On February 1, the Finance Minister will propose the Union Budget 2022-23 to Parliament.

  • 18 Jan 2022
  • Budget
  • Comments Off on On February 1, the Finance Minister will propose the Union Budget 2022-23 to Parliament.

On February 1, the Finance Minister will propose the Union Budget 2022-23 to Parliament.

GST rate cut on two-wheelers

FADA, the trade association for automobile dealers, has urged the government to lower the GST rate on two-wheelers to 18% in order to boost demand in the market.

The Federation of Automobile Dealers Association (FADA), which represents over 15,000 car dealers with a total of 26,500 dealerships, has stated that two-wheelers are not a luxury item, and hence the GST rate should be reduced.

“FADA begs that the Ministry of Finance regulate and cut GST rates on two-wheelers to 18 percent, so that our country can continue to dominate the world,” the industry group said on Monday.

On February 1, Finance Minister Nirmala Sitharaman will propose the Union Budget 2022-23 to Parliament.

It is worth noting that two-wheelers are utilised not as a luxury item but as a need for individuals in rural areas to travel long distances for their daily working demands, according to the report.

“As a result, the logic of 28% GST + 2% cess for luxury/sin products does not hold true for the two-wheeler category,” FADA observed.

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A fall in the GST rate will balance the price spike and assist stimulate demand, it noted, at a time when vehicle prices are increasing after a 3-4 month gap due to increases in input costs and numerous other variables.

“FADA expects that increased tax collections will result from increased demand and the ripple impact it will have on many dependent industries. It will be revenue positive in the mid- to long-term, as well as contribute to improved consumer mood and, as a result, the entire economy “According to the industry group.

It also requested a consistent 5% GST rate on the margin for all used automobiles in order to establish a win-win situation for the government, dealers, and vehicle owners.

“With the reduction in GST, the industry would be able to migrate from an unorganised to an organised segment, bringing in more business into the GST purview and putting a stop to tax leakages,” FADA said.

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The government presently levies a 12 to 18 percent GST on used automobiles.

Vehicles with a length of less than 4,000 mm are taxed at 12%, while those with a length of more than 4,000 mm are taxed at 18%.

“The used automobile market is 1.4 times larger than the new car market, with 5-5.5 million cars sold year and a revenue of approximately Rs 1.75 trillion. Only 10-15% of the transaction is handled by authorised dealers “According to FADA.

The government has decreased corporation tax to 25% for private limited firms with a revenue of up to Rs 400 crore, according to the industry organisation.

“Because most traders in the auto dealership sector fall into this group, the same benefit should be extended to all LLP, Proprietary, and Partnership firms. This would assist enhance the spirit and sentiment of the 5 million individuals employed by the traders “According to FADA.

The organisation also asked the government to take significant initiatives to help the sector grow quicker. FADA also called on the government to reinstate the ‘Depreciation Scheme’ for fiscal year 2022-23.

The Finance Ministry will begin the budgetary process on October 12th.

The Finance Ministry will begin the budgetary process on October 12th

The Ministry of Finance will start to construct the 2022-23 annual budget, starting on 12 October, with indicators that the Indian economy is recovering and is being severely affected by COVID-19. The following year’s budget will have to tackle crucial concerns such as demand generation, job creation and a sustained 8% growth plus economic growth.

According to the Department of Economic Affairs Budget Division’s Budget Circular (2022-23) dated September 16, 2021, “the pre-Budget/RE (Revised Estimate) meetings will commence on October 12, 2020.”

“All financial advisers should ensure that the essential facts linked to these discussions are included in the RE module of the UBIS (Union Budget Information System),” according to the circular.

After the spending secretary completes negotiations with other secretaries and financial advisers, the Budget Estimates (BE) for 2022-23 will be provisionally finalised.

Pre-Budget meetings will begin on October 12 and last through the second week of November, according to the statement.

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“Given the unique circumstances of this year, the final budgetary allocations will be based on the overall fiscal condition, subject to the ministry/absorptive department’s capacity,” it said.

Ceilings for all areas of spending, including the central sector and government-sponsored initiatives, will be discussed, according to the statement.

