Tuesday, March 12, 2013

Union Budget: We get disappointed: Tax Experts-

The Federation of Andhra Pradesh Chambers of Commerce and Industry (FAPCCI) in association with CPE Study Circle & Knowledge Partner – Ernst & Young organized a meeting on “Union Budget: Impact on Direct and Indirect Taxes & Industry and Trade” on March 02, 2013 at Federation House, Hyderabad. 

Mr. Jayesh Sanghvi, Partner, Ernst and Young Pvt Ltd, Mr. Simachal Mohanty, Director, Taxation, Dr. Reddy Laboratories, Mr. B. Shankar, Senior Advisor, Indirect Tax, Ernst and Young Pvt. Ltd, Mr. Srinivas Sharma, Finance Head, Ramky Estates and Farms Ltd, Mr. Devendra Surana, President, FAPCCI, Mr. S. Thirumalai, Senior Advisor, Deloitte Touche Tohmatsu India Pvt. Ltd, Mr. Srinivas Ayyadevara, Senior Vice President, Mr. Abhay Kumar Jain, Chairman – Direct Taxes Committee, FAPCCI and Mr. M.V. Rajeshwara Rao, Secretary General, FAPCCI have addressed the taxation experts.

Talking points from speakers:

Mr. Jayesh Sanghvi, Partner, Ernst and Young Pvt Ltd
Ø  Economy expected to grow at around 5.0% in FY 2012-13
Ø  Agriculture – 1.8%
Ø  Industry – 3.1%
Ø  Services – 6.5%
Ø  GDP growth remains sluggish with higher inflation
Ø  GDP Growth at 6.1% - 6.7%
Ø  Nominal GDP Growth at 13.4%
Ø  Assumed inflation rate at 7% if real GDP growth is about 6.4%
Ø  Overall expenditure increase of 16.4% is being financed by assuming a nominal growth of 13.4% and a buoyancy of nearly 1.5 in gross tax revenues. This seems unrealistic.
This buoyancy was 0.93 in FY12 and 1.3 with respect to RE in FY13.
FAPCCI welcomed long-term infra brands.

Mr. Jayesh Sanghvi, Partner, Ernst and Young Pvt Ltd
Ø  Companies engaged in manufacture of article or things
Ø   Acquired and installed new P&M during April 1, 2013 to March 31, 2015
Ø   Value of the P&M should be more than Rs. 100 cr.
Ø  Tax Residence certificate (TRC) is a necessity but not a sufficient condition to avail DTAA benefit [Retrospectively from April 01, 2012, FY 12-13].
Ø  In order to avail DTAA relief, payee has to pass twin tests
Ø  Residence Test: Produce TRC to evidence that he is resident of contracting state. Tax department issued a Press Release on 01.03.13, stating that it will accept TRC and will not go beyond TRC and question resident status.
Ø  Sunset clause for availing tax holiday for power sector    extended by one more year

Mr. Devendra Surana, President, FAPCCI
Ø  Highlighted the problems faced by industry and trade from all areas; whether it is the international situation of Europe, Greece, Italy or the domestic slow down in the Indian economy. India has always been higher at Interest Rates, when we look at India, it has been fighting from Inflation since last 2-3 years and the Industrial production was between 1% to 2% and even negative due to poor performance of manufacturing sector.

Ø  Another major problem is huge infrastructural bottleneck, in AP, Power has been a major problem since long time, in addition to it Shipping, Road Sectors are also facing bottlenecks.

Ø  The Budget proposes an investment allowance at the rate of 15 per cent to a manufacturing company that invests more than Rs.100 crore in plant and machinery which is welcome measure.

Ø  Over the last few years MAT has gone up, the saving of MAT is not really too much, However the FM to encourage Micro, Small and Medium Enterprises (MSME) sector, proposed to continue non-tax benefits to these units for three years even after they graduate to a higher category.

Ø  That fiscal deficit for the year 2011-12 was 1.8% and the Finance minister has articulated a Fiscal Deficit (FD) target of 4.8% of GDP during FY14 with a commitment to bring down the FD, how credible this will be, if expenditure goes up next year. There is no stimulus to grow and we are targeting 20% revenue.

Mr. Abhay Kumar Jain, Chairman, Direct Taxes Committee, FAPCCI
Ø  This 32 AC giving investment alliance for setting up the new industries for manufacturing was the recommendation of the FAPCCI, but we are disappointed by the limit of 100 crores. We suggest from rupee one. According to the survey last 242 industries only invested more than 100 crores.

Ø  So, FAPCCI feels that the limit should be brought down to 5 crores or much lower limit in order to the boot in the investment in new industries.

Ø  FAPCCI had recommended in order to improve current deficit to re introduce a section 80 HSC which will exempt all the export profits and bring lot of foreign currency to India.

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