SSL Union Budget 2015-16a

UNION BUDGET 2015-16

1

The highlights of the Union Budget 2015-16, presented by Finance Minister

Shri Arun Jaitley in Parliament today:

The Budget has laid out a clear and tangible roadmap for the future. Fiscal deficit for

the current fiscal has been contained at 4.1% and for the next fiscal it is budgeted at

3.9%, 30 bps higher than the 14th

Finance Commission recommendations.

Target to complete the journey to a fiscal deficit of 3% in 3 years, rather than the two

years envisaged previously and have targeted 3.5% for 2016-17 and, 3.0% for 2017-

18. In principle, in achieving this, the additional fiscal space will go towards funding

infrastructure investment.

A number of steps taken to give a better autonomy to the PSBs, with the creation of a

Bank Board Bureau and eventually a holding company are being seen as key positives

emerging for banks from the Governments budget, even as limited capital allocation

for the current year may prove to be an immediate constraint.

Disinvestment target set at Rs 69,500 crore. We believe the current buoyant condition

in the equity market will be extremely good for achieving the target.

Non-Plan expenditure for FY16 are budgeted at Rs 13.12 lakh crore to revive growth

and investment in providing jobs for the youth. Total expenditure estimated to grow

at 5.7% to Rs 17.8 lakh crore.

Devolution to the States is budgeted at Rs 5.24 lakh crore and share of Central

Government will be Rs 9.20 lakh crore. However, an immediate jump in the states

share in the tax revenue would lead to unused resources by end of the financial year.

Gross tax revenue is expected to grow by 15.8% in FY16 to Rs 14.5 lakh crore. This

revenue target from taxation is supported by 10.5% growth in corporation tax and

17.5% rise in income tax from direct tax side. The estimated tax buoyancy at 1.4

(basis gross tax revenue) looks perfectly reasonable given the increase in service tax

and rationalization of excise taxes.

Total direct tax revenue is budgeted to grow by 13.1% and indirect tax revenue at

19.5%. The indirect tax revenue seems to be on a higher side but the tax measures

taken to boost indirect tax revenue are quite significant. This optimistic view on

revenue collection is mostly due to 2% rise in service tax rate is from 12% plus

education cess to 14%.

Abolition of Wealth Tax with additional 2% surcharge for the super-rich with income of

over Rs 1 crore.

Subsidies to decline by 10.5% to Rs 2.27 lakh crore.

Rs 70,000 crores to be mobilized for infrastructure sector. Tax-free bonds for projects

in rail, road and irrigation. PPP model for infrastructure development to be revitalized

and Government to bear majority of the risk.

Government proposes to set up 5 ultra-mega power projects, each of 4000 MW.

AIIMS to be set up in Jammu and Kashmir, Punjab, Tamil Nadu, Himachal Pradesh,

Bihar and Assam. IIT in Karnataka; Indian School of Mines in Dhanbad to be upgraded

to IIT. IIM for Jammu and Kashmir and Andhra Pradesh.

KEY HIGHLIGHTS OF THE UNION BUDGET 2015-16


2

Two game-changing reforms to be introduced: GST & JAM Trinity. GST will be

implemented by April 2016.

MUDRA bank to refinance micro finance organisation to encourage first generation

SC/ST entrepreneurs.

New scheme for depositors of gold to earn interest and jewellers to obtain loans on

their metal accounts.

Forward Markets Commission to be merged with the Securities and Exchange Board of

India.

NBFCs registered with the RBI and having asset size of Rs 500 crore and above to be

considered as financial institution under SARFAESI Act, 2002, enabling them to fund

SME and mid-corporate businesses.

In order to promote investment in the country, Public Debt Management Agency

(PDMA) to be setup, which will bring both Indias external borrowings and domestic

debt under one roof.

In the budget, there is no change in tax slabs or minimum taxable limit for individual

tax payers. However, it has increased exemption limits on health insurance premium

and transport allowance.

The Government has proposed a 5% reduction of the basic rate of corporate tax to

25% from current 30% over the next four years, starting from the year 2015-16.

The Government has formally made an announcement of adopting inflation targeting

as a nominal anchor for conducting monetary policy. It has also said that the

Government has concluded a Monetary Policy Framework Agreement with the RBI and

necessary amendment required to the RBI Act will be done. This framework gives a

mandate of keeping inflation below 6%.

The Union Budget for FY16 makes a clear case for pushing up public investment. The

3.9% fiscal deficit assumption is well thought out and the revenue numbers could be over

achieved if the economy revives as per expectations. The assumptions of a nominal GDP

growth at 11.5% and a tax buoyancy at 1.4 looks perfectly reasonable given the increase

in service tax and rationalization of excise taxes.

Tax Buoyancy vis--vis Nominal GDP Growth

Source: SBI Research

MACRO VIEW


3

It was high time to revisit the controversy regarding the relationship between private and

public investment. In broad terms public sector investments lowers private investment if

it utilizes scare and physical financial resources that would otherwise be available to

private sector. However public investment can also be complementary to private

investment if it is related to infrastructure, as historical evidence in several countries,

including developed ones like US suggests. Public investment of this type can enhance

the possibility for private investment and raise the productivity of capital, increase the

demand for private output and augment overall resources through an increase in

aggregate output and savings.

The decision to incentivise credit card transactions coupled with a new law on black

money will clearly lower the social cost for unaccounted money. Along the entire supply

chain for supply of cash, banking system bears the highest cost primarily because of high

fixed costs of ATM machines and others. Interestingly, the use of electronic payment

instruments allows the unbanked to start building a transaction history, which can be a

step towards initiating them towards financial inclusion. The lack of wide spread

electronic payments infrastructure makes it difficult for the financial industry to deliver

micro-version of payment products in a sustainable way.

Otherwise, the proposed introduction of a gold deposit scheme is a big positive and

conservative estimates show even at a 30% strike rate, the monetary value of gold

deposits mobilized may be as much as Rs 3 lakh crore. Drawing inspiration from China,

tapping such vast gold reserves will also strengthen the case for rupee as an international

currency in the years to come. The gold deposit scheme could be a game changer by

incentivising the banks to hold a part of the deposits as CRR or SLR. This measure could

instil a sense of confidence in public and free up resources for productive purposes. The

gold mobilised could also add to overall gold reserves and help the central bank to

diversify into assets from existing dollar denominated ones.

The Gold Deposit scheme should not be looked at from the myopic lens. Drawing

inspiration from China, tapping such vast gold reserves will also strengthen the case for

rupee as an international currency in the years to come. This should be an objective from

a long-term strategic interest, given that India is exploring trade swap agreements

currently.

The measure, minting Indian Gold Coin carrying Ashok Chakra is measure similar to

American Eagle Bullion Coins issued by the United States Government. Similar coins are

also issued by Perth Mint of the Government of Western Australia. But the focus is to

recycle the domestic gold such as scrap gold. This will provide investors with a

convenient and cost-effective way to add a small amount of physical metal to their

portfolio.

This apart, the proposal to channelise pension funds to infrastructure is a welcome move

and will give a fillip to the NPS. Pension funds by design are vehicles to create financial

claims on future output. Hence, when pension funds are channelized in infrastructure, it

creates a bi-directional positive feedback loop where supply infrastructure boosts further

GDP growth. Interestingly, in the erstwhile Twelfth Plan (2013-17) it was estimated that

the infrastructure requirement was at Rs 55.7 lakh crore (debt plus equity), and the

pension funds were expected to contribute at least Rs 1.5 lakh crores in debt component.

This estimated contribution by pension funds towards infrastructure is on the lower side

given the potential for developing pension market in India. As per latest data, the number

of subscribers under NPS are 71.05 lakh with a corpus of only Rs 58,523crore. Hence,


4

convincing pension funds to invest in infrastructure as an asset class has remained a

challenge till now. Therefore, the need to push savings in pension funds is an appropriate

step.

The decision to have a flexible limit for own provident fund contributions for people

below a threshold income will encourage people to balance between consumption and

savings.

The other positive steps in the budget include the proposal to frame a Bankruptcy Law

and a Dispute Settlement. These will help the banks to fasten recovery and enable a

pickup in activities in sectors like construction marred by disputes. The move to align

NBFCs at par with financial institutions will allow banks to clean up their balance sheets.

The Government has proposed a 5% reduction of the basic rate of corporate tax to 25%

from current 30% over the next four years, starting from the year 2015-16, accompanied

by fewer exemptions. This is not to be misinterpreted. While the details and fine print are

yet to be deciphered, a broad outline of the revenue forgone due to exemptions in central

tax system, as per union budget 2012-2013 and 2013-2014, on a safer footing, one may

assume the extent of removal of certain deductions at 20% of revenue forgone of tax

receipts in 2012-13. The amount is expected to be around Rs 13,500 crore and is likely

to square off against the decline in corporate tax proposed.

In the end, as emphasized in Economic Survey, We must emphasize that given the

expectations surrounding the upcoming budget, one question that was to be addressed

head on: Does India need Big Bang reforms? Much of the cross-country evidence of the

post-war years suggests that Big Bang reforms occur during or in the aftermath of major

crises. India today is not in crisis, and decision-making authority is vibrantly and

frustratingly diffuse. From this point, the manifestations in Budget are just the ideal one.

Overall, the Budget is a pragmatic vision and a roadmap for the future. This coupled with

the Railway Budget seems a well concerted move by the Government to sustain the

existing momentum.