As a result, it said that the RE 2021-22 and BE 2022-23 for all categories of spending, as well as select schemes/projects, may be expressed separately for revenue and capital expenditure.

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It stated that the budget estimates for 2022-23 are as follows: “The allocations for the establishment and other central government expenditures will be finalised. During the pre-budget meetings, proposed ceilings for Central Sector (CS) and Centrally Sponsored Programs (CSS) schemes would be considered.”

The Budget for 2022-23 is expected to be delivered on February 1st, during the first part of Parliament’s Budget Session, which typically begins in the last week of January each year.

In actual terms, the budget for the current fiscal year forecast a growth rate of around 10.5%, with a fiscal deficit of 6.8% of GDP (GDP).

The government of Prime Minister Narendra Modi abolished a colonial-era practise of presenting the Budget towards the end of February. On February 1, 2017, then-finance minister Arun Jaitley delivered the annual accounts for the first time.

When the Budget was delivered at the end of February, the three-stage Parliament approval procedure used to be completed around mid-May, weeks before the monsoon rains started.

This meant that government departments would only begin investing on projects once the monsoon season ended in late August or early September.

India’s once-in-a-century budget runs into trouble as virus strikes back

  • 17 May 2021
  • Budget
  • Comments Off on India’s once-in-a-century budget runs into trouble as virus strikes back

Many praised India’s annual budget in February, raising hopes that it would spark a rapid economic recovery. However, there are now concerns that its promise may be unfulfilled since it failed to account for a crippling second wave of COVID-19 infections.

The budget aims to resurrect Asia’s third-largest economy by investing in infrastructure and health care, while relying on an aggressive privatisation plan and strong tax collections – on the back of anticipated growth of 10.5 percent – to cover its expenditure in the fiscal year.

India would not see a budget like this in “100 years,” according to Finance Minister Nirmala Sitharaman. At the time, the economy was on course to recover from its deepest recorded depression, thanks to a huge COVID-19 immunisation campaign and a revival in consumer demand and investments.

After the United States, the South Asian country is fighting the world’s second-highest coronavirus burden, with 300,000 infections and 4,000 deaths every day. With numerous sections of the country under varying degrees of lockdown, most of the budget’s growth estimates are now in jeopardy.

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The severity of the problem has investors questioning if India, which was once anticipated to become an economic giant, still deserves to keep its ‘investment grade’ rating after years of debt accumulation.

India’s catastrophic second wave, according to Moody’s, will hinder the near-term economic recovery and may have an impact on longer-term growth dynamics. It lowered its GDP prediction from 13.7 percent to 9.3 percent.

While the government claims it is too early to modify its own figures, officials privately admit that if social distancing measures persist, growth will be far more muted than previously predicted.

Apart from giving 350 billion rupees ($4.78 billion) in the budget for vaccine expenditures, the government had not set aside any funds for contingencies arising from a second wave, and officials say the government may now have to cut back on some expenditure.

A request for comment from India’s finance ministry was not returned.

 

PRIVATISATION DELAYS

The Indian bureaucracy has been hard damaged by the health crisis, with many key employees afflicted with the coronavirus, delaying decisions on privatisations and other suggested reforms.

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Two senior officials stated that the privatisation of assets such as oil refiner Bharat Petroleum Corp and national carrier Air India, whose processes are well along, could now be put back to early 2022, three months later than envisaged.

“The virtual data room for BPCL NSE -0.44 percent has been opened for initial bidders,” one of the executives said, “but given the lockdown, physical verification of assets is unlikely right now.”

The delays will have an impact on a number of other privatisation proposals, including two banks, insurance, and energy businesses, which are at the heart of the budget’s proposed reforms and are critical to meeting the nearly $24 billion target from asset sales and privatisations, according to authorities.

According to them, the issue is also likely to postpone India’s largest insurer Life Insurance Corp’s IPO, which was anticipated to raise $8-$10 billion.

According to another source, the lockdowns will begin to influence tax collections in June, potentially decreasing revenues by 15% to 20% compared to projections for the quarter.