Union Budget '13 Review (First Cut)

Union Budget 2013‐14 (First cut)

Credible and balanced budget

Edelweiss Research February 2013

Union Budget FY14: Highlights

Fiscal math largely credible. Revenue slightly aggressive, but expenditure and subsidies well provided for.
Consolidation process continues. Fiscal deficit for FY14 budgeted at ~4.8% of GDP (our estimate ~5.0% of
GDP).
GDP)
Budgeted net borrowing is at ~INR 4.8tn. We believe it could be a bit higher by ~INR200bn. However, gross
borrowing came higher than expected as government intends to rebalance the maturity profile of debt.
Budget was growth supportive as it intended to support investments through extra tax exemptions for
investment in plant and machinery. Further, it substantially raised the limits of tax‐free infra bonds.
Some attempt has been made to boost financial savings by liberalising coverage of Rajiv Gandhi Equity
p g y g g j q y
Scheme (RGES) and insurance sector. Further, the finance minister announced that inflation indexed bonds
will be introduced possibly with the intent to curb gold imports.
While the finance minister cited CAD as a big worry, no export boosting measures were announced.
While the finance minister cited CAD as a big worry, no export boosting measures were announced.
Positively impacted companies are:
Capital goods companies namely Thermax, Cummins, ABB and Siemens
Refiners namely IOCL, BPCL, HPCL, MRPL and RIL
Housing finance companies namely LIC Housing Finance, Gruh Finance and Dewan Housing
Bus manufacturers namely Ashok Leyland, Tata Motors and Eicher Motors
Affordable housing developers namely Jaypee Infratech & Puravakankara Projects

2

Fiscal math looks largely credible

Fiscal math largely credible
Fiscal consolidation process continues, although at a bit slower pace compared to FY14. The FM has announced gross fiscal
deficit for FY14 at 4.8% of GDP (against 5.2% of GDP in FY13).
Broadly speaking the Budgeted fiscal target is certainly in the realm of possibility, we think that fiscal deficit of 5% of GDP is
more realistic.

Revenue slightly aggressive
Gross tax revenue collection of the government will improve on account of better tax buoyancy on account of improving
economy and some changes in the taxes, which will add to government kitty. However, the benefits of headline tax rate
hikes in indirect taxes last year will be absent in FY14. Overall, we think that 18% YoY growth in tax revenues is more
realistic compared to 19% YoY assumed by the government (against ~17% YoY achieved in FY13).
p y g ( g )
On non‐tax revenues side as well, we think FM has been a bit aggressive, particularly with regards to telecom revenues .
Expenditure does not seem to be under‐budgeted
Budgeted growth of 16% YoY in expenditure is sizeable and we do not see any material risk of slippage on this front
Budgeted growth of 16% YoY in expenditure is sizeable and we do not see any material risk of slippage on this front.
Subsidies (at ~2% of GDP) have been adequately provided especially given that government is undertaking periodic diesel
price hikes.
Meanwhile, sharp cuts in plan expenditure undertaken in FY13 are being compensated by budgeting 29% YoY growth in
FY14. Some of this is related to substantial increase in rural development spending.
FY14 S f hi i l d b i li i ld l di

3

Minor changes in taxes

Slight changes in direct and indirect taxes
Minor changes in the direct taxes. Surcharge raised to 10% from 5% on corporate taxes.
Surcharge introduced on super rich (income above INR 10mn)
No changes in headline indirect taxes rates.
Voluntary compliance encouragement scheme introduced in service taxes for the defaulters.
DTC bill to be introduced in this budget session itself.
GST no specific time‐frame for implementation mentioned. However, FM mentioned that significant progress has been
made and he hoped to introduce constitutional amendment and draft bill in GST in coming months.

4

Few positive announcements…

Positive for investment
Investment allowance of 15 % in FY14 and FY15 to manufacturing companies which invest more than INR1bn in plant
and machinery.
Tax free infra bonds to increase from INR250bn to INR500bn.
T f i f b d t i f INR250b t INR500b
Road regulator to iron out issues in the sector.