5

FY 13 FY 14 FY 15 (RE )FY 16

(BE )

FY 16 /

FY 15

(%Gr)

FY 15 /

FY 14

(% Gr)

FY 14/

FY 13

(% Gr)

5 Y r CAGR

(FY 11-15,%)

Decadal CAGR

(FY 06-15,%)

1.1 Revenue Receipts 8,79,232 10,14,724 11,26,294 11,41,575

% of GDP 8.8 8.9 8.9 8.1

1.1.1 Tax Revenue (Net to centre) 7,41,877 8,15,854 9,08,463 9,19,842

% of GDP 7.4 7.2 7.2 6.5

1.1.2 Non-Tax Revenue 1,37,355 1,98,870 2,17,831 2,21,733

% of GDP 1.4 1.8 1.7 1.6

1.2 Capital Receipts 5,31,140 5,44,723 5,54,864 6,35,902

% of GDP 5.3 4.8 4.4 4.5

1.2.1 Recoveries of Loans 15,060 12,497 10,886 10,753

% of GDP 0.2 0.1 0.1 0.1

1.2.2 Other Receipts 25,890 29,368 31,350 69,500

% of GDP 0.3 0.3 0.2 0.5

1.2.3 Borrowings and other liabilities* 4,90,190 5,02,858 5,12,628 5,55,649

% of GDP 4.9 4.4 4.1 3.9

1. Total Receipts 14,10,372 15,59,447 16,81,158 17,77,477

% of GDP 14.1 13.7 13.3 12.6

2.1 Non-Plan Expenditure 9,96,747 11,06,120 12,13,224 13,12,200

% of GDP 10.0 9.7 9.6 9.3

2.1.1 On Revenue Account of which, 9,14,306 10,19,040 11,21,897 12,06,027

% of GDP 9.2 9.0 8.9 8.5

2.1.1 a) Interest Payments 3,13,170 3,74,254 4,11,354 4,56,145

% of GDP 3.1 3.3 3.3 3.2

2.1.2 On Capital Account 82,441 87,080 91,327 1,06,173

% of GDP 0.8 0.8 0.7 0.8

2.2 Plan Expenditure 4,13,625 4,53,327 4,67,934 4,65,277

% of GDP 4.1 4.0 3.7 3.3

2.2.1 On Revenue Account 3,29,208 3,52,732 3,66,883 3,30,020

% of GDP 3.3 3.1 2.9 2.3

2.2.2 On Capital Account 84,417 1,00,595 1,01,051 1,35,257

% of GDP 0.8 0.9 0.8 1.0

2. Total Expenditure 14,10,372 15,59,447 16,81,158 17,77,477

% of GDP 14.1 13.7 13.3 12.6

2.a) Revenue Expenditure (2.1.1+2.2.1) 12,43,514 13,71,772 14,88,780 15,36,047

% of GDP 12.4 12.1 11.8 10.9

2.a).1 Of Which, Grants for creation of Capital Assets1,15,710 1,29,418 1,31,898 1,10,551

% of GDP 1.2 1.1 1.0 0.8

2.b) Capital Expenditure (2.1.2+2.2.2) 1,66,858 1,87,675 1,92,378 2,41,430

% of GDP 1.7 1.7 1.5 1.7

3. Revenue Deficit (2.a)-1.1) 3,64,282 3,57,048 3,62,486 3,94,472

% of GDP 3.6 3.1 2.9 2.8

4. Effective Revenue Deficit (2.a)-2a).1) 2,48,572 2,27,630 2,30,588 2,83,921

% of GDP 2.5 2.0 1.8 2.0

5. Fiscal Deficit {2-(1.1+1.2.1+1.2.2)} 4,90,190 5,02,858 5,12,628 5,55,649

% of GDP 4.9 4.4 4.1 3.9

6. Primary Deficit (3-2.1.1 a)) 1,77,020 1,28,604 1,01,274 99,504

% of GDP 1.8 1.1 0.8 0.7

Nominal GDP 99,88,540 1,13,45,056 1,26,53,762 1,41,08,945

Growth rate 13.1 13.6 11.5 11.5

-27.4-21.3-1.7 24.8-7.7

Memoranda

Source:Union Budget Documents & SBI Research

-2.01.58.8 16.4

-8.41.323.1 0.0

2.61.98.4 14.9

9.5

0.0

8.2

10.38.53.2 14.5

11.81.9-16.2 -

12.52.525.5 12.6

9.4

10.8

5.3

7.14.0-10.0 14.1

19.20.533.9 15.0

10.67.85.7 14.3

3.9

11.7

8.9

19.59.910.9 13.4

5.64.916.3 10.4

9.63.2-0.6 14.3

15.1

-0.1

5.4

10.67.85.7 13.8

11.09.78.2 14.3

11.510.17.5 14.6

9.0

10.3

11.5

12.4

-0.1

7.9

15.411.01.4 9.3

Budget at a glance (Rs Crore and as a % of GDP)

44.89.51.8 12.3

14.0

10.011.41.3 14.4

2.61.914.6 14.9

-17.0-12.9-1.2 0.2

13.46.7121.7 39.4

2.61.98.4

-3.2

8.2

8.2 14.9


6

Fiscal deficit is budgeted at 3.9% of GDP and Revenue Deficit at 2.8% of GDP for FY16.

The Budget estimate of fiscal deficit was Rs 5.31 lakh crore for 2014-15. FM has also

hinted on possible uncertainties in fiscal space due to implementation of GST and the

likely burden from the 7th

Pay Commission. FM targets to complete the journey to a fiscal

deficit of 3% in 3 years, rather than the two years envisaged previously and have targeted

3.9%, for 2015-16; 3.5% for 2016-17; and, 3.0% for 2017-18. However, in achieving this

the additional fiscal space will go towards funding infrastructure investment.

Composition of Tax Revenue


Indirect tax revenue growth is budgeted at 19.5%, though it may seem to be on higher

side but the tax measures taken in relating to boost indirect tax revenue are quite

significant. Customs duty is budgeted to grow by 10.4% to Rs 2.1 lakh crore, higher than

the revised growth of 9.7% in FY15. This seems to be achievable as Basic Customs duty

has been raised in many cases including customs duty on metallurgical coke being

increased from 2.5% to 5% and Basic customs duty on Commercial Vehicles increased

from 10% to 20%. Union Excise duty is projected to grow considerably by 23.9% from

previous year as there has been increase in excise duty on condensed milk, peanut

butter, solar water heater and systems, mobile handsets etc. Total service tax revenue is

budgeted to grow by 24.8% to Rs 2.1 lakh crore, primarily based upon the 2% rise in

service tax rate from 12% plus education cesses to 14%. The underlying theme of the

indirect tax policy during the year is to boost domestic manufacture, to bring about

clarity in tax laws, stability in duty rates & rationalization of duty structure.

The fiscal policy of 2015-16 has been calibrated with a two fold objective first, to aid

economy in growth revival; and second, to institutionalize the co-operative federal

structure in light of emerging views on the Centre-State fiscal relations. While, allocations

in the social and welfare sectors have been protected, it is expected that the States will be

bringing in greater share to give fillip to government spending in these sectors. Under the

Central Plan, which falls under the exclusive domain of the Centre, allocation has been

increased in the Capital spending. Similarly, higher allocations have been made to core

sectors of infrastructure which have the potential to give impetus to manufacturing and

job creation. It is a noteworthy achievement indeed.

Accordingly, Budget 2015-16 provides for a realistic growth of 15.8 % over RE 2014-15,

with tax-GDP ratio at 10.3 %. With higher devolution to States, following FFC award, Tax

revenue of the Centre shows marginal improvement over RE 2014- 15, about 1.3 %,

despite the growth on gross taxes. Non-tax revenue has witnessed higher growth in last

HIGH TAX BUOYANCY TO SUPPORT FISCAL MANAGEMENT


7

few years due to higher dividend payment from PSUs and Banks, higher dividend paid by

RBI and increase in estimates of Spectrum charges. However, with higher potential under

this item already realized, Budget 2015-16 provides for marginal increase of 1.8 % over

RE 2014-15. Thus, total revenue receipts of the Centre remains stagnant, with marginal

increase of 1.4 % over RE 2014-15.

We believe the budget has set a realistic targets, and can actually overshoot its 3.9%

target at the year end. Moreover, we also envisage that slight digression of fiscal deficit

target on account of more capital spending will not affect RBIs decision regarding

monetary policy. The RBI has also made it clear that not the fiscal deficit number but also

quality of fiscal is equally important.

