Finance minister Arun Jaitley’s first full-year budget on Saturday initiated a number of steps at streamlining the economy and boosting growth on the lines of Narendra Modi-led government’s ‘Make In India’ campaign.
The government left basic excise duties largely untouched, while corporate income tax rate was reduced to 25% over the next four years to give the necessary signal to manufacturers to start producing in India.
“Increasing investment in infrastructure and manufacturing will give a huge boost to the Make in India campaign, which in turn will create jobs,” Jaitley said.
The minister also cut various import duties across sectors either to free up accumulated credit or to provide cushion to the domestic industry against international peers.
“The role of indirect taxes is very important in the context of promotion of domestic manufacturing and Make in India,” Jaitley said. “I propose to reduce the rates of basic customs duty on certain inputs, raw materials, intermediates and components (in all 22 items) so as to minimise the impact of duty inversion and reduce the manufacturing cost in several sectors.” This would minimise the impact of duty inversion and cut manufacturing cost.
The cut in duties will have wide ranging impact across sectors like for consumer durables, where components would see a fall in prices to enable competitive manufacturing of finished products such as computers, television panels and smart cards in India.
At the same time duties on finished steel has been increased to curb imports, while those on raw materials like sulphuric acid for fertilisers have been reduced.
“We welcome initiatives on ease of doing business, enhancing global competitiveness of the Indian industry, rationalisation of taxes for GST (goods and services tax) roll out and enhancing social security,” said Rakesh Srivastava, senior vice-president, sales and marketing, Hyundai Motor India Ltd. “It will uplift the business and consumer sentiments and there will be only a marginal increase in basic duties. The service tax increase is not expected to have much impact on manufacturing since there is a facility to offset it.”
Jaitley also ventured into new territory by proposing to create a debt management agency and a bankruptcy code, while sticking to the deadline of implementation of a uniform goods and services tax in April 2016, all of which buoyed the manufacturing sector. The perennial concerns over efficacy in implementation, however, remain.
“The commitment to infrastructure, announcement of GST with a specific timeline and a simplified tax structure greatly enhances ease of doing business in India,” said Eberhard Kern, MD and CEO, Mercedes-Benz India. “These positive steps will simulate growth and should indirectly help the automotive market. It is crucial now that these measures are implemented within the next 12 – 18 months to accrue desired results.”