Incentives to boost financial savings
RGES scheme to incentivise households savings in equities and mutual funds broadened in coverage.
Announcement to introduce inflation indexed bond.
Certain steps to increase the coverage of insurance.

Others
Additional tax deduction for first time house buyer (loan up to INR 2.5 million)

5

Fiscal deficit likely to be ~5% of GDP in FY14

Fiscal Deficit FY14 at 5.0% of GDP (INR bn)
Particulars FY14 (Edel) FY14 (BE) FY13 (RE) FY13 (BE) FY12 (Actual)
Tax revenue (net) 8,741 8,841 7,421 7,711 6,297
      ‐ Direct tax 6,654 6,709 5,685 5,676 4,967
     ‐ Indirect tax
Indirect tax 5,565 5,650 4,695 5,054 3,924
   Less : Assignment to states 3,478 3,518 2,959 3,019 2,595
Non‐tax revenue receipts 1,624 1,723 1,297 1,646 1,217
          of which telecom & 3G 300 408 194 580 174
Capital receipts 605 665 381 417 369
      of which disinvestment
of which disinvestment 400 400 240 300 181
TOTAL RECEIPTS 10,970 11,228 9,099 9,774 7,883

Non‐plan expenditure 11,078 11,100 10,016 9,699 8,920
   a) Total subsidy 2,360 2,311 2,577 1,900 2,179
   ‐ Food subsidy
Food subsidy 950 900 850 750 728
    ‐ Fertilizer subsidy 660 660 660 610 700
    ‐ Oil Subsidy 650 650 969 436 685
   ‐ Interest and others subsidy 100 101 98 104 66
b) Interest payments 3,707 3,707 3,167 3,198 2,732
c) Other revenue expenditure
c) Other revenue expenditure 3,911
3 911 3,911
3 911 3,454
3 454 3,557
3 557 3,210
3 210
d) Capital expenditure 1,100 1,171 819 1,043 799
Plan expenditure 5,553 5,553 4,292 5,210 4,266
    ‐ Revenue 4,433 4,433 3,434 4,205 3,337
    ‐ Capital 1,121 1,121 858 1,005 786
TOTAL EXPENDITURE
TOTAL EXPENDITURE 16,631
16 631 16,653
16 653 14,308
14 308 14,909
14 909 13,186
13 186

Fiscal deficit 5,662 5,425 5,209 5,135 5,303
Revenue defcit 4,046 3,798 3,912 3,503 3,944
Revenue deficit/GDP (in %) 3.6 3.3 3.9 3.4 4.4
Fiscal deficit/GDP (in %)
Fiscal deficit/GDP (in %)                      5 0
5.0 4.8
4 8                       5 2
5.2                      5 1
5.1                      5 9
5.9
RE: Revised Estimates          BE: Budget Estimates
Source: Budget documents, Edelweiss research
6

Borrowing could exceed by ~INR 200bn

Funding the Fisc
FY14 (Edel) FY14 (BE) FY13 (RE)
Gross market borrowing                   6,527                      6,290                      5,580
       ‐ Net market borrowing
Net market borrowing                 5 077                   4 840                   4 674
5,077 4,840 4,674
Net short term (T‐bill)
198                         198                         457
Small savings scheme
58
58
86
Others
329                         329                             (8)
Fiscal deficit
Fiscal deficit                 5 662                   5 425                   5 209
5,662 5,425 5,209
RE: Revised Estimates          BE: Budget Estimates
Source: Budget documents, Edelweiss research

Net budgeted market borrowing of INR 4.8tn (vs INR 4.67 in FY13) was inline with the market expectation
However, gross borrowing came much higher than the expectations of ~INR 5.75tn
Th i f hi h b i i b b k/ it hi ( t ~INR500b ) hi h ill b i d
The main reason for higher gross borrowing  is buyback/switching (extra ~INR500bn)  which will be carried
this year for better debt management.