Fiscal Ratio

% of GDP FY15

(RE)

FY16

(BE)

FY17

(Target)

FY18

(Target)

Effective Revenue Deficit 1.8 2 1.5 0

Revenue Deficit 2.9 2.8 2.4 2

Fiscal Deficit 4.1 3.9 3.5 3

Old Fiscal deficit target 3.6 3

Source: Union Budget document & SBI Research

FY12 FY13 FY14 FY15 (RE) FY16 (BE)FY16 /

FY15 (%Gr)

FY15 /

FY14 (% Gr)

FY14/ FY13

(% Gr)

5 Yr CAGR

(FY11-15,%)

Decadal CAGR

(FY06-15,%)

Gross Tax Revenue 8,89,177 10,36,235 11,38,734 12,51,391 14,49,491

% of GDP 10.1 10.4 10.0 9.9 10.3

Corporation Tax 3,22,816 3,56,326 3,94,678 4,26,079 4,70,628

% of GDP 3.7 3.6 3.5 3.4 3.3

Taxes on Income

Other than

Corporation Tax

1,64,485 1,96,512 2,37,817 2,72,607 3,20,836

% of GDP 1.9 2.0 2.1 2.2 2.3

Customs 1,49,328 1,65,346 1,72,085 1,88,713 2,08,336

% of GDP 1.7 1.7 1.5 1.5 1.5

Union Excise Duty 1,44,901 1,76,535 1,70,197 1,85,480 2,29,809

% of GDP 1.6 1.8 1.5 1.5 1.6

Service Tax 97,509 1,32,601 1,54,778 1,68,132 2,09,774

% of GDP 1.1 1.3 1.4 1.3 1.5

Source: Union Budget documents & SBI Research

10.4 9.7 4.1 8.6 12.6

23.9 9.0 -3.6 7.7 5.8

24.8 8.6 16.7 24.0 24.7

Indiect Taxes

Direct Tax

10.5 8.0 10.8 9.3 17.3

17.7 14.6 21.0 18.3 18.9

Direct and Indirect taxes (Rs crore and as a % of GDP)

15.8 9.9 9.9 12.1 14.6


8

14th

FC

Budget

2015-16

Difference

(in bps)

Gross Revenue Receipts 12.25 14.03 178

Gross Tax Revenues 10.72 10.27 -45

Corporation Tax 3.61 3.34 -27

Income Tax 2.27 2.32 5

Customs 1.55 1.48 -7

Union Excise Duties 1.5 1.63 13

Service Tax 1.75 1.49 -26

Net Revenues to Centre 8.25 8.09 -16

Revenue Expenditure 10.81 10.89 8

Subsidy 1.7 1.73 3

Food 0.67 0.88 21

Others 1.03 0.85 -18

Capital Expenditure 1.64 1.71 7

Fiscal Deficit 3.6 3.94 34

Revenue Deficit 2.56 2.80 24


Union Budget vis--vis Finance Commission

As % of GDP

For 2015-16

Revenue

Expenditure

Deficit

The debate on fiscal austerity (fiscal consolidation) in Euro Zone and other economies has

focused exclusively on Government budget deficits and public debt as a percentage of

GDP. The impact of this fiscal austerity program is closely related to the size of the

Keynesian multiplier of public expenditure, which was believed to be large when the

neoclassical synthesis of Keynesian economics prevailed up to the 1970s. Also, reducing

Government spending is not so easy and wise. According to traditional Keynesian theory,

if you manage to reduce the fiscal deficit, you run into another problem: the country

might slide into recession. There is a significant misunderstanding, perhaps deliberate,

around the notion of fiscal consolidation, as policy measures are not clearly

differentiated from policy outcomes. Fiscal austerity is a policy measure; fiscal

consolidation is the goal that may or may not be achieved through fiscal austerity; yet

fiscal consolidation is used with both meanings, as if the desired outcome from policy

tightening was assured. However, many factors can mediate and have an impact on the

economic result. If slow growth or recession is due to insufficient demand, a new round

of fiscal tightening will further depress the economic activity. Conversely, by

strengthening the domestic demand, fiscal stimulus may actually contribute to fiscal

consolidation.

FISCAL AUSTERITY AND PUBLIC EXPENDITURE


9

Pre-Crisis

2005-2007

Crisis

2008-2010

Post -Crisis

2011-2013

Pre-Crisis

2005-2007

Crisis

2008-2010

Post -Crisis

2011-2013

France -2.7 -5.7 -4.7 64.1 75.3 88.3

Germany -1.6 -2.5 -0.2 67.3 74.6 79.8

Greece -6.2 -12.2 -6.4 105.3 130.3 167.5

Ireland 1.5 -16.6 -9 24.6 64.1 108.8

Italy -3.2 -4.2 -3.2 105.1 113.9 126.7

Portugal -4.5 -7.9 -5.2 64.9 83.1 120.4

Spain 1.9 -8.4 -9.1 39.7 51.9 83.4

Canada 1.6 -3.3 -3.4 69.4 79.5 87.6

India* -3.3 -5.7 -5.1 77.3 71.5 65

Japan -3.5 -7.9 -8.9 185.1 206 236.8

UK -3 -8.7 -7.2 42.7 65.8 88

USA -3 -10.6 -8.1 64.2 84.6 101.9

Gross Debt (% of GDP)

Euro Zone

Other Economies

Source: IMF, SBI Research; * Financial Year

Deficit and Debt during 2005 to 2013

Country

Fiscal Balance (% of GDP)

It was high time to revisit the controversy regarding the relationship between private and

public investment. In broad terms public sector investment lowers private investment if it

utilizes scare and physical financial resources that would otherwise be available to private

sector. However public investment can also be complementary to private investment if it

is related to infrastructure. Public investment of this type can enhance the possibility for

private investment and raise the productivity of capital, increase the demand for private

output and augment overall resources through an increase in aggregate output and

savings.

In conclusion, fiscal austerity has become part of the problem, not of the solution. This

does not mean that fiscal discipline is not important or fiscal consolidation is not

desirable, but the first must be exercised within a global programme for restarting

growth, and the second will be the medium- to long-term result of that process, not its

precondition. There are enough instruments for pursuing pro-growth policies, although

they must go beyond the macroeconomics of big aggregates (for example, fiscal balances

and monetary aggregates) and intervene in the level and composition of fiscal

expenditure and revenues, in the direction of credit and in the distribution of income.

Instruments, including specific structural and institutional reforms, must also be better

suited to their goals. To avert sovereign debt crisis, a lender of last resort is the best way

to eliminate the risk of default and maintain risk premium and interest rates at

manageable levels, instead, new doses of austerity would only deepen the recession and

further deteriorate long-run solvency.


10

FY13 FY14 FY15(RE) FY16(BE)FY16 /

FY15 (%Gr)

FY15 /

FY14 (% Gr)

FY14/ FY13

(% Gr)

5 Yr CAGR

(FY11-15,%)

Decadal

CAGR

(FY06-15,%)

1. Non Plan Expenditure 996742 1106120 1213224 1312200

% of GDP 10.0 9.7 9.6 9.3

1.1 Interest payments 313170 374254 411354 456145

% of GDP 3.1 3.3 3.3 3.2

1.2 Defence Expenditure 181776 203499 222370 246727

% of GDP 1.8 1.8 1.8 1.7

1.3 Subsidies 257079 254632 266692 243811

% of GDP 2.6 2.2 2.1 1.7

1.4 Other Non Plan Expenditure 244723 273735 312808 365517

% of GDP 2.5 2.4 2.5 2.6

2. Plan Expenditure 413625 453327 467934 465277

% of GDP 4.1 4.0 3.7 3.3

2.1 on Revenue Account 329208 352732 366883 330020

% of GDP 3.3 3.1 2.9 2.3

2.2 on Capital Account 84417 100595 101051 135257

% of GDP 0.8 0.9 0.8 1.0

3. Total Expenditure 1410372 1559447 1681158 1777477

% of GDP 14.1 13.7 13.3 12.6

3.1 on Revenue Account 1243514 1371772 1488780 1536047

% of GDP 12.4 12.1 11.8 10.9

3.2 on Capital Account 166858 187675 192378 241430

% of GDP 1.7 1.7 1.5 1.725.5 2.5 12.5 5.3 12.6


5.7 7.8 10.6 8.9 14.3

3.2 8.5 10.3 9.4 14.5

-10.0 4.0 7.1 3.9 14.1

33.9 0.5 19.2 11.7 15.0

16.9 14.3 11.9 5.1 13.0

-0.6 3.2 9.6 5.4 14.3

11.0 9.3 12.0 9.6 11.9

-8.6 4.7 -1.0 11.4 21.1

Expenditure Trends (Rs crore and as a % of GDP)

8.2 9.7 11.0 10.3 14.3

10.9 9.9 19.5 15.1 13.4

In line with Governments new fiscal target, the fiscal deficit for 2015-16 of 3.9% of GDP

and total borrowings requirement for 2015-16 has been budgeted at Rs 5,55,649 crore.

Though in nominal terms net borrowing projections at Rs 4,56,405 crores shows an

increase of 2.1% over the previous year, but In terms of GDP, net market borrowing is

budgeted to decline to 3.2% as compared with 3.5% in 2014-15. Interestingly the

Government has earmarked Rs 32,000 crore of switch/buyback of Government securities

due for maturity in the next fiscal, thus bringing down overall maturity and Gross

borrowings by Rs 32,000 crore in the next fiscal. The budget also set aside Rs 50,000

crore of Government Bond Switch for the next fiscal.

As per the budget, dependence on market borrowing for financing fiscal deficit has come

down by 5%, whereas, other means that would now be used to meet that gap are buoyant

small saving inflows and utilization of Government cash balance.

The weighted average maturity of primary issuances of dated securities in fiscal year

2014-15 increased to 14.66 years from 14.28 years in the previous year. The weighted

average yields of issuance in fiscal year 2014-15 went marginally up to 8.51% from 8.48%

in the previous year. We expect with further reduction in repo rate along with conducive

domestic macroeconomic environment, the average cost of Government borrowing is

expected to come down by ~100bps in the coming fiscal. Commercial banks are a major

investor in the Government bonds (around 45% of outstanding dated securities). The

deposits of commercial banks during 2014-15 saw a y-o-y growth of ~11%. With increase

in broad money and improvement in economic condition, we expect banks to continue to

remain large subscriber of Government bonds. Insurance companies are another major

investor category (around 20% of outstanding dated securities), the budget has given

number of avenues for insurance companies to scale up their business. In addition to

that, insurance linked with Pradhan Mantri Jan Dhan Yojana and continuous increase in

penetration level will also increase demand for bonds. Nonetheless easing interest rate

cycle and benign issuances of government augers well to further softening of yield.

