Most business sectors express appreciation for Budget provisions; aviation industry disappointed

There are no major surprises in the overall reaction to the Union Budget from the industry today, with most sectors praising Finance Minister Nirmala Sitharaman for decisions like extending tax incentives, ECLGS policy benefits and boosting start-ups through agriculture, and farming are being largely appreciated.

There were, however, some opinions which said that a lot more could be done to help the industry. Like the aviation sector which was hoping for direct fiscal support expressed disappointment. “Contrary to the hopes and expectations, no such financial support to the sector was proposed in the Union Budget 2022-23,” Poonam Verma, Partner, J. Sagar Associates (JSA) said.

Though the Budget has increased the allocation for the aviation sector from Rs. 3,224 last year to Rs 10,667 crore, it does not really provide any immediate relief to the struggling aviation sector. “The Union Budget 2022-23 fails to address any of the current financial needs of the sector which have clearly been overlooked. A strong government support at this stage could have played a pivotal role to firmly entrench the nascent signs of recovery being currently seen in the sector since the last couple of months,” Verma said, adding that an increase in ATF prices is a further blow to the industry.

The increase in ATF prices is all set to see a rise in airfares.

Ronojoy Dutta, Whole Time Director and Chief Executive Officer, IndiGo said that while the Budget 2023 showed efforts being made to reduce compliance burdens and improve ease of doing business, the industry was expecting tax concession to aviation industry in the forms of cut in ATF excise duty and allocation of concessional finance to airlines to help us come out of the pandemic.

“We expect the Budget would enable India to achieve a growth estimate of 9.2%. We welcome the new incentives of issuing E passports and introducing digital currency. The government’s relentless focus on national transportation infrastructure development with the PM Gati Shakti plan will strengthen the much-needed multimodal connectivity and facilitate seamless movement of cargo, while reducing logistics costs,” Dutta said.

Rupesh Jain, founder and CEO of jewel-tech brand Candere by Kalyan Jewellers, said the decrease of customs duty from 7.5% to 5% might help remove the blockages and tie-ups in the legalized channels of diamond imports.

“The decrease in customs duties will help Indian e-commerce brands expand to overseas markets and cater to the vast and growing demand. Furthermore, the positive uptake to this is the development and maintenance of transport infrastructure which will allow e-commerce businesses to improve access and reach out to the interior sectors of the Indian market. This development decision gives us a broader audience base and prospective markets,” he observed.

Manufacturing sector

Rajesh Khosla, President and CEO, AGI Glaspac said that the Indian government this year had presented a growth-oriented budget with a special focus on boosting the manufacturing sector. “This would create massive employment opportunities and to maintain India’s status as world's fastest-growing economy,” he said.

Khosla opined that the concessional corporate tax for newly incorporated manufacturing companies is a positive move towards promoting the Make in India initiative as this will encourage new manufacturing industries as well as increase private investment in this industry.

Technology companies

Prashanth Nanjundappa, VP of Product Management for the Chef Business Unit of IT firm Progress, said that the government has shown its inclination towards digitisation in various fields.

“The government has given a strong emphasis on spending on Infrastructure with the Special Economic Zones Act which will be replaced with new legislation for the development of enterprises and hubs. Alongside, the corporate surcharge rate that is reduced from 12% to 7% is needed to ensure that digitalisation penetrates even on to the small businesses,” he said.

Nanjundappa felt that this meant that more money in the system would act positively towards faster growth of the economy. The government move of giving an additional push to upskilling, reskilling and skill development segment in the budget, will result in extensive use of technology which in turn will give a boost to the job market in India and encourage tech companies to invest in R&D and explore avenues to leverage existing tech and create new products, he said.

Startup incubators, accelerators

Deepthi Ravula, CEO of WE HUB, an exclusive incubator for women entrepreneurs said that millions of MSMEs impacted by the pandemic may receive additional support from ECLGS, aiding them in softening but not minimizing the impacts.

“The dedicated fund for Agritech is a great move in the right direction as it will regulate and infuse capital in to a much-needed sector of the economy. We are pleased that the capital gains tax exemption on start-ups investments is extended, as this will encourage more investment in start-ups. In addition, the National Skill Qualification Framework will focus on enhancing skill-building and upskilling - as well as support for the job market,” he said.

However, Ravula noted that with the emphasis on NariShakti, it looked like a missed opportunity on supporting inclusion and diversity. “With the pandemic enabling more women to be part of the work force and entrepreneurship, the budget lacked support in terms of working capital, technology upgradation, incentives to companies, MSMEs and startups for addition of female workforce. Although the startups have contributed a great deal of energy and capital, the path to preferential procurement has not been clearly defined yet, as well,” she said.