7

Comparison to pre‐crisis period

Revenues still long way to go Expenditure reined back close to pre‐crisis levels
13.5 17.0

12.0 15.6

)
(as % of GDP)
(as % of GDP)

10.5 14.2

9.0 12.8

7.5 11.4

6.0 10.0

FY14(Edel)
FY14(Edel)

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13
FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13
Gross tax as % of GDP
G % f GDP Total expenditure as % of GDP
T l di % f GDP

F
F
Source: CMIE, Edelweiss research

8

FY13 : Significant consolidation in 2H

In 2H FY13 government undertook aggressive fiscal consolidation to achieve gross fiscal deficit of ~5.2% of
GDP in FY13 (vs Budgeted ~5.1% of GDP).
The consolidation was undertaken mainly via reductions in expenditure (especially plan expenditure).
The consolidation was undertaken mainly via reductions in expenditure (especially plan expenditure)

Deficit as % of budgeted fiscal deficit
130

fiscal
as % of Budgeted f
106

deficit) 82

58
(Fiscal deficit a

34

10
Apr.

Sept.
Jun.

Mar.
Dec.
Jul.

Aug.

Oct.
May

Nov.
S
FY13 FY12
Source: CMIE, Edelweiss research

9

Sector-wise
Sector wise Announcements

10

Automobiles

Sector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/company
Auto Relief in excise duty. Not likely. Increase in excise duty to 30% on non‐ Marginal negative for M&M as we
taxi SUVs in 27% bracket. expect the additional levies to be
passed on to the customer.
Clarity on diesel passenger vehicle taxation. Diesel tax on higher capacity SUVs No announcement. Positive for M&M.
was expected
Benefits in tax and R&D expenditure to electric Likely. No announcement. Marginal negative for M&M.
vehicles.
To provide INR149bn for JNNURM (to Positive for Ashok Leyland, Tata
purchase upto 10k buses, especially Motors, Eicher Motors.
by hill states).
by hill states)
To increase tax rate on payments of Neutral for Maruti as applicable rate
royalty/technical fees to non‐ will be the rate of tax stipulated in the
residents from 10% to 25%. DTAA (10% between India and Japan).
Custom duty hike from 75% to 100% Neutral.
on luxury cars (CIF value above
on luxury cars (CIF value above
USD40k).
Custom duty hiked from 60% to 75% Neutral.
on bikes above 800cc engine capacity.
Excise duty on truck chassis reduced Neutal.
from 14% to 13%.

11

BFSI

BFSI Bank's lending to power sector • Sectoral exposure limit for banks in
case of lending to power sector can be
relaxed to facilitate fresh lending.
• Long term base rate to be introduced
for infrastructure projects which
should be delinked from bank base
rates in order to provide stable
interest charges for projects
Tax sops on fixed deposits • Increasing the TDS limit on fixed
deposit to Rs 25,000 from 10,000 at
d it t R 25 000 f 10 000 t
present.
• Tax break on longer tenor to provide
some relief to ALM: Considering low
deposit mobilization and lending
skewed towards longer tenor assets
g
Commodities Transaction Tax Levy of CTT on commodity trading Proposal to introduce Commodities Negative for MCX as it impacts the
Transaction tax (CTT) in a limited way. jobbing volumes and increases cost of
0.01% of the value of the contract trading on MCX vis‐à‐vis international
implemented exchanges. However, on the positive
side with the introduction of CTT, the
bill now also specifies that
commodities trading will not be
considered a speculative transaction
and hence CTT paid by the assessee
along with losses incurred, if any can
now be adjusted against other
now be adjusted against other
business income thereby leading to tax
benefits.

12

BFSI‐contd.