GOVERNMENT BORROWINGS


11

Financing Fiscal Deficit


FY13 FY14 FY15 (RE) FY16 (BE)FY16 /

FY15 (%Gr)

FY15 /

FY14 (% Gr)

FY14/ FY13

(% Gr)

5 Yr CAGR

(FY11-15,%)

Decadal

CAGR

(FY06-15,%)

Total Subsidies 257078.6 254631.8 266691.8 243811

% of GDP 2.6 2.2 2.1 1.7

Fertiliser Subsidy 65612.81 67338.77 70967.31 72968.56

% of GDP 0.7 0.6 0.6 0.5

Food Subsidy 85000 92000 122675.8 124419

% of GDP 0.9 0.8 1.0 0.9

Petroleum Subsidy 96879.87 85378.16 60270 30000

% of GDP 1.0 0.8 0.5 0.2

Interest Subsidies 7270.37 8137.19 11147.17 14903.42

% of GDP 0.1 0.1 0.1 0.1

Other Subsidies 2315.55 1777.72 1631.55 1520

% of GDP 0.0 0.0 0.0 0.0


33.7 37.0 11.9 24.2 19.9

-6.8 -8.2 -23.2 -21.2 4.2

1.4 33.3 8.2 17.7 20.4

-50.2 -29.4 -11.9 12.0 41.3

Subsidy Trends (Rs crore and as a % of GDP)

-8.6 4.7 -1.0 11.4 21.1

2.8 5.4 2.6 3.3 16.1

FY13 FY14 FY15 (RE) FY16 (BE)FY16 /

FY15 (%Gr)

FY15 /

FY14 (% Gr)

FY14/ FY13

(% Gr)

5 Yr CAGR

(FY11-15,%)

Decadal CAGR

(FY06-15,%)

Gross Market Borrowings 558000 564147 592000 600000

% GDP 5.6 5.0 4.7 4.3

Less repayments 90644 110597 145078 143595

% GDP 0.9 1.0 1.1 1.0

Net Market Borrowings 467356 453550 446922 456405

% GDP 4.7 4.0 3.5 3.22.1 -1.5 -3.0 8.3 18.7


Government Borrowings (Rs crore and as a % of GDP)

1.4 4.9 1.1 7.9 18.2

-1.0 31.2 22.0 6.8 16.9


12

(Rs Cr) S tate Corporation

tax

Income

tax

W ealth

tax Customs

Union

E xcise

Other taxes

& DutiesT otal S hare (%) S ervice T ax

Grand Total

(Total + Service

Tax)

Share (%)

1 Andhra Pradesh 7,499 5,537 -0 3,481 22638 4.31

2 Arunachal Pradesh 2386.0 1762.0 -0.1 1108.0 7232 1.37

3 Assam 5,768 4,258 -0 2,677 17401 3.31

4 Bihar 16836.0 12430.0 -0.5 7815.0 50748 9.67

5 Chhattisgarh 5,365 3,961 -0 2,490 16213 3.08

6 Goa 658.0 486.0 0.0 306.0 1981 0.38

7 Gujarat 5,372 3,966 -0 2,494 16236 3.08

8 Haryana 1888.0 1394.0 -0.1 876.0 5686 1.08

9 Himachal Pradesh 1,242 917 - 577 3744 0.71

10 Jammu & Kashmir 3230.0 2384.0 -0.1 1499.0 8088 1.85

11 Jharkhand 5,468 4,037 -0 2,538 16499 3.14

12 Karnataka 8210.0 6061.0 -0.2 3811.0 24790 4.71

13 Kerala 4,355 3,215 -0 2,021 13122 2.5

14 Madhya Pradesh 13148.0 9707.0 -0.4 6103.0 39705 7.55

15 Maharashtra 9,617 7,100 -0 4,464 29062 5.52

16 Manipur 1075.0 794.0 0.0 499.0 3238 0.62

17 Meghalaya 1,118 826 - 519 3371 0.64

18 Mizoram 801.0 592.0 0.0 372.0 2414 0.46

19 Nagaland 868 640 0 403 2614 0.5

20 Odisha 8086.0 5970.0 -0.2 3753.0 24412 4.64

21 Punjab 2,747 2,028 0 1,275 8273 1.58

22 Rajasthan 9572.0 7067.0 -0.3 4443.0 28925 5.5

23 Sikkim 639 472 0 297 1925 0.37

24 Tamil Nadu 7008.0 5174.0 -0.2 3253.0 21150 4.02

25 Telangana 4,245 3,134 0 1,970 12823 2.44

26 Tripura 1118.0 826.0 0.0 519.0 3369 0.64

27 Uttar Pradesh 31,284 23,097 -1 14,521 94313 17.96

28 Uttarakhand 1833.0 1353.0 -0.1 851.0 5526 1.05

29 West Bengal 12,758 9,419 0 5,922 38462 7.32

TOTAL 174197.0 128607.0 -5.1 80855.0 523958 100

Source:Union Budget Documents & SBI Research

Statement Showing State-Wise Distribution Of Net Proceeds Of Union Taxes And Duties For BE 2015-2016

9444.0 0.0 78344.0 18.2 15969.0

3851.0 0.0 31950.0 7.4 6511.0

193.0 0.0 1601.0 0.4 324.0

1282.0 0.0 10631.0 2.5 2192.0

262.0 0.0 2172.0 0.5 441.0

829.0 0.0 6879.0 1.6 1394.0

2903.0 0.0 24085.0 5.7 4977.0

338.0 0.0 2801.0 0.7 570.0

1651.0 0.0 13694.0 3.2 2805.0

1315.0 0.0 10906.0 2.5 2216.0

1622.0 0.0 13454.0 3.2 2782.0

375.0 0.0 3110.0 0.7 633.0

0.0 14444.0 3.4 2957.0

1620.0 0.0 13436.0 3.2 2777.0

1741.0

2264.0 0.0 18780.0 4.4 3858.0

The 2015-16 Union Budget has set a divestment target Rs 69500 crore, higher than the

previous fiscal's target of Rs 58,425 crore. As per the budget documents, proceeds from

disinvestments in this year would be at Rs 31,350 crore. The success of the disinvestment

target will again largely depend upon Hindustan Zinc and Bharat Aluminium (Balco) along

with stake sale of Government holdings in private firms through SUUTI. We believe

remaining part of the targeted amount will be conditioned upon timely execution and

buoyant equity market, where we do not envisage any large slippages.

Government has announced 100% deduction for contributions, other than by way of CSR

contribution, to Swachh Bharat Kosh and Clean Ganga Fund.

Clean energy cess has been increased from Rs 100 to Rs 200 per metric tonne of coal,

etc. to finance clean environment. Doubling of cess is expected to fetch additional Rs

5000 crore per year in the clean corpus. Excise duty on sacks and bags of polymers of

ethylene other than for industrial use increased from 12% to 15%.

DISINVESTMENT

SWACHH BHARAT


13

The move will accelerate Construction of toilets under Prime Minister Narendra Modi's

dream project, Swachh Bharat Abhiyan and ensure uninterrupted progress. The

programme entails an investment of nearly Rs 2 lakh crore over the next five years to

construct 12 crore toilets in India. Government has constructed 7.10 lakh individual

household toilets in the month of January15 alone taking the total of 31.83 lakh toilets

up to January 2015. Further, concessions on custom and excise duty available to

electrically operated vehicles and hybrid vehicles has been extended upto 31st

March

2016.

In order to promote investment in the country, FM has proposed to set up a Public Debt

Management Agency (PDMA) which will bring both Indias external borrowings and

domestic debt under one roof.

Moving public debt management from the Central Bank to a Debt Management Office

(DMO) is an internationally accepted best practice. Most OECD countries has already

established dedicated debt management units. Several emerging economies, Brazil,

Argentina, Colombia, and South Africa, have also restructured and consolidated debt

management. The first Report of the Internal Working Group on Debt Management had

laid down the formats and structure of DOMs. As per that report there are certain

common features across countries that have restructured and modernized public debt

management:

The Central Bank no longer manages public debt; there is a clear separation between

monetary policy and public debt management.

Debt management is integrated in one entity rather than dispersed over several

departments and authorities.

The split between external and domestic debt management gives way to integrated

debt management, with a front-middle-back office structure.

The DMO focuses on making debt management more transparent.

The DMO focuses on communicating regularly and clearly with financial markets.

In the Budget, a number of steps has been taken to give better autonomy to the PSBs,

with the creation of a Bank Boards Bureau and eventually a holding company are being

seen as key positives emerging for banks from the budget, even as limited capital

allocation for the current year may prove to be an immediate constraint.

The budget provides Rs 7,940 crore for capitalization of banks. The capital infusion is

small given the fact that even after reduction of the minimum Government holding in

PSBs to 52%, a sum of Rs 1.02 lakh crore will be required during the period 2015-16

to 2019-20 from the Government for complying with Basel III norms (according to

14th Finance Commission).

To improve governance of PSBs, FM has proposed setting up autonomous Bank Board

Bureau for helping lenders raise capital for meeting expansion needs. This would be a

step towards establishing a holding and investment company for banks. This issue

was discussed extensively at the Gyan Sangam and PSBs heads suggested the

BANKING SECTOR

DEBT MANAGEMENT


14

creation of Bank Investment Committee (BIC) and transfer of the Government's

investment in banks to BIC. Creation of BIC would over time enable the Government to

reduce ownership to below 51% and help banks generate capital for growth. Earlier, in

Dec14, the Government decided to permit public sector banks to raise capital up to

Rs 1.6 lakh crore from capital markets by diluting Government holding to 52% in

phases so as to meet Basel III capital adequacy norms. PSBs alone require Rs 2.40 lakh

crore by 2018 to meet global Basel III norms. However, 14th Finance commission has

the view that proposal to create a holding company will result in indirect and non-

transparent fiscal obligations for the Union Government.

