Vikram Kotak, Chief Investment Officer, Birla Sun Life Insurance

BUDGET 2010-11 is likely to appear as a non-event for the markets as it is unlikely to announce big-bang reforms. However, it assumes significance from the fact that we expect it to lay forth the structural footprints for the next 5 years of economic growth. It will also have more anxious audience than its counterparts in the past. The global rating agencies would be looking forward to a comprehensive plan for rolling back the fiscal stimulus and reduction in fiscal deficit in order to revisit India ’s sovereign rating. Further, the Finance Ministers across the world, esp. troubled economies like Euro , Japan & US, would look for guiding light on striking a balance between growth and fiscal consolidation and how to revive domestic demand.

Overall, given the challenging economic backdrop, the government has done a commendable job. Action on implementing 36 of the 45 major announcements has already been completed or is in the final stage of completion. The quality of execution has been far better than that seen in the past. Few significant policy initiatives include strong traction in disinvestments which will garner ~ Rs.13000-Rs 14000 cr in FY10 against budgeted Rs.1,120 cr, introduction of a nutrient-based subsidy regime, clearance of the Rights to Education Bill and formation of the Unique Identification Authority. Higher spending on infrastructure and social sector cushioned the economy during the downturn (esp. NREGS and JNNURM). The price hike in Urea with political consensus is a clear indication of government’s intention to take structural ground-level measures. Ambitious road projects and draft Direct Tax Code have been laid down, however, their execution will be the key.

Going forward, whether the stimulus will be and should be withdrawn or not is no longer a debatable question. What is pertinent is a clear roadmap on how it will be done. India has already withdrawn 40% of the monetary stimulus. With economy already on a sustained recovery path, we expect fiscal stimulus to also follow suit, in a gradual and calibrated manner without snapping growth. The government would attempt to finely balance the dual objectives of sustaining growth momentum and addressing fiscal consolidation. Social programs and infrastructure spending are likely to remain other key focus areas. All eyes will be on this budget to get some headway on implementation of the new Direct Tax Code, guidelines for smoother transition to the proposed GST regime, auction of 3G telecom licenses, reforms pertaining to FDI limits for the insurance and retail sector and concrete steps to augment infrastructure financing through the ‘takeout financing’ scheme of IIFCL.

The government should not miss the opportunity of fiscal consolidation as it did in the growth phase of 2003-2007. At this juncture, it is pertinent to note that the economy does not require big promises. The need of the hour is the timely execution of the unfinished agendas which has the potential to take India to the next growth trajectory.

Partha Iyengar, Vice President, Distinguished Analyst Regional Research Director, India, Gartner

INDIA'S IT industry (domestic and offshore) has gone beyond needing 'micro level' sops in the form of tax breaks etc. in order to provide or retain its competitive advantage. It is at a point where some major macro statements and investments have to be made in the areas of infrastructure and education, the two factors that are major constraints to the industry moving along the path to becoming an IT superpower. Specific steps have to be announced in terms of continued increases in infrastructure spend, both in the urban and semi-urban areas, as well as an expanded focus on revamping primary and secondary education (PLEASE stop tinkering with the IITs and IIMs).

As a close second priority, a focus on broader reforms in the area of labor laws, privatization, FDI guidelines for various industries as well as a strong focus on IP protection are required.

In all of the above, there are two phases. One is the statement of intent and allocation that will come in the budget. The second, and often equally important element, is the statement of the steps the government will take to ensure the actual IMPLEMENTATION and oversight of whatever is announced, which is where there are major issues even in the implementation of past policy announcements.

The mandate given to the current government is the best chance that India has to set the course firmly towards global IT relevance and dominance. If we do not achieve this in the next five years, India will spiral down towards IT obscurity (a scenario we call "Global Irrelevance").

Vaswani , Executive Vice Chairman, intex Technologies

"DESKTOP penetration amongst the masses has still not gained momentum. The growth rate is declining. GDP growth is very directly linked to IT literacy and infrastructure, amongst various other parameters. It is time for the government to come out with a specific policy measure in this direction. The government is already thinking of adopting cloud computing technology for delivering e-governance services. It should also allocate funds for a scheme to enable homes and schools in villages to have the benefit of a PC. The digital divide issue has to be addressed more aggressively on the lines of Right to Education Act."

"Under the umbrella of convergence, we have seen that mobile phones satisfy communication & information needs of masses and could play a major role in also bringing them into the banking system. Policy initiatives and fiscal incentives to promote local manufacturing of mobile phone components/accessories and complete mobile phones should be addressed. In this sector we have the potential to become a leading global player, aided by a huge domestic demand."

Brotin Banerjee, CEO and MD, Tata Housing Development Company

WITH the launch of affordable housing and improved liquidity scenario, the Indian real estate sector is looking optimistic after going through a rough patch since 2008. While Indian real estate may be geared up for better times in 2010, the liquidity crunch witnessed in 2008-09 has led to a situation wherein there is a need for easing of lending norms for the sector. Given recent controversies surrounding FDI in the sector, clear policy statement on FDI participation is a necessity.

We believe that the government needs to adopt a multifold strategy for revival in the real estate sector. The following would be our expectations from the union budget:

On the consumer front

Subsidize Stamp duty and registration

· The Government should initiate schemes to subsidize stamp duty and registration fees for the end consumers.

Taxable Income Slabs

· With salaried class being the most consistent tax payers in India as they are subject to TDS, last year's budget provided only a marginal relief to the salaried class with just a Rs.10,000 hike in the limit for taxable income. The wish is to increase the minimum taxable tax slab to Rs.2.50 lakhs (for men). The next slabs can be at Rs.10 lakhs for 20% tax rate and 30% for income greater then 25 lakhs. Since the Fringe Benefit is now taxable in the hands of the salaried person, not raising the slabs significantly will increase the tax burden for salaried people.

Tax Exempt Investments

· The limit for tax exempt investments under Section 80C is continuing at the archaic Rs.1 lakh has to be increased. This will help those who have the potential to invest. This will also help the housing industry as currently people are not able to derive the full benefits for the principal portion of the housing loan repayment.