BFSI Interest subvention scheme for ST Positive for private banks as they too
crop loans to be continued and to be can offer the lucrative scheme to
extended to Private SCBs as well. farmers. A brief description of the
scheme‐Under this loans are provided
by banks to farmers at 9% and if the
repayment is done within the agreed
time frame, the farmer ends up paying
only 4% RoI while the bank can claim
another 5% from the government via
RBI. While now private banks too can
RBI. While now private banks too can
offer this scheme we believe they are
under no compulsion to do so.

Additional deduction of interest upto Positive for home loan financiers in
INR0.1mn for first home loan (of less the category of INR2.5mn and below,
that INR2.5mn) sanctioned in FY14.
h INR2 5 ) i d i FY14 namely LICHF, Dewan Housing, Gruh
l LICHF D H i G h
Value of property to be less than INR 4 Finance. SBI too stands to benefit to a
mn limited extent on the home loans
portfolio.
FIIs to be permitted to trade currency Positive for MCS‐SX, however the limit
g
derivatives on exchange to the extent to the extent of their exposure only
p y
of their Indian rupee exposure in limits the overall volume expansion
India
Infrastructure tax‐free bonds of Though the eligible limit of INR500bn
INR500bn can be issued in FY14 is lower than the INR600bn of last
fiscal, given that only INR250bn is
likely to be mobilized under this head
lik l t b bili d d thi h d
of the total limit the reduction in
overall limit is unlikely to have any
impact

13

Capital Goods

Capital Increased allocation to strenghthening T&D Increased allocation to No annoucement Negative
Goods network to cut AT&C losses strenghthening T&D network to cut
AT&C losses
Investment Allowance @15% on Positive for Capital equipment
investments in new Plant & companies like Thermax, Cummins,
Machinery worth INR 1bn and above ABB, Siemens, etc.
Tax on royalty payments by Indian Marginally negative for Cummins
subsidiary hiked to 25% from 10% India
Increased allocation of Capital
Positive Bharat Electrnoicsand Larsen
Expenditure in defence (INR 867bn ,
Expenditure in defence (INR 867bn ,
& Toubro
& b
25% YoY growth) in FY14E

14

Cement

Cement Reduction in excise duty on cement and No change. No change.
simplification of the duty structure to specific
rate per MT against the current complex
structure of charging it on ad‐valorem cum
specific duty basis and further relating it to the
Abolition of import duty on pet coke and levy of No change. No change.
customs duty on cement imports.

Classify cement as 'Declared Goods' under No change. No change.
Section 14 of the Central Sales tax Act to put it
on equal footing with other core sector goods
like coal and steel.
Customs duty on steam coal hiked by The impact will be marginal in the
2% and CVD by 1%. INR0.3‐0.8 range per bag of cement.
No incremental impact on ACC and
No incremental impact on ACC and
Tax on royalty payments hiked to 25%
Ambuja Cement as India has DTAA with
from 10%.
Switzerland capping the tax at 10%.

15

Consumer Goods

Consumer Rural initiatives on income generation. We expected this to continue, though Contribution to MNREGA scheme Rural growth has been growing ahead
Goods growth could moderate. maintained at INR330bn (no of urban growth which is likely to
increase), in line with expectations. continue.

No increase in excise duty on cigarettes. Increase in exercise duty by 8‐ Excise on cigarettes increased 18% on The hike is sentimentally negative for
10% for cigarettes was expected. all segments except below 65mm. all cigarette companies, especially the
smaller players as this is second year
of harsh Budget for cigarettes. ITC will
need to hike price ~13% to offset this
excise rise to maintain EBIT margin at
excise rise to maintain EBIT margin at
the current 32.3%; ITC's strong pricing
power will have little impact on
volumes, though no change in sub
65mm category will prop volumes.
An upward revision in the income tax exemption
p p We expected an increase as it would
p Tax credit of INR2,000 for income up
, p We expect this step to marginally
p p g y
limit. be a step towards direct tax code. to INR500,000 (leading to effective increase disposable income of the
exemption of INR220,000 for urban poor/urban middle class which
individuals with income less than will help boost Consumer spending to
INR500,000). some extent.
Rate of tax increased from 10% to 25% No significant impact on most
on royalties and technical fees paid
li d h i lf id companies (HUL, Colgate) due to DTAA
i (HUL C l )d DTAA
to non‐resident. This will be effective rate over‐riding the enhanced rate.
as per government note from April 1, Since it is applicable from FY15 there
2014 (i.e. FY15). is no near term impact.