The move to bring NBFCs at par with financial institutions will help banks to clean up

their balance sheets by selling stressed assets at an early stage to ARCs. This is

because NBFCs, on account of their inability to access SARFAESI would only take on

NPA accounts where SARFAESI already invoked. Now SMA accounts would also be

applicable.

In line with US Chapter 11 bankruptcy code, Government is to form a new bankruptcy

code, by scrapping the Board for Financial and Industrial Reconstruction (BFIR) and the

Sick Industrial Companies Act (SICA). The loopholes existing on account of multiple

laws like SICA (Sick Industrial Companies Act) and Board for Industrial and Finance

Construction (BIFR) that allowed defaulters to exploit and delay recovery will stand

altered.

Also, the decision to have commercial courts acting under the judicial courts may fast

track debt recovery. For lender this appears to be a big positive as tightening of

defaults will lead to ease of doing business.

Government also proposes to utilise the 1.55 lakh of postal network to promote

PMJDY by venturing into payment bank. The Payment Bank will improve payments and

remittance services across the length and breadth of the country.

Internationally, insurance penetration and density reflects the level of development of

insurance sector in a country. Despite several measures, the insurance penetration of

India is staggering at a very low level (3.90% in 2012-13), compared to other countries

like US 7.5%, UK 11.5% and South Africa 15.4%. However, the Indian insurance industry

faces a number of difficulties like capital raising, tight regulations etc. However, in the

Budget 2015-16, Government has taken a number measures to increase insurance

penetration in the country, especially in the health insurance segments. In line with

Pradhan Mantri Jan Dhan Yojana (PMJDY), the Finance Minister launched Pradhan Mantri

Suraksha Bima Yojana (PMSBY) that will cover accidental death risk of Rs 2 lakh for a

premium of just Rs 12 per year i.e. Re 1 per month. As per estimates, around 63 million

people have been driven into poverty due to the high cost of healthcare. In addition to

that, around 73% of the country's population live in rural areas and 26.1% is below

poverty level.

Similarly, Social Security Scheme that was announced is the Pradhan Mantri Jeevan Jyoti

Bima Yojana (PMJJBY) which covers both natural and accidental death risk of Rs 2 lakhs.

The premium will be Rs 330 per year, or less than one rupee per day, for the age group

18-50. Interestingly, all the contributions will be transferred from their Jan Dhan accounts

directly. So, this move will give an additional boost to the banking industry in India.

INSURANCE & PENSION REFORMS


15

Health Insurance

In line with our expectations, Finance Minister has raised the deduction limit under

section 80D to Rs 25000 from Rs 15000. Increased tax sops are aimed at helping tax

payers to buy enhanced covers for themselves. Senior citizens above 80 years of age with

no health insurance cover are allowed a deduction of Rs 30,000 towards expenses

incurred for health care. Deduction available under Section 80DDB for senior citizen has

been hiked up to Rs 80,000 from extant Rs 60000. The deduction now stands at Rs

80,000 or actual whichever is lower. This move will encourage people to take health

insurance given the fact that penetration of health insurance is quite low in India

compared to emerging economies. Health insurance penetration in India is only around

5% overall with about 13-15% in urban areas.

Pension Fund Reforms

In line with the PMJDY, Government has also proposed to work towards creating a

universal social security system for all Indians, especially the poor and the under-

privileged. In this context, Government has announced the Atal Pension Yojana (APY),

which will be a defined benefit pension, depending on the contribution, and its period. To

encourage people to join this scheme, the Government will contribute 50% of the

beneficiaries premium limited to Rs 1,000 each year, for five years, in the new accounts

opened before 31st

December, 2015.

Additionally, to promote savings, Government has raised the tax incentive limit for

investment in pension fund by Rs 50,000 under 80CCD, taking it to Rs 1.5 lakh. The limit

on deduction on account of contribution to a Pension Fund and the New Pension Scheme

(NPS) is proposed to be increased from Rs 1 lakh to Rs 1.5 lakh.

In addition to that, workers covered under EPFO may soon have an option to choose

between Employees Provident Fund (EPF) scheme and NPS and also between health

insurance products of Employees State Insurance Corporation's (ESIC) and Health

Insurance product, recognized by the Insurance Regulatory Development Authority. It is

also proposed that for workers getting wages below a certain threshold, contribution to

EPF will be optional. This is a welcome move as now employees get options of investing in

debt and equity. EPF invests in debt only while NPS in debt and equity both. At present,

over five crore workers are covered under EPFO and two crores under ESIC.

The announcement of creating a refinance agency MUDRA bank with an initial corpus of

Rs 20,000 crore to provide credit facilities to SC/ST businesses is a welcome move as it

will help around 62% of 5.77 crore small business units that are owned by SC/ST. This will

result in a lower rate for MSME borrowers and hence increase in credit demand.

The announcement of establishment of an electronic Trade Receivables Discounting

System (TReDS) for financing of trade receivables of MSMEs, from corporate and other

buyers, through multiple financiers will improve liquidity in the MSME sector significantly

and helps the sector in managing working capital cycle effectively.

MSME


16

The Finance Minister has announced four concrete measure regarding monetization of

gold. These include: one, a Gold Monetisation Scheme, which will replace both the

present Gold Deposit and Gold Metal Loan Schemes; two a Sovereign Gold Bond which will

be an alternative to purchasing metal gold; three developing Indian Gold Coin, which will

carry the Ashok Chakra on its face and four buying of Gold using Debit cards/ Rupay

cards.

The first proposal is a monetization measure which will recycle the existing stock of gold

and will unlock the value in gold for productive purposes. Since, existing Schemes may be

amended or replaced and the ensuing business risk of this policy announcement can be

assessed only when exact contours of the proposals are known.

The second proposal, Sovereign Gold Bonds is creating a near substitute for physical gold

by issuing gold denominated/indexed sovereign bonds. One can infer that Bonds will

carry a fixed rate of interest, and also be redeemable in cash in terms of the face value of

gold. Banks can be the designated agencies once the scheme becomes operational.

Government may even recognize these bonds an eligible collateral for loans. However,

taxation related issue for these bonds have not been clarified.

The third measure, minting Indian Gold Coin carrying Ashok Chakra is a measure very

similar to American Eagle Bullion Coins issued by the United States Government. Similar

coins are also issued by Perth Mint of the Government of Western Australia. But the focus

is to recycle the domestic gold such as scrap gold. This will provide investors with a

convenient and cost-effective way to add a small amount of physical metal to their

portfolio.

The fourth measure is proposed with an intention to curb black money. Since gold

provides not only a safe means of holding illegal gains, but also makes such holdings

highly profitable when the onshore price of gold differs substantially from offshore price.

This is a welcome measure.

Otherwise, the proposed introduction of a gold deposit scheme is a big positive and

conservative estimates show even at a 30% strike rate, the monetary value of gold

deposits mobilized may be as much as Rs 3 lakh crore.

Estimated stock of gold (Tonnes)

Eligible stock for monetization @ 23%

Percent of monetization 0.1 0.2 0.3

Gold mobilised (Tonnes) 460 920 1380

Dollar value of gold monetised (Billion) 17.9 35.9 53.8


Conservative Estimates of Gold Monetization

20000

4600

The budget looks to simplify the FDI regime by doing away with the distinction between

different types of foreign investments. Portfolio and foreign direct investments will now

have to comply with FDI norms on same footing. Sectors under 100% automatic route

would not be affected. Also, there are few sectors where FDI and FII cap is not clearly

MONETISATION OF GOLD

ROADMAP FOR FDI AND FII COMPOSITE CAPS


17

mentioned. The composite caps would aid foreign investments into the country. An

estimated FDI of $21 billion was reported in the April-Jan period exhibiting a 27% growth.

The removal of ambiguity on application of sectoral caps, conditionalities and approval

requirements in different sectors is intended to pave the way in keeping with the

momentum in FDI.

Finance Minister indicated GST as one of the game changing reforms and announced that

GST will put in place a state-of-the-art indirect tax system by 1st April, 2016. To facilitate

smooth transition to GST, Service tax plus education cess is proposed to be increased

from 12.36% to 14%. Earlier the 14th

Finance Commission (FC) also increased the share of

States in Union taxes to 42% (from the current level of 32%). The one year moratorium will

help a smooth implementation of GST as there are several challenges and many

unresolved issues.

Regarding the compensation to the States, FC has a view that given the scale of reform

and the apprehensions of revenue uncertainty raised by the States, the revenue

compensation, should be for five years. It is suggested that 100% compensation be paid

to the States in the first, second and third years, 75% compensation in the fourth year and

50% compensation in the fifth and final year. FC also recommends creation of an

autonomous and independent GST Compensation Fund through legislative actions in a

manner that it gives reasonable comfort to States, while limiting the period of operation

appropriately. As a first decisive step, in Budget FY14, Rs 9,000 crore was provided

towards the first instalment of balance of CST compensation. In the current Budget the

compensation has not been talked about.

FC has a view that Union may have to initially bear an additional fiscal burden arising due

to the GST compensation and this fiscal burden should be treated as an investment which

is certain to yield substantial gains to the nation in the medium and long run.

The implementation of GST would be critical for the economy as this will streamline the

tax administration and result in higher revenue collection both for the Centre and the

States. In our estimates, implementation of GST would lead to a 1% to 1.5% increase in

GDP growth.