Availability of finance for people at the Bottom of the pyramid

· There is a lack of financing for the people working in the unorganized sector, this can be an another thrust area and the government should look at creating options to provide access to cheap and easily accessible financing options in terms of Housing loans, especially for the consumers at the bottom of the pyramid. There is limited or no organized funding for this segment as of now

· The government must ensure to strengthen the National Housing Bank and must encourage Micro Housing Finance Agencies to provide credit to the low income group

· Tax benefits for the home loan to be increased

On the Developer front

1. The Government must incentives developers by waiving off development charges and by focusing on stamp duty and registration for land.
2. The budget should also explore the Public Private Partnership (PPP) format which should be scaled up rapidly.
3. Provide infrastructure subsidies for building affordable housing and Incentives on the tax front could be in the form of introduction of tax benefits for development of affordable / low cost houses townships.
4. The developers should get infrastructure subsidies on developing townships as it leads to an overall infrastructure development leading to an increased cost for the developer

5. Increase focus on green development

The real estate sector contributes to more than 5% of global carbon emissions across the globe and subsides for green projects can lead to an increase in the green projects. The budget should look at providing incentives to both consumers buying properties in green and developers focusing on green development.

6. Relaxation of ECB regulations

External Commercial Borrowing (ECB) is allowed for development of townships and further extension of this will serve the cause of increasing the housing stock in the country. The cost of borrowed funds for the developers is high and the availability of long term loan is also not easy. Therefore, it will serve as a great incentive to increase the access to overseas funds at lower cost through the ECB

Executive Vice Chairman- Mr. Vaswani.

"Desktop penetration amongst the masses has still not gained momentum. The growth rate is declining. GDP growth is very directly linked to IT literacy and infrastructure, amongst various other parameters. It is time for the government to come out with a specific policy measure in this direction. The government is already thinking of adopting cloud computing technology for delivering e-governance services. It should also allocate funds for a scheme to enable homes and schools in villages to have the benefit of a PC. The digital divide issue has to be addressed more aggressively on the lines of Right to Education Act."

"Under the umbrella of convergence, we have seen that mobile phones satisfy communication & information needs of masses and could play a major role in also bringing them into the banking system. Policy initiatives and fiscal incentives to promote local manufacturing of mobile phone components/accessories and complete mobile phones should be addressed. In this sector we have the potential to become a leading global player, aided by a huge domestic demand."

UNION BUDGET 2010 LIKELY TO SUPPORT INDUSTRY

Atul Punj, Chairman, Punj Lloyd Group -Infrastructure

'Last two years have been tumultuous in the truest sense of the word. We faced economic meltdown and limited investments in every sector. However, we have a very positive outlook on the economy this year. We are on the path of recovery and the industry is hopeful that the Government will encourage the optimistic business environment.

The development of a world class overall Infrastructure/construction is extremely crucial as the world is looking at India. We are hosting big ticket international events, laying down metro rail, mono rail projects.

India is undergoing a rapid urbanization. Mega projects like the ultra mega power projects, dams, highways, airports and large construction projects are today the engines for inducing new development paths in India. Government of India has made some positive announcements like that of increasing infrastructure spend from 5 percent of GDP to 9 percent, phasing it over the next five years.

This converts into an investment of US$ 500 billion, over the next five year. Our expectation from this budget would be to encourage/ support public-private partnership in the key mega projects. We sincerely hope that Union Budget 2010 comes with even more positive factors which will ease out further PPP's (Public Private Partnership), JV's and collaborations.

And while the government is extending all possible support for the PPP, completion of the projects on time is one grey area where we all have to look into. The Indian infrastructure/highway/construction industry should be able to finish projects on or even better, before the deadlines. We are all optimistic that Union Budget 2010 will again support the industry to grow and flourish. As an industry player, we expect some initiatives from government in the upcoming budget to fast track the awarding of infrastructure projects.

EXPECTING PILLS AND NO PILLS

Vinay Phadnis, CMD, Phadnis Infrastructure

THIS s is one the most expected budget to be tabled by Finance Minister on 26th of this month. It is very critical for India to survive in the global financial crisis and at other hand Indian common man is very concerned over growing inflation is that directly affecting his plans and pocket. Hence it is very serious task for the Government to address wide range of concerns and expectations from every segment of society. The real challenge is maintaining GDP while keeping control over shooting prices.

On the top of the list let me put Infrastructure and real estate segment that is directly linked to prosperity of society and the nation. In other words, the infrastructure development remains key factor in the all round development of the country. In order to proceed aggressively, we need to focus the segment with more attention. Let`s compare the China`s budget provision for 2010-2011. According to a report, China plans to spend RMB 992.7 billion on infrastructure projects in 2010, up 9.3% from last year`s budget of RMB 908 billion. The Ministry of Finance of China will also release plans to reform the country's natural resources tax policies to promote environmental protection this year. I hope our leaders will take the due cognizant of their measures and vision.

Real Estate: empower the common buyers

Though there are some signs of improvement in economic slowdown scenario, we required to give proper attention towards the middle class tax payer who has been witnessing hardships and unbearable burden of inflation. There is a significant demand for affordable housing. Giving developers a tax holiday on affordable housing projects will help bring shelters over more heads. The income tax rebate on home loans must be continued. There is a tax exemption on entire interest amount paid on a home loan for a house that is rented out. A self-occupied house too should get this benefit. The industry is also hopeful for real estate mutual fund (REMFs) which could provide essential financial support to housing sector. The Government is expected to provide more incentives to them, as it can be acted as major capital contributor to the sector. In order to bridge the gap between demands and supply in the social housing, the Government should also come up with new policies. Rationalizing the stamp duty across the state and encouraging state governments to release the land for low and middle housing schemes, are few more expectations from real estate industry. These measures would certainly give a push to the Indian economy.