Digital assets

Vikas Ahuja, CEO of crypto exchange CrossTower India said the government has recognised the potential and increasing adoption of virtual digital assets. The Finance Minister announced that any income derived from the transfer of virtual assets will be taxed at 30%.

“This is the first step towards embracing the crypto and blockchain industries in India, we believe this is a positive move. With this move, the Indian government has also removed the uncertainty surrounding the crypto sector in India, by recognizing it as an asset class. We also believe this will allow the government to better oversee crypto transactions. In addition, introducing a digital rupee utilizing blockchain technology represents a major advancement for the crypto sector, as it will accelerate crypto adoption and put India on the cutting edge of the digital revolution,” Ahuja said.

Arjun Khazanchi, CLO and Co-Founder, Rooba Finance, another crypto exchange, termed the budget as inclusive and well thought-out. “One of the biggest changes which will positively impact the Indian economy in the years to come is the taxation of virtual and digital assets. By taxing the transfer of virtual assets at 30% the government has set the ball rolling for the formalization of the sector and bringing it out of the fringe. By keeping the tax at 30% the government has addressed fears of a 40% taxation which would effectively penalize the industry, prima facie. The government given the economic survey noting that there was a 67% increase in revenue from tax collection is clearly not starved for income through taxation,” he said.

Khazanchi noted that taxing virtual assets by virtue of ‘transfer’ which is defined u/s 2(47) of the Income Tax Act, 1961 is broad and inclusive. ‘Transfer’ is used in the context of the transfer of ‘capital asset’ under the lens of Income Tax. “Transfer under the Act includes any form of sale, exchange, or relinquishment of an Asset. Whereas Capital assets are defined under the Income Tax Act u/s 2(14). Therefore, it is reasonable to assume that this taxation brings about a form of temporary classifications of Virtual assets as an asset class under the Income Tax Act,” he said.

“This would bring a wave of Institutional Money which was waiting for regulatory clarity. It will open banks to participate as partners with exchanges and businesses and open India to a web3 future. Players like Rooba finance, which has been building specifically to cater to the needs of these institutions for the last couple of years, are extremely excited by the announcements,” he said.

Khazanchi explained that the Government also seemed to have taken note of the popular tax-loss harvesting strategy employed by investors to avoid paying or reducing actual taxable amounts. “This seems to be one of the reasons to not allow setting off losses. However, this may be quite complicated because it will complicate some business models and the inability to offset a loss in a period of bear markets may have practical issues which can be solved with consultations and more clarity as it comes out,” he said.

Amit Singal, General Partner, Fluid Ventures, a start-up termed the budget as giving the sector a boost. “Among the many incentives proposed in the Budget is the reduction of voluntary exit, where the government has allowed the closure of a private limited company in 6 months of non-functioning. This will not only help accelerate and provide relief to start-ups wanting to shut a business but encourage them to experiment. Earlier they had to run the company for 18 months, even after closure, to avail of the benefit of the Fast Exit facility. The surcharge on Long Term Capital Gain (LTCG) has been capped to 15%, which is again a good move to bring more HNIs into start-up Angel investment," he said.

Automobile sector

Toyota Kirloskar Motor said that the government’s push for green energy and clean mobility systems has ensured that India is on the path of limitless possibilities.

“As a sustainability-committed organisation, we believe that the Government’s push for clean mobility initiatives and blended fuels will play a significant role in achieving decarbonisation goals and reduce dependence on fossil fuels. One of the biggest challenges for the EV ecosystem has been battery charging stations. The proposed battery-swapping policy will help create standards of interoperability thereby making EVs more accessible and affordable. The PM’s Gati Shakti Initiative of expanding the National Highway network by 25,000 km will augur well for the auto sector. We hope the outlay for rural economy will improve the sentiments of people, thereby playing a catalyst for increase in vehicle demand,” a Toyota Kirloskar Motors spokesperson said.

Insurance sector

Anup Rau, MD and CEO, Future Generali India Insurance felt that mental health problems are growing in our country; and have reached alarming proportions with the pandemic and thus the government's initiative of a national tele-mental health program was a good starting point to normalize mental health conversations and seek help and access to universal health facilities.

“As a responsible insurer and a purpose led brand, we strongly believe that mental health is as important as physical health and remain committed towards educating our citizens and creating awareness on mental wellness,” Rau said.