on the direct tax front to encourage private investments and provide tax certainty to investors and businesses. The  government  should  consider  introducing  necessary  steps  to  address  concerns of  the investors/taxpayers in the forthcoming budget.

Expectation #1: Allow the deduction for CSR expenses and other expenditure incurred on account of the pandemic.

Expectation #2:  Withdraw/recalibrate  the  amendment  denying  tax  depreciation  on  goodwill;  alternatively,  the amendment be made prospective  and  grandfathering  be  allowed  for  pre-existing  goodwill.

Expectation #3: Recalibrate nexus rule for foreign taxpayers.

Expectation #4: Lay out tax policy framework for taxation of cryptocurrencies. 

Indirect Tax

The focus of this year’s budget is likely to be on the recovery of the economy, reassurance to the industry, and an indication that they are aligned to the trends in the market.  While  the  pandemic  has  proved  challenging,  the  government  has  used  this  opportunity  to  bring  about  economic  revival through export  facilitation measures. 

Expectation #1 Roadmap of incentives/programmes for a wide range of sectors.

Expectation #2 Need for favourable changes to the SEZ scheme.

Expectation #3 Positive progress on Free Trade Agreements (FTA) and other customs changes.

Expectation #4 Key GST policy changes  

Energy, Resources & Industrials

Monetisation of various assets by the government, including the railways and roads, airports, oil and gas sector, was the highlight of FY21. It is expected that during the next year as well the government will continue to focus on these areas and include more industries from the Energy, Resource & Industrials (ERI) sector in this monetisation list, which will provide money for other key infrastructure development projects. 

Expectation #1 Provide a consolidated or group taxation regime for the infrastructure sector.

Expectation #2: Inclusion of power sector, railway redevelopment or airport redevelopment as specified business for the purpose of section 35AD.

Expectation #3: Increase wage limit for new employee deduction (section 80JJAA) for employees in manufacturing and mining  sector.

Consumer Industry 

India is a consumer-driven economy. The retail sector is expected to touch US$1.3 trillion by 2024 compared with  the current  size  of  US$883  billion  in  2020.  The pandemic was extremely disruptive, and each wave brought its own set of  challenges. The government can support the growth of consumer industry by improving ease of doing business  to  accelerate  multi-channel  or  hybrid  capabilities,  creating  policies  to  support  technology  development,  and building infrastructure to optimise retail supply chain.

Expectation  #1:  Ease  of  doing  business  to  accelerate  multi-channel  or  hybrid  capabilities.

Expectation #2: Government can create policies to support technology development.

Expectation  #3:  Building  infrastructure  to  optimise  retail  supply  chain.

Education

The most significant development in the education sector in the past year was the announcement of the National Education Policy (NEP) 2020, which has the potential to transform the education system in the country.

Expectation  #1:  Facilitate  increased  allocation  to  the  education  sector  to  assist  implementation  of  NEP.

Expectation  #2:  Guidelines  for  setting-up  of  International  Branch  Campuses  (IBCs)  by  foreign  universities.

Technology, Media & Telecommunications

Global  impact  of  COVID-19  accelerated  technology  and  digital  adoption  across  industries.  It  also  heralded  hybrid work  environments,  heavily  reliant  on  technology  led  solutions.  As  per  various  estimates,  India’s  technology  industry (excluding e-commerce and internet services) is expected to record a growth of 2.3% in FY2021 to reach US$ 194 billion, of which exports constitute roughly US$ 150 billion. The Indian e-commerce market is expected to grow to US$ 111.40 billion by 2025 from US$ 46.2 billion as of 2020. By 2030, it is expected to reach US$ 350 billion. Digital continues to drive growth for the industry in domestic as well as export markets. 

Expectation #1: Creating advanced manufacturing jobs.

Expectation #2: Boost 'Made in India' for electronics.

Expectation #3: Support commercial deployment of 5G - the future of communications.  

Life Sciences & Healthcare

A number of steps taken by the government in the recent past for the healthcare sector have clearly demonstrated the importance that the sector duly deserved. Achieving affordable healthcare for all is the ask of current times.

Expectation  #1:  Tax  holidays  and  funding  for  hospitals  and  skill  development.

Expectation #2: GST Reforms - Bring more life-saving drugs at the lowest rate of GST and “zero-rating” of GST for health care services.

Expectation  #3:  Creating  the  ecosystem  for  innovation  and  research.

GlobalLinker recently conducted a webinar where a seasoned Chartered Accountant & Tax Expert shared insights on how Budget 2022 impacts MSMEs. Watch the highlights below.

Information source: Deloitte

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