Urban Infrastructure Development

As mentioned herein, it is hot time for Indian Government to take quick and effective steps in order to compete with China in area of infrastructure development. The Indian cities and towns needed most attention for development. The metropolitan cities like Pune attract hundred of thousand people per month for different reasons like education to hob search. The city immediately required perfect solution for its far stretched problem of public transportation. The Metro rail project has been emerging as solution. The project needs to be implemented very effectively as well as quickly, so that it could really help citizens to get rid of daily traffic problem. The proper planning is also must for such project in order to avoid possible complications in the future. Punekars should be involved in the planning of the same before going for allocating thousands of crores for the project. The bridges and road development should also be given topmost priority to keep the required pace.

Let's tuned with Telecom infrastructure

India is taking lead in telecommunication with a significant increase in tele-density, which has touched 46.32, a whopping 250% jump in the last four years. There are large number of service providers have entered into Indian market which is ultimately going beneficial for common man. As the strong network of roads leads to rapid development of any region, telecom infrastructure carries equal potential in bringing new era of communication to this country. According to a report, India has crossed the 500 million wireless subscriber mark in November last year. With the increase in the number of players and reduced tariffs, this number is expected to soar. Introduction of WiMAX and 3G would be of great significance for India, as it would help in bridging the gap between rural-urban digital divide. However, stoppage in allocation of spectrum is still cause of concern for moving ahead the business.

Encourage private players in solar energy business

Solar Valleys in India will be on the lines of Silicon Valleys and has a target to generate 20,000 MW of solar generating capacity by the end of 13th Five Year Plan. As part of efforts to combat climate change, Prime Minister Manmohan Singh recently advocated creation of Solar Valleys in India on the lines of Silicon Valley. He has asked industrial houses to view the Solar Mission as a huge business opportunity. The Government should take a lead in this segment and private players should be encouraged to achieve the goal.

Realise the potential in Hospitality

Hospitality is emerging as one of most prominent business sector and is expected to earn 42.8 billion dollars business in next five years. The industry is reviving significantly after few months of economic slowdown. Unfortunately we neither have industry status for this segment nor have master plan for its development. The government must look forward in this direction and adopt new policies to encourage more and more investment in this segment. At the same time, we also are expecting a justified and rational taxation system with better clarity.

Once such positive measures are taken, Indian industries can definitely smell of success taking on global challenges.

CEOs SEEK CARRY FORWARD OF EXCISE BENEFITS FOR ONE MORE FISCAL

Thesynergyonline Economic Bureau

NEW DELHI, FEB 17 :
MAJORITY of India Inc. seek extension of existing excise sops for next fiscal barring engineering and automobile sector in which Indian industry is little apprehensive that there could be a calibrated roll out of excise benefits for them, says a random Survey of the Associated Chambers of Commerce and Industry of India (ASSOCHAM).

The Survey on Industry's Expectations of Budget Proposals for 2010-11 conducted under aegis of ASSOCHAM in which 400 CEOs were consulted by ASSOCHAM Research team concludes that Finance Minister would focus more on to sustain current growth momentum for which continuation of fiscal concessions would have to be retained.

85% of CEOs belonging to large, micro, small and medium enterprises polled in ASSOCHAM Survey held that stimulus package for textiles, gems & jewellery, construction and real estate, cement and steel etc. should go on for 2010-11.

340 such CEOs have expressed their concurrence that they anticipate partial roll out of excise benefits for engineering and automobile sector as these key areas of Indian economy are virtually out of recessionary mode, say findings of ASSOCHAM Survey.

Remaining 160 executives, however, held that the government has already dropped sufficient hints by projecting GDP growth @ 7.5 percent for current fiscal that government has already made up its mind for gradual and measured phase out of stimulus package.

They argued that not only the projected GDP growth of 7.5 percent for current fiscal is an indication to this effect but their reason is supported by the robust figure of index of industrial production (IIP) for December 2009 which clocked 16.8 percent growth - the highest in recent history of economic liberalization.

About 240 CEOs are of the view that the Finance Minister might propose to RBI in his budget proposals to vigilantly monitor activities of micro finance companies and restrict them from availing huge credit from commercial banks under garb of priority sector lending at highly reduced rates.

According to them, micro financing companies are exceeding their mandate and liberally extending credit to micro belts in every nook and corner of large cities including metros at exorbitant rate of interest.

Two hundred ten CEOs have suggested that real estate still needs government to continue doles and therefore in a bid to spur up demand for dwelling units, ceiling of interest exemptions limit on housing loans should be raised to Rs.3 lakh from existing Rs.1.5 lakh. This is necessary as real estate has yet to come out from recessionary modes, they felt.

Over 300 CEOs have demanded that the Finance Minister should permit Pension Funds to invest 10-15 percent of their funds in Infrastructure projects from 2010-11. They have also suggested that refinancing of existing rupee loans through External Commercial Borrowings (ECBs) be permitted for such projects based on interest cost advantage.

Besides, majority of the CEOs also pressed for disinvestment of public sector undertakings, proceeds of which should partly be allowed to fund infrastructure augmentation in PPP projects to help India grow and achieve intended growth rate of close to 9 percent in next 2-3 years.

They also called for rationalization of Dividend Distribution Tax (DDT) and recommended that it should be payable at one level only so that cascading effect is minimized. According to them, Infrastructure development business often requires a multi-tier corporate structure with a holding company at the top which is generally a listed entity.

Bhim Yadav(CEO , Falcon Realty

India is facing a shortage of 24 million housing units with majority of demand coming from low and mid income housing. The private sector can play a major role in giving a boost to such housing if the tax holiday in respect of the profit derived from housing projects built u/s 80 IB (10) to the "projects approved between 1st April 2007 to 31st March 2008 if such projects are completed before 31st March 2012", is extended for the next three years. The government should also consider amending the definition of 'infrastructure facility' u/s 80- IA to include an integrated township and group housing development on areas of more than 10 acres. This will meet the long outstanding demand of housing to be treated as infrastructure.

Further revival in the Indian real estate sector will be steered by the affordable housing segment. Increasing the deduction currently available with regard to interest and principal repayment on housing loans will give much required impetus to the housing segment. Moreover, the limit of Rs.2.5 lakh should be increased as the present limit of Rs.1 lakh is already overcrowded.