16

Construction

Construction Steps to lower borrowing costs by allowing Unlikely. No announcement. Neutral.
refinancing of INR term loans through ECBs.

Government will constitute a Positive as it will increase
regulatory authority for the road
regulatory authority for the road accountability and transparency in the
accountability and transparency in the
sector. system.
3,000 km of road projects will be Positive for the sector as it will
awarded in the first six months of increase order flow.
2013‐14.

17

IT

IT MAT on SEZ income to be withdrawn as it is Did not expect to occur No announcement
counter to the long‐term policy announced by
the Government through the SEZ Act.
Alternatively, MAT should be withdrawn at least
in respect of SEZs which have already been
notified so that economic viability of these SEZs
is protected
Denial of tax deductions for onsite The expectation was that onsite No announcement
services.With the sunset of STP benefits, there services will be treated as exports of
has been denial of tax deductions for onsite services and not as export of
services on one pretext or the other, which the manpower
exporters of IT services are entitled to.
Increase in surcharge to result in Marginally negative impact
1.3% average tax increase as some
portion of the income is on MAT and
majoiity on Non MAT.
j iit N MAT

18

Media

Media Subsumption of service tax and entertainment tax Unlikely as it also depends on the No announcement No impact
in GST. implementation of GST which has
been pending for a few years.
Reduction of customs duty on digital head ends
y g Unlikely as it will put additional
y p Customs duty on set top boxes
y p This will be a negative (~INR65 impact)
g ( p )
and set top boxes. burden on the government and increased from 5% to 10% to promote for cable and DTH companies as
discourage domestic production of domestic production of set top boxes. almost all set top boxes are imported.
STBs. We expect all companies to pass this
hike to consumers.
FM Phase 3 auctions will be Positive for ENIL, Next Mediaworks and
conducted in FY14. 294 cities
d t d i FY14 294 iti RBNL. Also, slightly positive for
RBNL Al li htl iti f
(population > 0.1mn) will have 839 companies like Sun TV, DB Corp and HT
FM stations. Media which have small FM radio
operations as a % of total sales.
Temporary transfer or permitting the Likely negative for broadcasters as
use or enjoyment of a copyright movie acquisition costs might increase
relating to cinematographic films was due to higher service tax. Likely minor
fully exempt from service tax; now, negative for DTH/cable operators who
this exemption will be restricted to provide pay‐per view facility.
exhibition of cinematograph films in
movie theatres.

19

Metals & Mining

Metals Steel ‐ increase in import duty to 10% from 7.5% Low probability No change None
and
Mining
Removal of steel imports from free trade Unlikely. Measure also requires No change None
agreements (FTA) concurrence of foreign countries
Implementation of zero import duty on import Likely Import duty on all thermal coal Sentimentally positive for Coal India
of certain grades of coal grades at 2%
Imposition of 4% excise duty on silver Negative for HZL and Sterlite
produced from zinc/lead ore
Increase in customs duty for aluminium from Unlikely No change None
5% to 10%
Iron ore ‐ reduction in export duty (currently Unlikely No change None
30%)

