Union Budget 2016

India’s Union Budget 2016 Pre-Budget Expectations

Ports sector

Vishwas Udgirkar, Partner, Deloitte Touche Tohmatsu India LLP

The Budget may signal a move towards market linked tariff for Major Ports. Promotion of coastal shipping has been one of the Government’s priority areas. The Budget may indicate tax reforms, exempting seafarers from income tax for the time of service on vessels which would help address the issue of shortage of skilled manpower for coastal vessels.  Reinstatement of service tax exemption on construction of ports may also be considered.

Life Sciences & HealthCare

Charu Sehgal, Partner, Deloitte Touche Tohmatsu India LLP

Continuing the focus on R&D, the Income Tax Act offers Tax benefits and deductions for both revenue and Capital expenditure for R&D.  However there is no clear differentiation for Incremental R&D efforts as opposed to Transformational R&D efforts.  While maintaining the existing deductions, it might be beneficial to provide Tax incentives for Transformational R&D efforts (using some targets mentioned above) so that Indian companies, get added incentives to drive transformational R&D efforts. 

Priority API lists: Government needs to identify a priority API list especially of key life savings medications and also drugs that require specialized skills (bio-similars, Cancer drugs etc.) and offer special incentives to companies that are looking to enhance existing capacity or develop new capacity.  The primary impact will be to reduce over-reliance on Chinese supplies.

Competitiveness of domestic players

Savan Godiawala, Partner, Deloitte Touche Tohmatsu India LLP

There are instances of inverted duty structure in several products where customs duty on import of final product is lower than its raw material. This makes it difficult for the domestic players to effectively compete in the market. Government should revisit the duty structure for the specific products where rationalisation is required for protection of domestic industries.

Corporate Social Responsibility

Anindya Mallick, Partner, Deloitte Touche Tohmatsu India LLP

With CSR mandated for companies meeting prescribed financial thresholds in the Companies Act, 2013, it has been observed that “promotion of education including employment enhancing vocation skills” has been the preferred CSR activity for most companies. In designing their CSR strategies and initiatives, industry should look at long term involvement in skill development in their business interests and not just fund short term training courses with the sole intention of complying with the law.

Smart Cities

Arindam Guha

With quick implementation being the need of the hour, the forthcoming Union Budget needs to earmark around Rs. 5,000 Crores under the Smart City Scheme to commence the activities in around 50 cities across the country. In addition, adequate budgetary provisions under convergent schemes like Amrut, Safe City, Solar City, Swaach Bharat etc. also need to be made for the selected cities to ensure implementation of the Smart City plans in a comprehensive manner. With States also having to contribute their share of the investment (1:1 in the case of the Smart City Mission with the proportion varying for the other schemes), a suitable budgetary mechanism for ensuring coordinated release of funds may also be explored.

Increasing options and means for financing of Smart Cities is another area which needs to be addressed. Based on the quantum of funds required, it is imperative that the Central and State Government funding be supplemented with private investments, both in the form of debt and equity. With a large part of the investments proposed to be used for creation of urban infrastructure, one of the options which may be explored is to allow the Smart City SPVs to issue long term tax free bonds as in the case of infrastructure development companies.

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