Mukul Somany, Joint Managing Director, Hindusthan National Glass

++ Removal of customs duty on soda ash which accounts to 10 to 12% of production costs
++ Zero import duty on packaging machinery
++ Lower excise duty to be continued on glass packaging to boost employment
++ Lower input costs on capital goods, infrastructure development, new technology, etc for the domestic packaging industry

“Packaging materials is one area where most FMCG companies have expectations from this year’s

budget. The reduction in excise duties on commodities, removal of customs duty on soda ash

and lowering of inputs costs for packaging companies would drive the growth in the processed foods

sector for domestic consumption as well as exports.”

- Mukul Somany, Joint Managing Director, Hindusthan National Glass

THE Indian packaging industry is estimated at Rs 65,000 crore. and is growing at the rate of 15 percent per annum, which is almost double the growth of the global packaging industry, reflecting tremendous potential of the segment in the country.

To provide further thrust to the packaging segment in India especially the untapped glass packaging sector, HNG expects central government to continue lowering excise duty on various commodities, similar to FY 09-10. We also look forward to removal of customs duty on soda ash which accounts for 10 to 12% of cost of production of the glass products. The import duty on packaging machinery should be nil as well.

India is amongst the top 15 markets for glass packaging globally. It is the third fastest growing market after Turkey and Brazil

According to World Packaging Organization report,"The glass packaging industry continues to grow remarkably, especially with the increased awareness and demand amongst consumers for eco-friendly and hygienic solutions. While the glass industry is currently experiencing a tremendous upswing, the untapped potential of the Indian market is reflected in the per capita glass consumption of around 1.40 kgs as compared to 5.9 kgs in China, 4.8 kgs in Brazil, 10.2 kgs in Japan and around 27.5 kgs in the developed countries of the West.

The highest demand for packaging and the associated equipments come from the food processing sector that accounts for more than 50% of India’s total packaging demand. To keep in line with the ever growing demand in the sector, the industry has witnessed a series of innovation in its best form especially with glass packaging, such as shape, light weighting, technology development etc.

Alongwith providing thrust to the overall potential of the packaging sector, central government should also promote better eco-friendly packaging.

EPCH FOR EXEMPTION OF SERVICE TAX BOTH TO EXPORTERS AND EPCs

Thesynergyonline Economic Bureau

NEW DELHI, FEB 12 :
EXPORT Promotion Council for Handicrafts (EPCH), in its Pre-Budget Memorandum to the Government recently, has recommended exemption from Income Tax under Section 10BA of I.T. Act, 1961, should be reintroduced covering all handicrafts products and exemption from Service Tax be also extended to merchant exporters and more importantly the name of EPCH should be included along with other Councils.

Mr. Raj Kumar Malhotra, Chairman, EPCH also recommended exemption from Service Tax while paying in any foreign currency including Indian rupees at the time of participating in international shows and also continuation of waiving of Service Tax on Membership Fee of the Council beyond March 31, 2010.

Chairman, EPCH has requested for announcement of more mega clusters namely Jodhpur (Rajasthan), Mysore-Channapatna (Karnataka), Puri (Orissa) and Ferozabad for development and promotion of handicrafts from these areas.

Mr. Malhotra demanded imports of tools required in the manufacture of handicrafts at nil rate of custom duty, pre and post shipment finance for 360 days be made available to exporters at 7 per cent, enlargement of the existing list of products is suggested including items of trimmings and embellishment needed by handicrafts exporters, Marketing Development Assistance (MDA) Scheme should be liberalized for direct participation in the international business exhibition for which they consider fit for their product.

The Council also suggested that the handicrafts items not elsewhere specified are eligible now under ‘’New Special Focus Products” scheme covering all new and innovative handicrafts items which came into effect only from August 27, 2009 in the Foreign Trade Policy 2009-14, should be applicable with retrospective effect from April 1, 2008 as the slowdown in exports started from that period.

The EPCH Chief also reiterated his demand to provide exemption from service tax both to exporters as well as export promotion councils and other export organizations in order to stimulate and diversify the country’s export trade.

INCREASE INCOME TAX DEDUCTION ON HOME LOAN INTEREST : CBRE

Anshuman Magazine CMD , CB Richard Ellis, South Asia

THE real estate sector is very hopeful that the government will continue to provide stability to the industry which has gone through extreme turmoil this past year.

For the upcoming budget I hope that the government will continue to lend its support to the JNNURM scheme further, which is an excellent scheme.

Overall, there are a number of expectations the real estate sector has. One of the key ones is the hope that the government will be generous towards infrastructure funding and also look into the implementation of the numerous infrastructure projects. Some of the other expectations are:

1. Introduce further measures towards affordable housing like
a. Increase in income tax deduction on home loan interest - A deduction to the extent of Rs.1,50,000 is available on housing loan interest payment. We propose increasing this further to Rs. 300,000
b. Allow ECB route to be kept open for the housing sector in order to reduce cost of finance, thereby reducing the cost of affordable homes

2. Provide infrastructure status to residential townships

3. Encourage green building initiatives across metros

4. Provide Industry status to the real estate sector – a petition that has been voiced many times

5. Facilitate the setting up of REITS

6. Reduce Stamp Duty by 4-5 percent and make it uniform across all states

7. Exemption from service tax on renting immovable property

We hope that the finance minister will take these points into consideration and announce some incentives that will encourage investment and give a boost to the sector.

Pradeep Jain, President CREDAI-NCR

Tax Holiday for housing projects - Section 80-IB (10) -

In order to support developers' efforts of promoting LIG/MIG housing projects there is an immediate need for a tax holiday to make LIG/MIG housing a more realistic proposition. For the same, the Cut-off date for eligibility should be further extended and Tax holiday eligibility, based on project completion condition should be restored. The tax holiday benefit under Section 80-IA (4) (iii) is only for industrial parks notified up to March 31, 2011. We
suggest that the time limit for notification of industrial parks under the New Industrial Park Scheme 2008 be extended up to March 2015 as during the slowdown in 2008 - 2009 there were certain delays in the execution of the projects.