20

Oil & Gas

Oil & Gas Removal of National Calamity Contingent Duty on We did not expect any changes on the No announcement
Crude Oil levied @ Rs.50/MT. same.
Extension of 100% Excise Duty Concession to North Should happen, maybe partial say No announcement
East Refineries. 50% or 75%
Declared Goods status to Natural Gas and LNG
Declared Goods status to Natural Gas and LNG No changes
No changes No announcement
No announcement
Extension of 'Infrastructure Status' to 'Gas projects' No changes No announcement
such as LNG terminals for the purpose of 10‐year tax
holiday under Section 80‐IA
Extension of 7 year tax holiday on refineries from No changes No announcement
March 2012 to March 2017
100% Depreciation on Fuel quality up‐gradation
100% Depreciation on Fuel quality up‐gradation No changes
No changes No announcement
No announcement
projects
Include petroleum products in GST, while addressing No changes No announcement
the concern of states through levy of an additional
tax
None Import duties on crude to increase No announcement No changes. This is positive for refining
from 0% to 2.5%. Also increases
from 0% to 2 5% Also increases companies (IOCL, BPCL, HPCL, MRPL, RIL)
companies (IOCL BPCL HPCL MRPL RIL)
import duties on all products by 2.5% as the current duty differential of ~2% is
except diesel, LPG, Kerosene maintained
‐ PSC for NELP blocks will in future be Revenue sharing model will ease the
moved from profit petroleum sharing capex approval process. If the
to revenue sharing model Rangarajan Panel recommendations on
‐ Shale gas policy to be announced
Shale gas policy to be announced natural gas pricing are approved, it will
natural gas pricing are approved it will
soon be a positive for RIL and ONGC. Any
‐ Natural gas pricing policy will be approvals by CCI for NELP blocks will
reviewed soon lead to exploration activities picking up
‐ Cabinet Committee on Investment
(CCI) will meet to clear hurdles in
exploration/development of NELP
l ti /d l t f NELP
blocks
Investment allowance of 15% on new The same is positive for sector but more
plant & machinery acquired and for RIL. RIL has planned $12bn capex
installed in FY14 and FY15, and worth and most of the same is expected to be
INR 1bn and above commercial 2015 end.

21

Pharma

Pharma Rolling out of universal access programme to Important to see if private sector Healthcare expenditure  increased Positive as it increases the reach for
essential medicines with an outlay of INR5,000‐ players will be part of the from INR30,000 crores to medicines thereby improving
6,000 crores p.a. (0.1% of GDP). procurement for access to essential INR37,330crores (increase of 24%); penetration levels in both urban and
medicines. overall, the expenditure under rural areas.
National Health Mission increased to
N i l H l h Mi i i d
INR21,200 crores and will include
both rural and proposed urban
mission.
Increase weighted deduction on R&D to 300% No announcement.
from current 200%.
Revisit the MAT currently being levied on SEZs, Increase in surcharge from 5% to 10%; a) Negative impact of 0.4% increase in
given industry has high investment in SEZs. investment allowance of 15% over MAT rate to an extent that domestic
current depreciation on capex of accounts for 40% of total business.
INR100 crores and more on P&M.
b) Investment allowance does not
benefit as most companies pay tax at
benefit as most companies pay tax at
MAT.
Remove excise duty disparity between API and We expected this in order to reduce No change in the duty structure.
formulations. disparity in the MODVAT structure.
Healthcare Increase in exemption limit under Section 80D Likely. More insurance penetration in Tier ‐II   Improve affordability for quality
(hospitals) for health insurance. cities without prior approval of IRDA healthcare in these towns that are
and health cover under social target areas for growth by specialty
security package for unorganized hospitals.
sector.
Priority sector status to healthcare including
hospitals and diagnostics.
Increase in surcharge from 5% to 10%.
Increase in surcharge from 5% to 10%. Negative impact with increase in tax
Negative impact with increase in tax
rate by 1% as most profit comes from
domestic business.

