union budget 2009 highlights

the union budget 2009 is expected to balance between social orientation and growth; as well as fiscal prudence. union budget 2009 Greater allocation to infra, healthcare and education spending is likely to continue. Considering the large capital requirements going forward, opening up of several sectors to attract FDI / FII investment can be expected. 2% hike in excise and service tax is expected post 4% cut in excise through Stimulus I and II.

10% surcharge on personal Income Tax removed

Key Features of Budget 2009-2010

Some benefits in union budget 2009
for
personal income tax, increase in exemption limit of home loan interest and union budget 2009 for schemes to divert investment into infrastructure, are also expected. A tax amnesty scheme could be considered in the union budget 2009 to address fiscal deficit. We anticipate the Union Minister to indicate a clear way ahead that will lead to sustainable economic growth. union budget 2009 for The fiscal deficit is cause for concern and should be reigned in. While the Union union budget 2009 2009 might appear to have several disappointments, it is
union budget 2009
for expected to be a healthy one for the long term. Across the key sectors, our expectations are as follows:

union budget 2009 highlights
expected

Agriculture Revisions are expected in the urea policy to attract new investments. The government should increase focus on rural infrastructure by increasing RIDF corpus and other rural schemes. Focus on irrigation is likely to continue by bringing more land under irrigation and increasing outlay.
union budget 2009 highlights
expected in auto

Auto Roll back of additional charge of Rs. 15,000 to Rs. 20,000 on utility vehicles/cars above 1500 cc. Some benefits are anticipated under income tax for product development/capex.

union budget 2009 highlights
expected in cement

Cement Uniform excise duty should be levied on cement. Some changes have already been undertaken during last year and we expect the government to maintain status quo on other factors. Import duty on coal, pet coke and gypsum saw no change and continues to attract 5% duty which the industry wishes should be abolished.

union budget 2009 highlights
expected in engineering

Engineering & capital goods Easy access to fund, increase in import duties on equipments for the benefit of local players, faster implementation of ongoing projects and those in pipeline, tax incentives to private sector players to encourage private sector participation and an increase in the ad valorem rates from 8% to 10% with exceptions in generation and transmission equipment; are also very likely to be announced, in our opinion.

union budget 2009 highlights
expected in financial services

Financial services Exemptions are likely to be granted to bring down cost of fund for infrastructure projects, raising of agri-credit targets, measures to channelise credit to export oriented units should be undertaken.

union budget 2009 highlights
expected in fmgc

FMCG The government should increase tax incidence on filtered cigarettes and alcohol beverages, continue development spending for rural India and increase allocation to social programs to boost consumption. We also anticipate that the 2010 timeline for implementation of GST should be maintained and the multiple tax system should be replaced.

union budget 2009 highlights
expected in it/ites

IT/ITES The industry anticipates the extension of tax benefits available to Indian IT/ITES companies to be extended further given the weakness in the end markets for the sector by around 3-5 years. However, we do not expect any substantial tax benefits. It would benefit mid Tier IT companies/ITES players in a more meaningful manner.

union budget 2009 highlights
expected metals

Metals Import duty on steel is likely to be increased. No imposition of export duty is expected on iron ore. The industry expects anti-dumping duty of 25% on steel, but we re of the view that anti-dumping duty may not be imposed. If imposed then it not likely to be more than 15%.

union budget 2009 highlights expected in pharma

Pharma Healthcare sector is likely to be granted infrastructure status. It is also likely that the sector will see an extension of EOU benefits for another three years. Greater allocation on healthcare infrastructure and National Rural Health Mission can be expected. We also believe that excise duty on formulation and bulk drugs will be maintained at current level.

union budget 2009 highlights expected in power

Power The industry anticipates several much awaited measures and incentives in this sector and reflecting the same sentiment we too anticipate the policy frame work to encourage private participation in power distribution. A roadmap to expedite various clearances required for approval of power projects and extension of 80 IA benefit up to 2017 for power projects, is much awaited.

The union budget 2009 for 2008-09 attributed the buoyancy in direct tax revenues to the stable and moderate tax regime coupled with a tax administration that showed no fear or favour.

This was carried forward in 2008-09 through changes in personal income tax slabs and rates conferring a minimum relief of Rs 4,120 and maximum relief of Rs 45,320 per annum per taxpayer. No change was made in corporate income tax.

The union budget 2009 also raised short-term capital gains under Section 11A of the Income Tax Act to 15% to establish parity with dividends.

A commodities transaction tax with features on the lines of securities transaction tax on option and futures was introduced and the banking cash transaction tax was abolished.

Overall, the tax proposals on direct taxes were revenue neutral and a loss of Rs 5,900 crore (Rs 59 billion) was estimated on the indirect taxes side. The union budget 2009 for 2008-09 also effected a reduction in Central sales tax (CST) to 2% with effect from April 1, 2008 with a mechanism for compensation for losses to states.

The union budget 2009 expressed satisfaction over the considerable progress made in preparing the road map for the goods and services tax, proposed to be operationalized with effect from 01 April 2010.

Gross tax revenue was initially union budget 2009ed to grow by 16.3% in 2008-09 over its level of Rs 593,147 crore (Rs 5,931.47 billion) in 2007-08.

In the event, the provisional actual for 2008-09 was Rs 609,705 crore (Rs 6,097.05 billion) which represents a modest growth of 2.8% over the level in 2007-08.

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