Infrastructure status to integrated townships

Integrated townships projects should be given incentives at par with infrastructure and single window clearance mechanism should be introduced for such integrated townships to ensure efficient execution. Integrated Township projects deserve Infrastructure status as while developing integrated townships, developers also develop the infrastructure comprising of roads, lighting, water drainage systems etc in and around the township.

Slum Redevelopment Projects/ Dilapidated Housing / Social Housing- Measures such as tax incentives should be extended to developers who take initiative
of improving social infrastructure through Slum Redevelopment Projects/ Dilapidated Housing / Social Housing-

Tax holidays to Industrial Parks - Section 80-IA (4)(iii)- growth in commercial space during 2007 and 2008 was driven primarily by IT and ITeS sectors. But following the slowdown over the last two years, IT spending, particularly in the BFSI sector, has been hit. Therefore the minimum tenant requirement should be reduced to 10 units. Also, the time limit for notification of industrial parks under the New Industrial Park Scheme 2008 be extended up to March 2015 and benfits under Section 80-IA should be
extended to developers.

Income from other sources- Section 56 (2) - Section 56(2) of the Act, should not be made applicable to the transfer of immovable property

Deduction for principal repayment of a housing loan - Section 80C -

In addition to the existing deduction of upto INR 100,000, a separate limit up to INR 200,000 deduction should be permitted for repayment of principal
portion of housing loan for self occupied residential property

ECB through automatic route - ECBs be permitted for funding construction costs of real estate projects, at least for those projects which qualify for
100% FDI as per press note 2 if not all

Mr. Kabul Chawla, Managing Director – BPTP
 
Fiscal incentives provided by the Government for the development of the housing and real estate sector in successive budget along with the liberal investment and reforms and policies has brought the real estate sector to the centrestage.
 
Real estate sector in the past has witnessed unprecedented slowdown due to the ongoing global financial crisis. But due to Govt. timely initiatives by providing liquidity in the system through stimulus packages announced last year, the worst seems to be over and market is stabilized after the correction.
 
We hope finance bill 2010 is expected to give a further boost to the real estate sector.
·        Tax Holidays
Firstly, we expect tax holidays for housing projects under Sections 80-IA and 80-IB, infrastructure status for integrated township projects and bring down the cost of funds.
 
·        Restructuring of Developers Debt.
Restructuring of existing debt of developer till March 2011.
 
·        Section 80 C
It is suggested that the limit of Rs. 1  lacs u/s 80C be increased to Rs 2 Lacs and Rs 1 Lacs out of it exclusively reserved for payment of principal borrowed for the purchase of a residential house. This will help in boosting the housing.  
 
·        Incentives for promoting rental housing
 
Tax on rental Income
Income from renting of properties be taxed at a flat rate of 10%.
 
High cost of houses and high property taxes lead to a low rate of return from the rental housing making renting out an un-remunerative proposition. It is suggested deduction from rental income under section 24 be increased from 30% to 50%. This will promote rental housing.
 
·        Funds for affordable housing
Govt. should dedicate a affordable housing Fund in line with infrastructure fund exclusively for the construction of LIG/EWS and lend it to the developers.
 
·        Most important thing that we expect the government to do for the real estate sector is exemption from Section 56(2) of the Act relating to payment of stamp duty. The apartment purchase agreements are signed even before the construction commences. But the conveyance is done after project completion which could be 3-4 years down the line when value could be higher. The difference in value of stamp duty and the purchase price is booked as income in the hands of the buyers.

RAISE I - T LIMIT TO RS 3 LAKH , SAYS CMD , RAHEJA DEVELOPERS

Thesynergyonline Economic Bureau

NEW DELHI, FEB 05 :
HOUSING and real estate is a vital segment of the economy in the sense that it has multiple connectivity with the rest of the economy. Housing and real estate generates demand for steel and cement, consumer durable goods, plastics, sanitary ware, electrical goods and a variety of services. Housing starts are, therefore, regarded as critical indicators of the activity levels of an economy, says Mr.Navin M Raheja, CMD, Raheja Developers in a pre-Budget memorandum to the Government.

It is therefore important to push up the housing sector through the following measures:-

" It would be desirable to raise the Interest deduction limit of Rs.1.5 lakh in the computation of income under section 24 of the Income Tax Act, to Rs.3 lakhs.

" Also, under 80IB section, one of the prescribed conditions is that the built-up area of the shop and other commercial establishments included in the housing projects shall not exceed 5 percent of the aggregate built-up area of the housing project or 2000 sq. ft., whichever is less. In large housing projects, 2000 sq. ft. may not be adequate, particularly in view of high density as may arise from restriction of maximum built up area of 1000/1500 sq. ft. per residential unit. The absolute limit of 2000 sq. ft. may be deleted.

" The government should provide tax incentives for smaller size of units and accordingly the applicability of section 80IB should be extended upto 31st March 2010. Therefore, income tax exemption will be applicable for projects sanctioned upto 31st March 2009.

" That apart, Stamp duty needs to be brought down further to 4-5% and made uniformly applicable across all states. Also, if stamp duty has already been paid on one transaction, there should be a mechanism to provide concession or a system of credit for any subsequent transactions. This would avoid the resultant cascading effect of Stamp Duty, thereby reducing the cost of a property. The concept of credit for taxes paid on subsequent transactions already exists in other statutes such as CENVAT, VAT, MAT, etc.

" Service tax in relation to construction of residential complexes having more than 12 houses has been imposed. Services in relation to construction of residential bungalows, not forming part of a 'residential complex', are excluded. Taxing the construction of such residential complex will now entail a higher cost of construction. The discriminatory tax treatment is not understandable. Also, what is the sanctity of the threshold of 12 dwelling units in a residential complex? Service Tax should not be imposed in the case of construction industry as the said industry is already paying a number of taxes on different inputs purchased for constructing the houses in addition to taxes such as Works Contract Tax (WCT). Also, Service Tax be not leviable on rental income of commercial premises which has a crippling effect on occupiers of retail premises.

" The definition of "infrastructure" earlier used by the government and all financial institutions allowed for funding of townships and residential / commercial buildings. This seems to have got de-linked and branded as Real Estate during the time when land and property prices were spiraling.

