NEW DELHI, March 1, 2015 /PRNewswire/ --
Expectations of businesses, industry in general and the common man were high in anticipation of a reformist Union Budget 2015. While no big bang reforms are announced, a sense of direction seems palpable. From a policy standpoint, the Budget has been engineered around the Prime Minister's initiatives such as 'Make in India', 'Skill in India' and 'Swacch Bharat' and outlines measures to boost domestic manufacturing, ease of doing business in India and focus on growth. The impetus to infrastructure, agriculture and education sectors is also laudable.
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Mukesh Butani, Chairman, BMR Advisors said, "The focus on infrastructure development combined with other initiatives that the Government is taking to make doing business in India easier, ought to provide the necessary thrust. Promoting foreign investment and assuring foreign investors of a stable and non-adversarial tax regime continues with proposals for rationalization of indirect transfers, non-applicability of MAT to FIIs, deferment of GAAR, relaxation of sourcing rules on account of fund managers in India, and reduction in royalty and technical service fee rates. Further on, the focus on black money and curing the economy off this menace seems to have taken centre stage."
Recognising that corporates with stressed balance sheets may have limited ability to commit fresh investments in infrastructure projects, the Finance Minister has loosened the Government's purse strings to fund such projects and provide the impetus to 'crowd in' private investments over time. The Government expects to find the funds by managing its expenses more effectively, through an aggressive INR 700 bn disinvestment budget, and by leveraging the power of the JAM trinity (Jan Dhan bank accounts, the Aadhar identity numbers and Mobile or cellular technology) to reduce leakages in the administration of the Government's benefits programs.
Gokul Chaudhri, Leader, Direct Tax, BMR & Associates LLP said, "The budget has materially delivered on investor expectations on key tax aspects bringing a much needed benign trend for corporate tax rate to 25 percent over 4 years. By proactively legislating that there will be no Minimum Alternate Tax on select category of investors, amending the provisions to remove impediments for Real Estate Investment Trusts and defining rules for "no permanent establishment" on presence of fund managers, potential dispute and litigation has been avoided, and capital flows and investment has been welcomed. The abolition of ineffective wealth tax and final burial of the Direct Taxes Code removes needless regulations - clearly a bold message to discard the bad legacy."
"Overall, it is a positive set of proposals from an indirect tax standpoint with focus on the larger GST reform agenda and certain near term measures to address industry issues. There is a definitive move towards GST implementation, with emphasis on multiple themes in the budget speech like make in India, ease of doing business, realignment of tax rates and cesses with a repeated focus on implementation of the tax reform from April 1, 2016. Near term measures to address issues around accumulation of tax credits, inverted duty structure, time limit for availing credits, maintenance of documentation online including digital invoices are steps in the right direction," said Rajeev Dimri, Leader, Indirect Tax, BMR & Associates LLP.
In line with the Government's initiatives, major amendments involved rationalisation of excise duties to 12.5 percent and increase in the service tax rate to 14 percent, with the education cess/secondary and higher education cess element being subsumed within the main levies. The reduction of tax on royalties and fees for technical services paid to non-residents from 25 percent to 10 percent, the fourfold enhancement of the threshold for domestic transfer pricing assessments to INR 200 mn and provision for levy of Swachh Bharat cess of 2 percent on services were some of the other key tax proposals. However, with withdrawal of service tax exemptions on construction of airports and ports, government services, increase in service tax rates and higher additional duties on petrol and diesel, the impact on prices would be an interesting area to keep an eye on.
The Budget sets out a vision for achieving double-digit growth trajectory through vital regulatory and fiscal reforms. A well-researched and tight-rope approach of FM's team appears apparent. There is yet hope of ushering in vital reforms for catapulting Indian economy into double digit growth trajectory. It now remains to be seen if the Government is able to pull off an effective implementation of policies and initiatives on ground to enable 'ease of doing business in India'.
About BMR Advisors
BMR Advisors is a professional services firm offering a range of tax, risk and M&A advisory services for domestic and global businesses of all sizes. The firm enhances value for clients by focusing on solutions that are innovative, yet practical and that can be implemented. This is achieved by blending domain expertise with analytical rigour, while maintaining an uncompromising focus on quality, and by hiring and nurturing high quality professionals with a passion for excellence. BMR is committed to making a difference to clients and to its people, and delivers this through the integrity of its effort and by living its core values. Founded on October 1, 2004, the firm has won the confidence of several Fortune 500 companies and is the partner of choice for their advisory services. The respect that the firm commands is evident from the fact that it is consistently rated amongst the top tax and M&A brands in India. A team of over 600 professionals has extensive functional and industry expertise across service areas, and is well-equipped to deliver world-class services to our clients. For additional information, visit www.bmradvisors.com.
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