Budget 2023: Govt may announce PLI scheme for more sectors

Budget 2023

The government is likely to extend fiscal incentives for the production of toys, bicycles, and leather and footwear in the forthcoming budget as it looks to expand the production linked incentive (PLI) scheme to cover more high-employment potential sectors, sources said.

The government has already rolled out the scheme with an outlay of about Rs 2 lakh crore for as many as 14 sectors, including automobiles and auto components, white goods, pharma, textiles, food products, high-efficiency solar PV modules, advance chemistry cell and speciality steel.

The scheme aims to make domestic manufacturing globally competitive and create global champions in manufacturing, and it is yielding solid results, sources said.

Read Also: Budget 2023: Strong outlook and hope for flat GST rate on online gifting industry

A proposal to extend PLI scheme benefits to different sectors such as toys and leather is at advanced stages of finalisation and there is a likelihood that it may figure in the Budget, they added.

“We expect that spends for Railways and Jal Jeevan Mission will remain steady and considering the inflation factor, the allocation could even go up materially,” says Priyankar Biswas, Vice President and Equity Analyst at Nomura. In the Union Budget, railway forms about 15 percent of the capital expenditure by the Government, highlighted Amit Anwani, research analyst at Prabhudas Lilladher.

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He believes that the upcoming Budget would include a 12-15 percent YoY rise in railway-related capex. And the broader focus of the government would be revamping rail network, rail electrification, station redevelopment, Vande Bharat trains among other things, he added.

Even urban infrastructure is expected to be in focus, market participants said. With Budget 2023 around the corner, investors are hoping for a simple system, which would be easy to calculate tax costs and minimise litigation and disputes.

As against the current three categories of holding period, the expectation is that this will be simplified to at least two categories.

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For instance, capital gain on listed shares is considered as long term, if the holding period is 12 months. REITs (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts) are categorised as long-term capital assets, if held for at least 36 months.

To bring parity into tax treatment, and for the computation of capital gains tax, the holding period for units of REITs and InvITs should be standardised at 12 months, instead of 36.

The upcoming Union Budget should not only create a roadmap for sustainable growth in the logistics sector but also incentivise the industry to adopt sustainable practices, operators have said.

FedEx Express Senior Vice-President Middle East Indian Subcontinent and Africa (MEISA) Operations Kami Viswanathan in a statement said, “We recommend the implementation of zero rating of Goods and Services Tax for all international transportation services.

“Most of the international GST/VAT legislations ‘zero-rate’ international freight transportation services. This would facilitate trade and align India with international tax practices as well as reduce logistics costs.” “The budget should not only create a roadmap for sustainable growth in the logistics sector but also incentivize logistics players to adopt sustainable practices,” Viswanathan said.

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The government may also consider introducing concessions for electric vehicle (EV) infrastructure installation, such as charging stations in addition to concessions for new EVs which can expedite the adoption of EVs for commercial purposes and speed up its presence in the last-mile delivery services.

India’s nascent private space wants tax incentives and a production-linked incentive scheme to boost local manufacturing and spur research and development.

In the 2023-24 Union Budget, some are requesting a space-based production linked incentive (PLI) scheme for space tech startups to help boost local manufacturing and encourage capability building within the country.

In the Union Budget 2023-24, we request a further Rs 100 crore issuance as viability gap funding (VGF) to set up new infrastructure. Chand also wants the government to make a dedicated allocation of Rs 1,000 crore for the Defence Space Agency (DSA) for the procurement of new technology from the industry.

Dalal Street is a bit edgy about FM’s call on long-term capital gains (LTCG) tax rates in Budget 2023. Tax experts feel any tinkering with LTCG tax rates could dampen investment sentiment. Britain provides an exemption up to GBP 12,300 for capital gains, beyond which the gains are taxed at 10 percent. LTCG gains are taxed at 15 percent in the US and in Thailand, while the rate goes up to 20 percent in Australia.

The debate is whether the FM will leave a considerable amount of wealth with investors to boost equity market sentiment or get her pound of flesh from recent gains.

Here are a few expectations on the current tax rate

  • An LTCG tax of 10 percent on all equity investments held for more than a year without indexation benefits. This will cover three classes of assets — equity, non-equity financial assets and all others including real estate.
  • A holding period of two years for all financial investments, which would mean debt fund holdings may get their period reduced from the current three years.
  • Bring listed and unlisted equity holdings at par for taxation.
  • Reduce holding period requirement for debt mutual fund units to two years.
  • Capital gains from real estate transfer is exempt to the extent it is invested in government of India-specified bonds, subject to a limit of Rs 50 lakh. One of the expectations from the budget is that this limit be enhanced.
  • The above benefit can also be extended to all LTCG, instead of limiting it to only gains on sale of land or building.
  • The current regime does not entitle taxpayers to the rebate (of up to Rs 12,500) on tax payable on LTCG on the sale of listed equity shares, equity-oriented mutual fund units and units of REITs/ InvITs, which should be permitted.

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