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Suggestions for Union Budget 2022-23 

Jan 12, 2022

Suggestions for Economy

1.     Give boost to housing sector

The housing and real estate sector can be a force multiplier for growth and for kickstarting investments/ capex cycle. Housing and construction sectors have forward and backward linkages and impact nearly 200 sectors. The sector needs to be provided holistic support in the upcoming Union Budget. An interest subsidy of 3-4% on housing loans could also be offered for a period of 3-4 years.

2. Offer regular subsidy to PMUY beneficiaries for incentivising cooking gas usage

The Pradhan Mantri Ujjwala Yojana (PMUY) is a transformative scheme contributing towards improved living of poor households, better health of women and also contributing towards a cleaner environment. The subsidy component under the scheme has focused more on providing new gas connections, free first refills, free hotplates, etc., rather than regular subsidies on every refill. During the first wave of Covid pandemic, three free cylinder refills were offered to PMUY recipients. However, with increase in gas prices lately, affordability has become a major challenge for such households for using cooking gas. Various reports show that monthly expenditure of such households has risen significantly due to increased gas prices. It is thus suggested that the government should subsidise the usage of 6 -7 cylinders in a year for such households.

3.  Extend further support to MSMEs

Ensuring ease of access to finance for MSMEs is extremely important. The government could consider increasing Collateral free loans under CGTMSE from the existing Rs. 2 crores to up to Rs. 5 crores. To ensure timely payments to the MSMEs, it is suggested that there should be automatic publishing of GST registered MSMEs' invoices on TReDS, and these should be deemed accepted and payable by banks, once the date for acceptance or rejection by the buyer is over.

Tax specific Suggestions

4. Extend Cut Off Date for Commencing Manufacturing Operations under concessional tax regime of section 115BAB of the Act

Due to the outbreak of Covid-19 pandemic, the setting up of manufacturing facilities/production plans, regulatory approvals, resource planning, etc. (which typically takes a considerable amount of time) within sunset date of 31 March 2023 has become difficult. Hence, it is recommended to extend sunset date for newly incorporated domestic companies to commence their manufacturing till 31 March, 2025. 

5.   Address issues impacting business reorganisation

There are several issues which result in notional income for businesses. For instance, the anti-abuse provisions of Sec 56(2)(x) and Sec 50CA create tax hurdles for several bonafide share transactions in situations like rise in value of shares between date of agreement and consummation of transaction, fresh allotment of shares under different modes like preferential allotment, rights issue without change in control, bonus issue, etc. These are an impediment towards raising fresh funds by the companies and for companies wishing to re-organise themselves but find it difficult due to the valuation.

6.  Work towards reducing litigation by aiding dispute resolution

In light of the substantial litigation related to faceless assessment, Government should allow it to mature and consider deferment of the proposal of Faceless Scheme for conducting ITAT proceedings.

Additionally, the government should constitute the Dispute Resolution Committee at the earliest with competent personnel and monitor its performance in terms of time-bound resolution of cases. There is a need to expand its scope to mid-sized and large sized taxpayers by removing the caps of returned income and disputed addition of Rs. 50 lakhs and Rs. 10 lakhs respectively. Additionally, there is a need to clarify that DRC can settle pending litigation cases. Also, the DRC should be allowed to resolve specific issues instead of entire appeal.

Infrastructure related suggestions

7. Resolve issue of non-fund credit to Infrastructure sector

Industry has a problem with non-fund-based credit. The major problem relates to bank guarantees, in the way such BGs are required by clients, the way they are issued by banks, and most importantly, the way they are extinguished. This is adding unnecessarily to project costs and will be the single biggest obstacle to rapidly completing construction under the NIP. Typically, 20% of the project cost is locked up in BGs that extend into over 4 to 10 years. Hence, if the NIP is targeting Rs 40 trillion in FY 21 and FY22, then BGs of Rs 8 trillion would have to be taken by the private sector only in 2 years. It is time to go for Revolving BGs or Insurance Surety Bonds.

8. Quarterly bidding calendar of NIP and NMP

We would request the government to issue a quarterly bidding calendar for the National Infrastructure Pipeline as well as the National Monetisation Pipeline. This will help the private sector in active participation.

9. Operationalise NaBFID

The establishment of National Bank for Financing and Infrastructure Development is a transformative initiative. We look forward to seeing an early operationalisation of this important institution.

10. Review of Public Procurement Policy

The recent amendments made by Finance ministry in Public procurement order wherein L1 or Least Cost Selection Method, will no longer be the only tendering format for selecting bidders is a much-desired initiative. This will help in ensuring quality work, while keeping time and cost overruns in check. The government should do a Quarterly Review of the implementation of this order to ensure its effective implementation.

Climate/ Green economy related suggestions

11. 
Promote development of Green Technologies across sectors

Hon'ble PM has played a leadership role at the global level in giving a push to renewables, waste management etc. To further give impetus to realizing his vision, it is important to create a facilitating environment for green technology. China incentivized companies in developing green technology in solar etc. by providing free land, concessional power cost and funding at low interest cost. Many other countries which have emerged as hubs of solar modules, components etc like Taiwan, Malaysia, Vietnam did so on back of huge government incentives. Following tax incentives may be considered for promotion and adoption of green technology in India -

  • Extend Concessional tax rate of 15% to companies which invest in Green technologies on or after a specified date
  • Allow full deduction towards investment/purchase of green technology assets. This will encourage replacement of obsolete technology with green technology.
12. Credit guarantee scheme for rooftop solar projects

Most of the rooftop solar capacity has come in from the Industrial, Commercial and Institutional sectors. The residential market remains virtually untapped. It is estimated that the residential segment can easily contribute about 15% to the total rooftop solar capacity. A credit guarantee scheme should be created, specifically for risk mitigation for customers with lower credit rating. This will enable such consumers to avail of bank financing for setting up rooftop solar projects.

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