GST: WAIT FOR ONE MORE YEAR


18

Some critical steps Status Remarks

Introduction of Value Added Tax throughout the

country

a Done successfully

Reduction in the Central Sales Tax (CST) rate as part of

a complete phase out of the tax

a Done successfully from 4% to 2%

Complete phasing out of CST r Proposed to be subsumed in GST

Introduction of the Service Tax by the Centre, and a

substantial expansion of its base over the years

a Done successfully

Rationalization of the CENVAT rates by reducing their

multiplicity

aReplacing many of the specific rates by ad

valorem rates based on the maximum retail

price (MRP) of the products

Drafting of model legislation for the Centre and State

GST in concert with States

r Under progress

Working formula for revenue sharing and whether

compensation to be given to States

rMost contentious issue. Partly resolved.

Working formula has been decided but

compensation need to be done

GST amendments to become law r

To be passed by the Parliament with a two-

thirds majority in both the Houses and

endorsed by at least half of the State

Assemblies in the country

GST network (GSTN) to be set up as a National

Information Utility

rGovernment missed the August 2012 deadline

to roll out GSTN and new date of roll out is

yet to be decided

Harmonization of Central Excise and Service Tax aA common simplified registration form and a

common return comprising of one page are

steps in this direction

Common tax code for Central Excise and Service Tax r Study team to examine the possibility

Concept of taxing services based on negative list a Introduced

Utilization of input tax credit aPermitted in number of services to reduce

cascading of taxes

Inclusion of Petroleum products and entry tax under

GST

rNo consensus as States want to keep these

items out of the GST, but industry is batting

for inclusion to ensure an effective GST

Status of GST

FM has addressed two major factors critical to agricultural production: soil and water. In

order to improve soil health, FM has proposed to support Agriculture Ministrys organic

farming scheme Paramparagat Krishi Vikas Yojana.

In this context, the Government can also launch a bi-annual Krishi Mahotsav

(synchronizing with Rabi and Kharif) in line with Gujarat Government where all

institutions are pulled under one platform to maximize farmer outreach. Additionally, the

Gujarat Government initiative on Soil Health Cards (soil data of 2 lakh farmers across

18,000 villages were initially collected for this purpose) and Scientists & Extensions

advising crop improvement qualitatively based on soil data and existing knowledge may

also be replicated.

The Pradhanmantri Gram Sinchai Yojana is aimed at irrigating the field of every farmer

and improving water use efficiently to provide Per Drop More Crop. FM has set a target

of Rs 8.5 lakh crore of agricultural credit during the year 2015-16.

The move towards a unified agricultural market will ensure that the farmers gets the

correct remuneration of their agricultural produce.

AGRICULTURE


19

The four important Budget proposals impacting the mutual fund industry are as follows:

a) An increase in surcharge of 2% from 10% to 12% on additional income-tax payable

by companies on distribution of dividends and buyback of shares, or by mutual

funds and securitization trusts on distribution of income. If companies want to

maintain their outgo, then shareholders will have to reckon with lower dividends.

The proposed increase in surcharge will reduce the return on long-term

investments of shareholders.

b) Tax neutrality on transfer of mutual fund scheme under the process of

consolidation of schemes of mutual funds as per SEBI Regulations,1996. Hence the

mutual fund industry is likely to witness more scheme mergers in the coming

weeks.

c) Service tax exemption withdrawn on the services provided by mutual fund agents

to an asset management company.

d) Modification in Permanent Establishment (PE) norms to the effect that mere

presence of a fund manager in India would not constitute PE of the offshore funds

resulting in adverse tax consequences. This would encourage fund managers

operating from offshore locations to relocate to India.

As suggested by the Financial Sector Legislative Reforms Commission (FSLRC), India

Financial Code (IFC) will be introduced in Parliament soon which will lay out clear

objectives for financial regulation. The code focuses on the formal process through which

the legislative, executive and judicial functions take place in financial regulators. Besides,

it provides clear objectives for financial regulation where government intervention is

required and the areas include consumer protection, systemic risk reduction, debt

management, capital controls and micro-prudential regulation.

FM announced of keeping aside Rs 1000 crore to help start-ups is a welcome news for the

aspiring entrepreneurs across the country. Earlier announcements of big funds like Rs

10,000 crore and Rs 5,000 crore for handholding start-ups with equity support never

took off. However, to start with Rs 1000 crore will be easy to set up operating structure

for utilising this fund which was not finalized last time. In the coming days, Government

should think of a structure which can satisfy various aspects like

equity support to the entrepreneur,

comfort to banks in financing,

repayment of the funds to Government to revolve it to other beneficiaries,

employment generation.

MUTUAL FUND

INDIA FINANCIAL CODE

FUND FOR START-UP


20

The Union Budget is particularly stringent on tackling the menace of black money. Black

money can be categorized into two groups - black money and red money. The former is

generally attributed to illicit money generated by normal economic activity by

circumventing the tax laws. The latter is exclusively attributed to money generated out of

crimes like narcotics smuggling, bribing and other nefarious activities. It appears that the

proposed measure are mostly dealing with black money and not red money. One way to

curb the flow of black money is to discourage transactions in cash. Now that a majority

of Indians has or can have, a RUPAY debit card the proposal to allow purchase of gold

using plastic money have already been mentioned.

Besides reducing the level of cash usage, it is now proposed that concealment of income

and assets and evasion of tax in relation to foreign assets will be prosecutable with

punishment of rigorous imprisonment up to 10 years. This offence will be made non-

compoundable; the offenders will not be permitted to approach the Settlement

Commission; and penalty for such concealment of income and assets at the rate of 300%

of tax shall be levied. Further, non-filing of return or filing of return with inadequate

disclosure of foreign assets will be liable for prosecution with punishment of rigorous

imprisonment up to 7 years.

Since nearly 70% of the black money and almost whole of red money is stashed abroad;

hence the proposal to amend the Prevention of Money-laundering Act, 2002 (PMLA) and

the Foreign Exchange Management Act, 1999 (FEMA) to recover the same. The offence of

concealment of income or evasion of tax in relation to a foreign asset will be made a

predicate offence under the PMLA. This provision would enable the enforcement agencies

to attach and confiscate unaccounted assets held abroad and launch prosecution against

persons indulging in laundering of black money. If any foreign exchange, foreign security

or any immovable property situated outside India is held in contravention of the

provisions of FEMA, then action may be taken for seizure and eventual confiscation of

assets of equivalent value situated in India.

To address domestic black money, a new and more comprehensive Benami Transactions

(Prohibition) Bill will be introduced in the current session of the Parliament. This law will

enable confiscation of benami property and provide for prosecution, thus blocking a

major avenue for generation and holding of black money in the form of benami property,

especially in real estate. Furthermore, the Finance Bill includes a proposal to amend the

Income-tax Act to prohibit acceptance or payment of an advance of Rs 20,000 or more in

cash for purchase of immovable property.

Central PSUs are sitting on huge surplus cash balances to the tune of Rs 2.50 lakh crore.

At the end of March 2014, 54 major listed central government enterprises (CPSUs) were

sitting on cash and equivalents worth Rs 2 lakh crore. However, this amount is almost

one fifth of the cumulative investment in fixed assets by these companies. PSUs

companies can expand their capacity by around a fifth if they use all their cash balances

which lies in bank deposits and earns interest. An investment push by PSUs will surely

help the investment cycle, given their size and position in the industrial value chain.

UTILISING CASH & BANK BALANCES OF PSUs

BLACK MONEY


21

In fact it seems imperative to consider the case for reviving public investment as one of

the key engines of growth going forward, not to replace private investment but to revive

and complement it. While private corporate investment surged in the boom phase, public

investment too grew by about 3% and just as corporate investment declined by 8%

between 2007-08 to 2013-14, so too has public investment by about 1.5%. Pro-cyclical

public investment during the downward phase has been driven in part by fiscal targets

which have resulted in large cuts toward the end of the fiscal year as the constraints of

fiscal consolidation have loomed large.

Capex blitz by companies in power and infra sector like Coal India, NMDC, ONGC, Indian

Oil, NTPC and Power Grid would trigger investment downstream by private firms and

overall lifting in India's investment cycle. Historically, in the past five years the combined

capital expenditure by PSUs expanded at a compound annual rate of 13.7%. In 2013-14

only, the PSUs together commissioned projects worth Rs 1.15 lakh crore.

Company

Cash &

equivalents

Leverage

Ratio

Coal India 54780.2 -0.4

ONGC 24480.1 0.3

NMDC 18657.2 -0.6

NTPC 17050.7 0.8

BHEL 12020 0.2

Oil India 11860.1 0

NHPC 6142.8 0.6

Nat Aluminium 5292.3 -0.4

Bharat Electron 4604.5 -0.6

Power Grid Corp 4417.5 2.5

All 54 PSUs 200229.9 0.7

PSU's Cash Balances (Rs crore) as on Dec'14

Surplus Cash Balances CPSEs (Rs lakh crore)


Economic development heavily depends on the availability of sufficient infrastructure.

Available infrastructure in our country does not match our growth ambitions and this

issue is rightly addressed by the FM in the budget. There is an urgent requirement of

increasing public investment. The Budget has made provision for increased outlay on

roads and railways by Rs 14,031 crore and Rs10,050 crore, respectively. It is proposed to

raise the capex of the public sector units to Rs 3.2 lakh crore in FY15, Rs 80,844 crore

higher than the RE FY15. Increased capex probably make use of the huge cash balances

of the PSUs which stands at nearly Rs 2 lakh crore. All this will lead to an increased

investment of Rs 70,000 crore in the year 2015-16, over the year 2014-15.