A change in the definition of Real Estate sector resulted in these activities being categorized as "outside of infrastructure sector". The immediate implication of this was that banks could not extend loans to real estate activities on the same norms as they can to infrastructure companies, even though building new townships are similar activities as building infrastructure facilities. In the ongoing sluggish environment of real estate market, it may be desirable to reinstate the definition of Real Estate business as contained in FEMA, he adds..

" Presently section 23 of the Income Tax Act provides a standard deduction of 30 percent from the rental income which should needs to be substantially increased to around 50 percent of the total income.

" As per Section 54, capital gain arising from transfer of any capital asset is exempt from tax in cases where the sale proceeds are invested in acquiring one residential house. We feels that exemption should be available where the capital gains are re-invested even in more than one house. (editor@thesynergyonline.com) .

INFRASTRUCTURE SECTOR STATUS TO HEALTH MOOTED

Thesynergyonline Health Bureau

NEW DELHI, FEB 03 :
IN a bid to give further boost to the healthcare sector, The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has suggested that it should be accorded with twin benefits of `Infrastructure Status' and holiday schemes up to a period of 10 years.

In its pre-Budget Memorandum submitted to Finance Ministry, the Chamber has pointed out that presently Sub-section (11B) of section 80-IB provides a tax holiday for five consecutive assessment years, beginning from the initial AY, to an undertaking deriving profits from the business of operating and maintaining a hospital in a rural area.

The Chamber has further stated that with accordance of infrastructure status to healthcare sector and keeping in view huge potential and investment incentives in sector, it would certainly boost desired investments flow from overseas and domestic players. By providing incentives to investments in healthcare sector, the demand and supply gap which is very huge right now will also narrow down to a large extent.

In addition, it would also lead to opportunities such as create more job prospects, growth in service sector, enhance bed capacity in hospitals, bring in more foreign exchange to the nation by way of medical travel.

On employment front, the Chamber has stated that healthcare sector can generate 0.7-0.9 million jobs for doctors, nurses and other paramedical staff, development of healthcare sector will not only give opportunities to talent in India but also help to reverse the brain drain.

Infrastructure status would enable setting up of more and more training centers for doctors and nurses, which would help the healthcare sector and Indian economy in a major way.

Due to increased job availability in healthcare sector, the service sector which is major contributor to the GDP of India will witness further growth, similar to that of IT sector, feels the Chamber.

By giving due consideration to healthcare sector, it can lead to narrowing down gap between current and required bed: population ratio in hospitals which is very low in India compared to major developed economies.

With various private players looking to manufacture medical equipment in India, it would definitely give a boom to manufacturing sector. The manufacturing sector and the service sector would complement each other and benefit to the Indian economy. There would be a huge demand for the medical equipment in the healthcare sector due to which considerable growth can be seen in manufacturing sector as well.

Medical value travel: Ministry of Tourism and the Healthcare sector have been trying to improve India's image and provide healthcare to the globe at a reasonable cost. This can bring along US$1-US$2 billion of FDI which is valuable for our country.

The Government would benefit a lot with medical value travel as the number of Tourist in the country would increase by about 4 million (approx.) and the image of India would improve considerably. With this India can be foreseen as a hub for Medical Value Travel.

Reduction of the burden from metro cities: With the penetration, the rural areas as well as the rural masses would benefit in a major way with world class medical care becoming available for them

Accordance of Infrastructure status would also enable mushrooming of the healthcare centers which will lead to a lot of healthy competition in the market, which in turn could bring the prices of healthcare down. (editor@thesynergyonline.com) .

' DROP 5% CUSTOMS DUTY ON STB IN 2010 -11 BUDGET PROPOSALS'

Thesynergyonline Economic Bureau

NEW DELHI, JAN 28 :
THE Associated Chambers of Commerce and Industry of India (ASSOCHAM) has urged the Finance Minister to withdraw 5 percent Customs Duty on Set Top Box (STB) in Budget proposals for 2010-11 in a bid to provide support to DTH industry to advance objectives of digitization.

Customs duty on set top box had been exempted in 2006 to provide impetus to industries involved in digitization of TV services like DTH, IPTV and Digital cable.  However, 5 percent customs duty on set top box was re-imposed in Union Budget of 2009-10 vide Notification No.77/2009-Customs.

According to the Chamber the customs duty of 5 percent is undue imposition since the government is committed to bring in digitization of TV services by 2010.  As has been suggested in various expert reports, DTH as a distribution platform  is ideally placed to achieve this stated objective of digitisation and hence is akin to an infrastructure industry.

In a representation submitted to Finance Minister, ASSOCHAM president Dr. Swati Piramal said that by supporting DTH, (and other addressable platforms like digital cable, IPTV) which use set top boxes, digitalization can realistically be achieved in the entire geographical area of the country in a transparent manner and in the shortest possible time.  Both the urban as well as rural and remote areas should be provided with the same quality of service, pointed out Dr. Piramal.

DTH is also the most effective alternative to analogue cable platform, the latter being marred by huge revenue leakages owning to its un-addressable nature unlike the former which is addressable and transparent.  It is estimated that the revenue loss to the government is around Rs.4500 crores per annum on account of under-declaration in the cable business.  The government should aim to stop such losses to the public exchequer.

Presently, the DTH industry is burdened with huge growth dampeners in the shape of multilayered tax structure aggregating to 59% of the gross revenue of DTH operators which challenges the economic viability of every DTH platform.  As per the estimates, operating losses of DTH operators in 2008-09 were US$ 450 million plus (Rs. 2000 crore).  As per ASSOCHAM, cumulative losses by the end of Rs.2008-09 were more than Rs.5000 crore.

The DTH industry is highly taxed with service tax component of 10.3 percent, excise CVD and VAT which respectively works out to be 8.24 percent and 12.5 percent upto 15 percent.  In addition, there is an annual licence fee @ of 10 percent and on top of it, entertainment tax, varying between 6-30 percent, besides entry octroi ranging between 1.00 percent to 5.5 percent. 

Subjecting this industry to 5 percent customs duty is undue as per the Chamber . Therefore, it should be withdrawn. The objective behind exempting customs duty on set top box, according to the Chamber is pertinent particularly on account of non-availability of components and other factors required to make STB as 80 percent of their components are imported, said Dr. Piramal.

