Budget 2015: Can emerge as landmark in India growth story, says BMR

BMR Advisors

The new Government that took charge last year will present its first full Budget this February 28.  With almost 9 months of incubation period and some reforms thrown in, the Government is faced with a lot of pressure as well as an opportunity to make a bold statement through this annual milestone event. 

Development plank formed the principal basis for the new Government’s majority mandate at the elections.  There is a heightened sense generally that the pace of reforms has been slower than expected.  Businesses and the economy are already almost cringing for big ticket reforms and for change to percolate to the ground levels.  This, with an improving yet challenging macro-economic environment, presents an interesting menu for the Government’s date with February 28.

The Government has been committed with its ‘Make in India’, ‘100 Smart Cities’, and ‘Digital India’ initiatives, amongst others.  The intent is clear - to lead India as the epicentre of all activity and make it a global supplier of goods and services.  There has also been a constant endeavour to improve India’s tax policy and administrative framework. 

From an overall policy standpoint, Budget 2015 could well emerge as landmark in India’s growth story if the Government manoeuvres the Budget as an incisive tool to break growth shackles.  On the tax policy side, announcements regarding two of the most deliberated tax reforms, viz DTC and GST, are likely to feature in the Budget.  Insofar as tax administration is concerned, Government would do well to embrace recommendations put forth by the Tax Administration Reform Commission.    

On the direct tax side, it is anticipated that General Anti Avoidance Rules may be deferred to continue building the favorable investment climate.  Likewise, there is also a strong expectation that some clarification is announced in the context of highly controversial ‘indirect transfer’ provisions. 

This provision single handedly dented India’s image on the international stage and there is need for the new Government to steadfastly make amends and demonstrate that it will ‘walk the talk’.  Provisions for Dividend Distribution Tax and Minimum Alternate Tax could also see a reshuffle, in particular for SEZ units and developers.  Separately, to make Real Estate Investment Trust and Infrastructure Investment Trust structures more viable, the industry at large continues to echo the need for more incentives.  Following the recent announcement of the policy framework for Finance SEZs, a concept that could help India develop competitive conclaves of financial services further regulations are expected.

On the indirect tax side, Budget 2015 is likely to kick off the spadework (such as rolling out white paper, model legislations etc) for implementation of GST.  Policy initiatives such as, ‘Make in India’ campaign, are likely to induce rationalisation of tax rates across sectors.  Also, domestic manufacturers are hopeful that inverted duty structure concerns would be addressed by the Government.