INFRASTRUCTURE


22

The proposed National Investment and Infrastructure Fund (NIIF) with initial capital of Rs

20,000 crore would raise debt funds which will be invested as equity, in infrastructure

finance companies such as the IRFC and NHB. This would help the infrastructure finance

companies to leverage extra equity many fold. Additionally, tax free infrastructure bonds

for the projects in the rail, road and irrigation sectors is a correct step. This step was

successful in raising funds during the UPA II regime. Revisiting the PPP mode of

infrastructure development would attract more private capital and technology and

rebalance risk.

To leverage huge land resources, it has been proposed to establish ports in public sector.

This would corporatize, and become companies under the Companies Act and attract

investment. Budget has proposed to set up 5 new Ultra Mega Power Projects, each of

4000 MWs in the plug-and-play mode. This is expected to unlock investments to the

extent of Rs 1 lakh crore. Similar plug-and-play projects in other infrastructure projects

such as roads, ports, rail lines, airports etc. are also expected to come.

The tax proposals of the Finance Minister is based on five key pillars; (i) measures to curb

black money; (ii) creation of job through revival of growth and investment and promotion

of domestic manufacturing through Make in India; (iii) minimum Government and

maximum governance to improve the ease of doing business; (iv) certain tax benefits to

individual taxpayers; and (v) improving the quality of life and public health through

Swachch Bharat initiatives. With the tax proposals, the direct tax proposals involve a

sacrifice of Rs 8,315 crore, while indirect tax proposal will yield a revenue of Rs 23,383

crore. Thus, the net impact of all tax proposals would be revenue gain of Rs 15,068

crore.

Direct Taxes

a) Corporation Tax: The Government has proposed a 5% reduction of the basic rate of

corporate tax to 25% from current 30% over the next four years, starting from the year

2015-16, accompanied by fewer exemptions. The basic rate of corporate tax in India

at 30% is higher than Asias average corporate tax rate of 21.91% in 2014, and a

global average of 23.64%. This will make our domestic industry more competitive,

which may promote a higher level of investment, higher growth and more jobs

opportunities in the economy.

While the details and fine print are yet to be deciphered, a broad outline of the

revenue forgone due to exemptions in central tax system, as per union budget 2012-

13 and union budget 2013-14, on a safer footing, one may assume the extent of

removal of certain deductions at 20% of revenue forgone of tax receipts in 2012-13.

The amount is expected to be around Rs 13500 crore and is likely to square off

against the decline in corporate tax proposed.

TAX PROPOSALS


23

2010-11 2011-12 2012-13

Deduction of export profits of units

located in SEZs (Sec 10A and 10AA)7,432 10,916 12,033

Accelerated Depreciation (Section 32) 33,243 34,320 37,831

Deductions of profit of undertaking

engaged in generation, transmission and

distribution of power (Section 80-IA)

7,581 8,301 9,151

Deductions of profit of undertaking

derived from production of mineral oil

and natural gas (Section 80-IB)

3,626 7,999 8,817

Total 51,882 61,536 67,832

Major Corporate Tax Exemptions in earlier years

Nature of Incentive

Revenue Forgone in Crore

On the revenue side, as per the budgeted estimate tax revenue (Corporate) stands at

Rs 4,70,628 crore for the FY 2015-16. Assuming 29% tax rate only for the next fiscal year

(reduction from 30% in a phased manner), the revenues are expected to decline by above

Rs.15000 crore for next fiscal.

b) Individual Tax: In the budget, there is no change in tax slabs or minimum taxable

limit for individual tax payers. However, it has increased exemption limits on health

insurance premium and transport allowance. Some of the highlights are as under:

As expected, limit in deduction on health insurance has been hiked from

Rs 15,000 to Rs 25,000 to encourage people to take health insurance. For senior

citizens the deduction would be Rs 30,000. Further, the Senior citizens above the

age of 80 years, who are not covered by health insurance, to be allowed deduction

of Rs 30,000 towards medical expenditures.

Contribution to pension fund and NPS has been hiked from Rs 1 lakh to Rs 1.50

lakh. Further, to provide for social safety net and pension to individuals, an

additional deduction of Rs 50,000 for contribution to new pension scheme under

Section 80CCD has been proposed.

Wealth tax has been abolished and has been replaced it with an additional 2%

surcharge on super rich individuals

Meanwhile, the transport allowance exemption has been hiked to Rs 1,600 per

month from Rs 800 per month.


24

The Union Budget has signalled a slight medium-term pain for longer term benefits for various industrial and

corporate sectors. The pain is in the overall attempts at augmenting the tax revenues by increase in the

corporate tax surcharge and the increase in service tax and excise duty rates. This pain though is sought to

be reduced by the Finance Ministers promise to lower the base corporate tax rates over the next five years

from the current 30% to 25%.

The budget provides for a National Investment and Infrastructure Fund and committed a creation of an e-BIZ

portal to act as one source for 14 regulatory permissions. Such a move can rekindle demand for a variety of

companies and associated ancillaries engaged in construction activities and building of infrastructure. Along

with this, the road and railway sector has been extended a budgetary support of ~Rs240bn, thereby

improving the awarding activity in the sector.

The budget also provides for benefits to companies in the expansion mode by offering regional investment

sops for capex made in the states of Andhra and Telangana. We find the plug-and-play model for Ultra Mega

Power Projects an innovative mechanism to revive the stalled expenditure in this sector. This coupled with the

thrust on the renewable sector is a welcome step. Although, here again, a medium-term pain exists in the

form of increase in the clean energy cess on coal.

There have been specific expectations that still remain unmet and include things such as a uniform and

simplified excise duty on cement, reduction of MAT, reduction in export duty on iron ore and increase in

exemption for interest on housing loans for self-occupied houses. However, many of these expectations were

not attuned to fiscal challenges that they threw up for the Finance Minister and were therefore not

considered.

While the equity markets will have to contend with a cut in earnings forecast arising from the taxation

measures, they are expected to maintain a positive bias given the fiscal space having been negotiated well

enough to spur growth in future.

EXECUTIVE SUMMARY CORPORATE & INDUSTRY


25

EXPECTATIONS BUDGET PROPOSAL REMARK IMPACT

Not expected Increase in surcharge by 2% on total income and on DDT.

The increase in surcharge would lead to increase in tax outgo and DDT would increase to 17.304% from the earlier 16.995%.

Negative

Reduction in MAT rate No change in base rate surcharge increased by 2% for total income above Rs1cr.

The average tax rate for all companies would increase due to the increase in surcharge by 2%.

Negative

Revision in tax slabs Unmet NA Negative

Increase in the deduction limit u/s 80C to Rs2lakh from Rs1.5lakh

Unmet A contribution to Sukanya Samriddhi Account is eligible for deduction u/s80C.

Neutral

Not expected

Increase in deduction u/s 80D for individuals and HUF to Rs25,000 from Rs15,000 and for senior citizen to Rs30,000 from Rs20,000.

At peak rate the increase in deduction would reduce tax outgo by Rs3,000 and Rs6000 excluding and including senior citizen benefit.

Positive

Not expected

Increase in deduction u/s80DD and u/s80U to Rs75,000 from Rs50,000 for disability and Rs125,000 to Rs100,000 for severe disability.

At peak rate, the increase in deduction would reduce tax outgo by Rs7,500.

Positive

Not expected Additional deduction u/s 80CCD up to Rs50,000.

At peak rate, the increase in deduction would reduce the tax outgo by Rs15,000.

Positive

Not expected

Deduction of tax at the rate of 10% on pre-mature withdrawal from the Employee Provident Fund Scheme.

The introduction of TDS on pre-mature withdrawals (before continuous service of five years) would lead to a higher tax outgo.

Negative

Upwards revision of deduction limits u/s 24

Unmet

The increase in deduction limit of interest on home loan would have enabled increase in disposable income in the hands of tax payers and encouraged owning of house.

Neutral

Re-instate investment in Infrastructure Bonds u/s

80CCF of Rs20,000/-

Unmet

The re-introduction of u/s 80CCF would have encouraged investment in infrastructure. However, the Budget speech mentioned the issue of tax free bonds.

Neutral

CHANGES IN SURCHARGE

PARTICULARS OLD NEW

Individuals, HUF, AOP, BOI, artificial juridical persons, partnership firm, co-operative societies, local authorities with total income >Rs1cr 10% 12%

Domestic companies with total income of more than Rs1cr but less than Rs10cr 5% 7%

Domestic companies with total income of more than Rs10cr 10% 12%

Other than domestic companies with total income of more than Rs1cr but less than Rs10cr 2% 2%

Other than domestic companies with total income of more than Rs10cr 5% 5%

DIRECT TAX


26

The Budget 201516 did not bring any direct or spot benefits as expected. However, this has possibly passed the test on policy related announcements. These include timeline on GST implementation, schemes related to the Make in India campaign, and increasing agricultural credits. The overall impact on the sector in our opinion would be neutral in the short term but positive in the long term.

ITEM EXPECTATIONS BUDGET PROPOSAL REMARK IMPACT COMPANIES AFFECTED

Indirect taxes

Timeline on GST implementation

GST to be implemented from April 2016.

GST is expected to lead to a uniform tax structure, which could result in lower tax expenses benefiting automobile and auto component manufacturers.

Positive

All companies in the sector

Agricultural credit

Increase in agricultural credit

The government increased agri-related credit to Rs8500bn for F16 from Rs8000bn in the previous year.