Therefore, till a mature eco system for STB manufacturing is not in place in India, the timing is not opportune for the imposition of continuation of any customs duty on STBs. (editor@thesynergyonline.com) .
 

'CUT CORPORATE TAX TO 25%, FIX I -T FOR SMEs AT 20%, CONTINUE WITH STIMULUS PACKAGE'

Thesynergyonline Economic Bureau

NEW DELHI, JAN 05 :
SEEKING equitable, efficient and transparent tax code, the ASSOCHAM president Dr. Swati Piramal pressed for immediate integration of excise and service tax into Central GST from April 2010 and demanded that corporate tax be reduced at 25 percent and that income-tax be curtailed to 20 percent for SMEs from present 30 percent.

In her pre-Budget presentation with Finance Minister Mr. Pranab Mukherjee among other industry leaders, the Chamber chief on Tuesday strongly advocated for continuation of stimulus package for fiscal 2010-11 also which can be gradually phased out subsequently.

Dr. Piramal argued that withdrawal of stimulus packages could be counter productive to recovery on which industry has gradually started returning to.  Fiscal deficit is not only the concern for the government but equally so for Indian industry also and one suggested way out to contain it could be through expeditious disinvestment process.

The Chamber chief also sought a flawless Goods and Service Tax (GST) regime which can be ensured with subsuming 5 key element of taxation into it.  These include purchase tax, electricity duty and taxes on natural gas, sugar and textiles. The flawless GST, according to ASOCHAM will reduce cost of production of Indian industry by 10-15 percent and additional accrue the government annual revenue to an extent of  Rs.1 lakh crore.

However, it has demanded exclusion of liquor and tobacco product from GST for social reasons since these already fall under high excise tax net to reduce their  consumption.

Dr. Piramal stressed that corporate tax in India is still higher as it’s effective rates exceed 35% and discourages foreign investments including Indian business.  The ASSOCHAM also demanded that service tax should be extended to all services except those in negative list because it supports the policy of wider tax base with low tax rate which include tax compliance and GDP growth rate.

On the personal tax front, the ASSOCHAM has recommended that it’s ceiling should be gradually enhanced to Rs.5 lakh per annum and taxes on Chamber, clubs or associations which provide certain services be withdrawn as Chambers and Commerce are non-profit making organization.

The past president of ASSOCHAM, Mr. Venugopal N. Dhoot and Chief of Videocon Industries demanded that their should be gradual phasing out of Stimulus package after 2011 is over so that Indian industry gears it up completely to take on the global competition.

The budget proposals of the Finance Minister should be simple and transparent, equitable, moderate, competitive and efficient so that the tax compliance go still further, he added. (editor@thesynergyonline.com) .

EPCES SEEKS URGENT CLARIFICATION ON DRAFT DIRECT TAX CODE

Thesynergyonline Economic Bureau

NEW DELHI, DEC 24 :
EXPORT Promotion Council for EOUs and SEZs (EPCES) recently had a meeting with Ministry of Finance comprising senior officers of CBDT and CBEC for making pre-Budget proposals for the Budget 2010-11.

Delegation comprising Mr R.K. Sonthalia, Chairman, EPCES, Mr Jatin R. Mehta, Vice-Chairman, EPCES, Dr.L.B. Singhal, Director General, EPCES, Mr Ajay Nijhawan, Convenor, EPCES Panel on SEZ Developers, Mr P.C. Nambiar, Serum Institute of India , Pune, Mr Vishwanath of Nath Bros.Exim Intl., New Delhi made submissions on behalf of EOUs, SEZ Units and SEZ Developers.

The meeting was chaired by Mr S.S.N. Moorthy, Chairman, CBDT and other senior officers present at the meeting included Mr C.S. Khalor, Member, CBDT, Mr Vivek Johri, Joint Secretary (TRU), Mr Gautam Bhattacharya, Joint Secretary (TRU), Mr Ashutosh Dikshit, Joint Secretary (TPL), Mr Manish Kumar, Director (TPL), Mr Yogendra Garg, Director (TRU), Mr Samar Nanda, Technical Officer (TRU), Mr Nitin Saini, Technical Officer (TRU) and Mr K.S.V.V. Prasad, Technical Officer (TRU).

Mr R.K. Sonthalia, Chairman, EPCES informed that exports from SEZ and EOU Sector is continuously increasing in the past years. The exports from EOUs and SEZs have increased from Rs.33,647 crore in the year 2002-03 to Rs.2,71,187 crore during the year 2008-09. The exports from EOUs were Rs.1,71,498 crore and exports from SEZs were Rs.99,689 crore during 2008-09.

Dr.L.B. Singhal, Director General, EPCES, while making a presentation in the meeting, emphasized that Draft Direct Tax Code has created uncertainty in the minds of SEZ Developers and SEZ Units including international investors and domestic investors as the provisions contained in the Draft Direct Tax Code in relation to SEZ Developers and SEZ Units are in contravention to the provisions contained in the SEZ Act.

He emphasized that SEZ Act was certainly not enacted for a period of 5 years. It was intended for providing long term stability and continuity to the Scheme. He submitted that the grandfathering clause provided in Draft Direct Tax Code does not clarify the manner in which the benefits to the SEZ Developers and the units would be grandfathered. Hence, he requested that a clarification should be issued immediately for removing uncertainty and the benefits provided in the SEZ Act for SEZ Developers should be continued in the manner provided in the SEZ Act.

The delegation emphasized that EOUs are operating in the same parameters as the SEZs and EOU Scheme provides distinct advantage to the exporters in the form of geographical location of the units and this scheme encourages manufacturing and employment. Hence, EPCES requested that extending Sunset Clause by one year basis does not help in attracting investments and requested that Sunset Clause should be extended for 3 years.