22

Real Estate

Real Give infrastructure status to affordable housing Likely Current sops for affordable housing No Impact
Estate segment. to continue.
Tax exemptions for small houses (under‐60 Likely No announcement. No Impact
sq.m carpet area) and special housing zones.
Increase in exemption limit on interest Not likely Additional interest deduction of Positive for Jaypee Infratech (BUY) and
payments on mortages. INR100,000 for housing loans up to Puravakankara Projects (Unrated).
INR2.5mn taken  for first home from Other listed companies do not have a
the period 1.4.13 to 31.3.14. significant presence in <INR3mn
segment
Industry status to real estate.
Industry status to real estate. Not likely
Not likely No announcement.
No announcement. No Impact.
No Impact.
Implementation of REITs so that small investors Not likely No announcement. No Impact.
will get a chance to invest in real estate assets.
Surcharge on taxes for higher income groups. Likely Surcharge of 10% for persons whose Minimal impact as segment is not
taxable income exceeds INR10mn per price sensitive / does not face
year. affordability issues.
Urban housing fund to be set up by
Ub h i f d b b Unlikely to impact listed space.
U lik l i li d
NHB for INR20bn.
TDS to be deducted at a rate of 1% for Could impact demand for real estate
transfer of immovable property (other properties in NCR and partially in
than agriculture land), where the   Mumbai with a possible fall in
consideration exceeds INR5mn. speculative transactions.
p
Houses above 2,000 sq ft or above To impact costs by ~0.6%. Expected to
INR1crore to have lower abatement of be passed on to end users.
70% against 75%. Sentimentally negative for DLF, Oberoi.

23

Power & Infrastructure

Power 2% customs duty imposed on thermal PPAs have a clause to pass on such
coal imports (earlier nil) & CVD increase in cost to procurers. However,
increased to 2% from earlier 1%. this is negative for developers having
merchant contracts. Negative for JSW
Energy and PTC India.
Sec 80 IA benefits extended and DDT Positive ‐ on expected lines
exempted for dividend from foreign
companies by another year

24

Retail

Retail Clarity on nuances of norms (sourcing, back Mirroring proactiveness in promotion No announcement. Confusion persists regarding FDI
end investment, etc.) for FDI in multi brand of FDI in single‐brand retail, we norms; will continue to await clarity.
retail. expected government to provide
clarity on norms on FDI in multi‐
No further regulations to curb gold demand; in We had not ruled out stricter No changes announced. Positive for branded jewellers who
January 2013, government had hiked import regulations like reduction of credit were fearing stricter rules
duty on gold from 4% to 6%. period by domestic banks provided to
jewellers (from current 180 days
credit to 90 days), mandatory quoting
of PAN numbers for high value
of PAN numbers for high value
purchases and to introduce gold‐
linked financial instruments to divert
savings from physical gold to bonds.
An upward revision in the income tax exemption We had expected an increase as it Tax credit of INR2,000 for income up We expect this reforms to marginally
limit.
limit could be a step towards direct tax
could be a step towards direct tax to INR500,000 (leading to effective
to INR500 000 (leading to effective increase disposable income of the
increase disposable income of the
code. exemption of INR220,000 for urban poor/urban middle class which
To further reduce central excise duty on We had belived this was unlikely due Zero excise duty route', as existed This is clearly positive for branded
branded clothes (effective excise duty reduced to ballooning fiscal deficit and the prior to Budget 2011‐12, is being garment players and also retailers like
by 90bps from 4.5% on 3.6% on apparel retail fact that there was cut initiated in the restored in respect of branded Pantaloons and Shoppers Stop
p
price in the last budget).
g ) last budget.
g readymade garments and made ups.
y g p
GST roadmap laid down This is a clear positive for Retail
players.
Service tax will be leviable on taxable This will be negative for QSRs and fine‐
service provided in restaurants with dining with air‐conditioning
air conditioning or central air heating
air‐conditioning or central air heating
in any part of the establishment at
any time during the year.

25

Telecom

Telecom Increase in surcharge to result in Marginally negative impact
1.6% average tax increase.

26

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