In addition to agri credit, the government extended Rs250bn for agricultural infrastructure. This will benefit farm mechanization going forward.

Positive

M&M, Escorts, VST Tillers and Tractors

Indirect Taxes

We expected the government to maintain status quo on the recently rolled back excise duty since beginning of January 2015. Consequently, we did not anticipate any announcement related to change in rates

The basic excise duty rates have been raised from 12.0% to 12.5% while education cess has been reduced.

Excise duty on small cars and two wheeler rises from 12.36% to 12.5%. However it reduces for larger vehicles from 24.72% to 24%.

Neutral

M&M gains, while Maruti Suzuki, Hero MotoCorp, Bajaj Auto, TVS Motor etc lose

Increase in defence spends

Expected on the line of the Make in India campaign

The government increased the total defence-related expenditure of Rs2,467bn in F15, as against Rs2,223bn in the previous year.

The government intends to boost domestic manufacturing and achieve self sufficiency in defense.

Positive

Ashok Leyland, M&M and Tata Motors

Import duty on vehicles

Not expected

Increase in import duty on vehicles having a seating capacity of more than 10 seats

1. If imported as a completely knocked down (CKD) for assembling a complete vehicle with engine, gearbox and transmission mechanism not in a pre-assembled condition, it will attract a duty of 10%.

2. Any other form will attract a duty of 20%.

As imports gets costlier, this will support domestic CV manufacturers. However, we dont anticipate this to affect domestic CV majors in a big way.

Neutral Tata Motors

AUTO


27

Duty concessions and increase in allocation on electric and hybrid vehicles

Not expected

Concessional excise duty of 6 per cent on specified goods for use in electrically operated and hybrid vehicles has been extended up to 31st March, 2016. Further, the government allocated Rs0.75bn under the faster adoption and manufacturing of electric vehicles (FAME) scheme.

This will speed up R&D investments and promotion of electric and hybrid vehicles.

Neutral Bajaj Auto and M&M

Indirect tax Not expected

The basic customs duty on specified components used in the manufacture of specified CNC lathe machines and machining centres has been reduced to 2.5% from 7.5%.

This move to benefit auto component manufacturers.

Positive

Auto component manufacturers

Amendment in section 194C of IT act for TDS

Not expected

Non-deduction of tax shall only be applicable to the payment in transport charges in the business of the transport with not more than 10 goods carriage effective from 1st June, 2015.

Under the existing provision, all transporters will benefit from TDS.

Negative

All CV manufacturing companies


28

The Budget has been mildly positive for the sector. Capital infusion of Rs79.40bn in PSBs has been proposed vs. Rs112bn in F15 (Rs69.90bn has been infused so far) and Rs140bn in F14. Significant steps have been taken to bring NBFCs at par with banks in terms of regulatory differences between them. An introduction of composite caps for foreign Investments will be conducive for any particular type of investment. Access to the formal financial system has been proposed to be widened using all the available post-office units.

ITEM EXPECTATIONS BUDGET PROPOSAL REMARK IMPACT COMPANIES

AFFECTED

SARFAESI Act NBFCs to be considered for SARFAESI

NBFCs will be considered for the SARFAESI Act, a step towards bringing NBFCs in parity with banks in terms of regulations.

This move will speed up the recovery process.

Positive All NBFCs

Gold Monetization

Not expected

Introduce Gold Monetization scheme, which will replace Gold Deposit and Gold metal Loan scheme.

Scheme will allow depositors to earn interest in their metal account and jewelers to obtain loans in their metal account. Banks/other dealers will also be able to monetize gold.

Slight

Negative for Banks

Major south-based banks have gold loan exposure such as KVB (~21%), CUB (~15%), Federal (~14%) and SIB (~12%)

Agricultural Credit

Increasing mandatory lending target

Rs85bn of lending to be done in F16

Banks are expected to surpass the proposed target.

Neutral All banks

Bankruptcy Code

Address the recovery mechanism in the case of bad loans

Comprehensive Bankruptcy Code will be brought in over F16.

SICA and BIFR failed in achieving the proposed objectives. This will enable legal certainty and speed.

Positive All banks

Foreign Investment Caps

Not expected

Do away with the distinction between different types of foreign investment, especially between FPI and FDI.

Replace them with composite caps (74% in total). Particularly FII limit of 49% will be abolished.

Positive

Yes Banks and Axis Banks weight will increase in the index, as it will create space in overall foreign holding

Financial Inclusion

Access to formal financial system to a larger audience

Postal network of 1,54,000 units will be utilized to provide regular banking services.

Using the already available infrastructure will speed up the implementation.

Positive All Financials

TDS in case of Co-operative banks

Not expected

Remove the exemption of tax deduction from payment of interest on time deposits in case of all co-operative banks.

Recurring deposit to be included under the definition of time deposits too, and hence, this amendment would be made applicable in case of recurring deposits too

Positive

Level playing field for all the banks

BANKING and NBFCs


29

Corporate Tax

Not expected

Corporate Tax to be reduced to 25% from 30% but surcharge of 2% to be levied from 10% to 12%

Banks and NBFCs pay at the maximum tax rate as compare to other corporate.

Negative All Financials

Service Tax Not expected Increased from 12.36% to 14%

Shall come into effect after the enactment of the Finance Bill 2015.

Negative All Financials

Mudra Bank

Make Re-Finance available to some NBFCs similar to banks

Establishment of MUDRA bank to provide refinance to Micro-Finance Institutions

Corpus for the same would be Rs.200bn and guarantee corpus of Rs.30bn.

Positive All Microfinance Institutions


30

Overall objective of improving manufacturing base of the country, improved allocation for the infrastructure sector coupled with selective reduction of custom and excise duty are the key positives for the capital goods sector. Companies in the expansion mode are likely to be benefited through selective regional investment sops. In our view the Budget has been neutral to positive for the capital goods sector. BHEL, L&T, Blue Star and Sterlite Technology are our top-picks.

ITEM EXPECTATIONS BUDGET PROPOSAL REMARK IMPACT COMPANIES

AFFECTED

Indirect taxes

Not expected

The basic customs duty on HDPE (manufacture of telecommunication grade optical fibre cables) is being reduced from 7.5% to Nil.

Also, customs duty on Ethylene-Propylene-non-conjugated-Diene rubber (EPDM), water blocking tape and mica glass tape, used to manufacture insulated wires and cables is being reduced from 10% to 7.5%.

The reduction in customs duty for the given items would be beneficial for OFCs, wires and cables.

Positive

Positive for Sterlite Technologies and Havells India

Indirect taxes

Not expected

Basic customs duty on C- Block for compressors, Over Load Protector (OLP) and Positive thermal co-efficient and Crank Shaft for compressors (manufacture of Refrigerator compressors) is being reduced from 7.5% to 5%.

The reduction in customs duty for the given items would be positive refrigerator industry.

Positive Positive for Whirpool

Indirect taxes

Not expected

Excise duty on inputs used to manufacture LED drivers and MCPCB for LED lights, fixtures and lamps is being reduced from 12% to 6%, subject to actual user conditions.

The reduction in customs duty for the given items would be positive for the lighting industry.

Positive

Havells, Salzer, Crompton Greaves and Bajaj Electricals

Indirect taxes

Not expected

Increase the present rate of service tax plus education cess from 12.36% to a consolidated rate of 14%. An enabling provision is being made to empower the Central Government to impose a Swachh Bharat Cess on all or any taxable services at a rate of 2% of the value of such taxable services with the objective of financing and promoting Swachh Bharat initiatives.

This development is negative as the tax outgo for the companies increase for the services provided.

Negative

All Capital Goods companies

Indirect taxes

Not expected

The general rate of Central Excise Duty of 12.36%, including the cess, is being rounded off to 12.5%.

This development is marginally negative driven by rounding off the tax rate; the tax outgo for the companies increase for the goods they manufacture.

Negative All Capital Goods companies

Indirect taxes

Not expected

It is also proposed to levy a surcharge of 12% as against the current rate of 10% on additional income-tax payable by companies on distribution of dividends and buyback of shares, or by mutual funds and securitization trusts on distribution of income.

Increase in surcharge would result in a higher tax outgo for companies.

Negative All Capital Goods companies

CAPITAL GOODS


31

Budget Provisions

Not expected

With a view to give effect to the provisions of Section 94 of the Andhra Pradesh Reorganisation Act, 2014, it is proposed to provide an additional investment allowance (@15%) and additional depreciation (@15%) to new manufacturing units set-up during the period 01.04.2015 to 31.03.2020 in notified areas of Andhra Pradesh and Telangana.

This additional depreciation in the two states to invite additional investments going ahead in the two states that have been affected due to the bifurcation.

Positive

Blue Star is planning to set up a new plant in Nellore, Andhra Pradesh; this project would be positively benefited with this allowance provided

Indirect taxes

Not expected

At present, service tax is payable on 30% of the value of rail transport for goods and passengers, 25% of the value of goods transport by road provided by a goods transport agency and 40% for goods transport by vessels. The conditions also vary. A uniform abatement is now being prescribed for transport by rail, roads and vessels. Service Tax shall be payable on 30% of the value of such services, subject to a uniform condition of non-availment of CENVAT Credit on inputs, capital goods and input services.

The rationalization of service tax paid on value of rail transport for goods and passengers to 30% will reduce the service tax outgo transport of goods for Capital Goods companies.

Positive

All Capital Goods companies

Indirect Taxes

Alloca

SSL Union Budget 2015-16a

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Transcript of SSL Union Budget 2015-16a