EPCES submitted following issues for consideration:

1 CLARIFICATION ON CONTINUATION OF THE BENEFITS OF INCOME TAX ACT, 1961, AS GIVEN IN 2ND SCHEDULE OF SEZ ACT, 2005, TO SEZ UNITS, SEZ DEVELOPERS, OBUs, IFSC, AFTER IMPLEMENTATION OF DIRECT TAX CODE

2. AMENDMENT TO SECTION 10AA OF THE INCOME TAX ACT, TO BE MADE APPLICABLE W.E.F. 10-2-2006

3. AMENDMENT IN EXPLANATION II OF SECTION 10AA OF THE SEZ ACT TO PROVIDE EXEMPTION FROM INCOME TAX ON INTER-UNIT TRANSFER OF GOODS AND SERVICES IN SEZs

4. REMOVAL OF SUNSET CLAUSE UNDER SECTION 10B OF THE INCOME TAX ACT

5 WITHDRAWAL OF AMENDMENT BY FINANCE BILL 2007, EXTENDING THE PROVISIONS OF MAT TO SECTION 10A & 10B OF THE INCOME TAX ACT

6 AMENDMENT IN SUB SECTION (3) OF SECTION 10B TO PERMIT I.T. EXEMPTION IN CASE OF REALIZATION OF PAYMENTS WITHIN 12 MONTHS, AS PER FTP & RBI PROVISIONS

7 AMENDMENT PERTAINING TO SECTION 10B, SUB SECTION (3) OF IT ACT TO PERMIT THIRD PARTY EXPORTS, IN ACCORDANCE WITH FTP & DEPTT. OF REVENUE PROVISIONS.

8 REMOVAL OF PLASTIC GOODS FROM SEZ TO BE SUBJECTED TO SAME DUTY AS FOR IMPORTS BY REMOVAL OF EXPLANATION AT S.NO. 78 OF CENTRAL EXCISE NOTIFICATION NO. 4 DATED 1-3-2006

9 REMOVAL OF GOODS FROM SEZ TO DTA TO BE SUBJECTED TO EITHER SAD OR VAT AND THEREBY AVOID DOUBLE TAXATION.

10 EXEMPTION FROM CST FOR GOODS SUPPLIED FROM SEZ TO DTA

11 CHANGE IN THE CENVAT CREDIT FORMULA FOR PROVIDING CENVAT CREDIT IN RESPECT OF COMPLETE EDUCATION CESS.

12 COMPUTATION OF EDUCATION CESS ON SALE OF GOODS FROM EOUs TO DTA, SHOULD BE AMENDED AND SALE OF GOODS FROM EOU TO DTA SHOULD BE SUBJECTED TO EDUCATION CESS ONLY ONE TIME INSTEAD OF PRESENT IMPOSITION OF EDUCTION CESS 3 TIMES.

Mr S.S.N. Moorthy, Chairman, CBDT assured that the suggestions made by the Council will be looked into while finalising Union Budget for 2010-11. (editor@thesynergyonline.com) .

'EXEMPT FERTILIZER SECTOR FROM EXCISE FROM 2010- 11 ONWARDS'

Thesynergyonline Economic Bureau

NEW DELHI, DEC 22 :
THE Associated Chambers of Commerce and Industry of India (ASSOCHAM) has urged the finance minister to exempt project imports for fertilizer sector from customs duty in his budget proposals for 2010 -11 and also demanded deemed export status to indigenous supply of capital goods, used in all new investment in fertiliser projects.

In its pre-Budget memorandum submitted to the finance ministry, the ASSOCHAM has also demanded waiver of excise duty on capital goods, used in fertiliser projects and urged that capital goods, used in fertilizer products, be exempted from sales tax and value added tax (VAT).

In addition, the chamber has also highlighted that tax holiday under income tax act should be extended to all new fertilizer projects for a period of 10 years so that the sector acquires self reliance in terms of meeting most of domestic demand.

The ASSOCHAM President, Dr. Swati Piramal pointed out that domestic capacity and production of fertilisers have stagnated for more than a decade due to unfavourable policies. The demand for fertilisers on the other hand has been rising continuously. This has resulted in steep rise in imports of finished fertilisers thereby increasing the subsidy requirement further.

Thus, there is an urgent need for attracting fresh investment in this sector for creation of additional capacity. The government has notified new investment policy in September, 2008 but, the pricing policy environment has not attracted investment in major expansion or new projects so far, as the viability of new investment is still uncertain under the policy. The government, therefore, needs to provide aforesaid tax incentives to make new investment in fertiliser sector viable, said Dr. Piramal.

The ASSOCHAM is also of the view that other tax incentives also needed for fertilizers sectors since the use of fertilisers is subsidised by the Central government to keep their prices (MRP) within affordable limit of farmers to encourage consumption for accelerating agricultural production and productivity. Levy of taxes and duties either on inputs or on finished fertilisers or on services utilised in production and distribution of fertilizers increases the cost of fertilisers and consequently the subsidy outgo.

This goes against the purpose of subsidisation which is to keep the price of fertilisers low so that the farmers can afford it. It is, therefore, submitted that fertilisers and inputs in general should be exempted from imposition of taxes and duties.

The Chamber has pressed for withdrawal of excise duty on Fuel Oil/LSHS used for fertiliser manufacture, as also demanded waiver of excise duty on HDPE bags used for packing fertilisers. In addition the chamber called for withdrawal of customs duty on LNG, Project imports & spares for fertiliser projects , Ammonia, Phosphoric acid,Rock phosphate, Sulphur, Sulphuric acid and Capital goods for implementation of Clean Development Mechanism (CDM) projects for fertiliser sector.

According to the Chamber , withdrawal of service tax on services related to fertilisers and inputs for fertilisers and agriculture is also need it. However, withdrawal is not possible, at least concessional rate of service tax on services for fertilisers and agriculture is suggested which include Storage and Warehousing charges for Fertilisers, Intellectual Property Services which include design, process, technology, Construction of commercial and industrial building or civil structure.

The other similar services comprise commissioning and installation/erection services etc. including such services meant for the fertiliser projects, Commission paid to commission agents dealing in inputs used in fertilizer manufacture, which in turn, increases the cost of fertilisers and consequently the agricultural produces, transport of goods (fertilizers) by road services and Cleaning services, (editor@thesynergyonline.com) .