Union Budget 2020-21: Proposals For Key Sectors And Industries

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2. B A C K G R O U N D Amidst an economic slowdown in India, all eyes were on the Finance Minister, Nirmala Sitharaman, to deliver the Union Budget for the year. Her speech had an overall theme which centred around 3 aspects; Aspirational India, Economic Development, and Caring Society. Via this presentation, we aim to showcase the major highlights of the Budget speech and its provisions, whilst also emphasizing on the key sectors which can look to benefit from a public policy perspective, going forward. © C O I N M E N C O N S U L T A N T S L L P

3. C O N T E N T S SECTOR SLIDE NUMBER AGRICULTURE AND FOOD PROCESSING 4 – 5 INFRASTRUCTURE 6 – 7 START-UPS AND MSMEs 8 – 9 BANKING, FINANCE AND NBFCs 10 – 11 EDUCATION AND SKILL DEVELOPMENT 12 – 13 MANUFACTURING 14 – 15 AUTOMOTIVE 16 – 18 TECHNOLOGY 19 – 20 REAL ESTATE 21 – 22 * Click on the individual topics to jump to their specific provisions © C O I N M E N C O N S U L T A N T S L L P

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5. A W A V E O F C H A N G E S I N T H E S E C T O R FOOD PROCESSING AND STORAGE PUBLIC POLICY FUNDS AND TARGETS  Expanding the PM-KUSUM Scheme to help 2 million farmers in setting up stand-alone solar pumps  To build a seamless national cold supply chain for perishables, the Indian Railways will set up a “Kisan Rail” – through PPP arrangements. There shall be refrigerated coaches in Express and Freight trains as well  Agriculture credit target for the year 2020-21 has been set at INR 15 lakh crore. All eligible beneficiaries of PM-KISAN will be covered under the KCC scheme  Helping another 1.5 million farmers in solarizing their existing grid-connected pump sets  Allocation of INR 1.60 Lakh crore for agriculture and allied activities for 2020-21  Proposing to create warehousing as per WDRA norms. Government to provide viability gap funding for setting up the warehouses at block level; collaborations to be undertaken in PPP mode  The NABARD re-finance scheme will be further expanded.  Aim of raising fish production to 200 lakh tonnes by 2022-23  Doubling milk processing capacity from 53.5 million MT1to 108 million MT by 2025 1MT = Metric Ton © C O I N M E N C O N S U L T A N T S L L P

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7. EXISTING INFRASTRUCTURE FOCUS FUTURE INVESTMENT AND NEW INITIATIVES The National Infrastructure Pipeline was launched on 31stDecember 2019 for more than 6500 projects INR 100 lakh crore would be invested on infrastructure over the next five years; INR 1.7 lakh crore allotted for transport infrastructure in 2020-21   Projects range across housing, safe drinking water, access to clean and affordable energy, healthcare for all, world-class educational institutes, modern railway stations, airports, bus terminals, metro and railway transportation, logistics and warehousing, irrigation projects, etc.  A National Logistics Policy to be released soon to create a single-window e-logistics market  Bengaluru Suburban transport project worth INR 18,600 crore to be green-lit; Government to provide 20% equity  HIGHWAYS AND WATERWAYS OIL, GAS, AND RENEWABLE ENERGY Accelerated development to be undertaken for highways including 2500 km access control highways, 9000 km of economic corridors, 2000 km of land-port roads and 2000 km of strategic highways Proposed to expand the national gas grid from the present 16,200 km to 27,00 km   INR 22,000 crore allotted to the power and renewable energy sector in 2020-21  The Jal Vikas Marg on National Waterway-1 will be completed. Further, the 890 Km Dhubri-Sadiya connectivity will be done by 2022.  Indian Railways aims to achieve electrification of 27,000 km of tracks  © C O I N M E N C O N S U L T A N T S L L P

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9. A N E W D A W N F O R S T A R T - U P S A N D M S M E s INR 27,300 crore allocated for development and promotion of Industry and Commerce for the year 2020-21  Eligibility criteria for registering as a startup has increased from a turnover of INR 25Cr. to INR 100Cr. Also, startups with turnover of up to INR 100 crore can now claim 100% deduction on their profit for computing tax liability for 3 consecutive years out of 10 years since its incorporation  A subordinate debt scheme to be introduced for MSME which would be counted as quasi-equity  The tax exemption benefit that was given to the startups for a period of 3 years in a block of 7 years has been increased to 10 years, meaning that a startup can now avail tax benefits for a period of 3 years out of a block of 10 years  ESOPs of startup employees will be liable for tax in one of the three cases: – Five years after exercising the option – The year in which they sell shares – The year when the employee leaves the company, whichever is earlier  Tax Audit for MSME shall be required in case the turnover exceeds Rs.5 Crore which was earlier Rs.1 Crore. However, this benefit can only be availed by those MSME whose total cash transaction does not exceed 5% of the total transactions  Under Section 194O, TDS of 1% to be paid by an e-commerce operator for sale of goods or provision of services facilitated by it through its digital or electronic facility or platform. (with effect from April 1, 2020)  Government e-Marketplace (GeM) is moving ahead for creating a Unified Procurement System in the country for providing a single platform for procurement of goods, services and works  © C O I N M E N C O N S U L T A N T S L L P

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11. P R O P O S E D C H A N G E S A N D R E F O R M S INTEREST ON HOME LOANS Deposit Insurance and Credit Guarantee Corporation (DICGC) to increase Deposit Insurance Coverage for a depositor, from INR 1 lakh to INR 5 lakh per depositor REFORMS FOR NBFCs FINANCING MSMEs The Govt. proposes to make necessary amendments to the Factor Regulation Act 2011. This will enable NBFCs to extend invoice financing to the MSMEs through TReDS, thereby enhancing their economic and financial sustainability DEBT RECOVERY LIMIT FOR NBFCs The limit for NBFCs to be eligible for debt recovery under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002 is proposed to be reduced from INR 500 crore to asset size of INR 100 crore or loan size from existing INR 1 crore to INR 50 lakh INFRASTRUCTURE FINANCING INR 22,000 crore has already been provided to support the National Infrastructure Pipeline. This would cater for equity support to Infrastructure Finance Companies such as IIFCL and a subsidiary of NIIF. They would leverage it, as permissible, to create financing pipeline of more than INR 1,00,000 crore. This would create a major source of long-term debt for infrastructure projects and fulfil a long-awaited requirement © C O I N M E N C O N S U L T A N T S L L P

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13. E S C A L A T I N G I N D I A N E D U C A T I O N SECTORAL INITIATIVES FUTURE DEVELOPMENTS PROPOSED REFORMS  Govt. proposes INR 99,300 crore for education sector in 2020-21 and about INR 3,000 crores for skill development  About 150 higher educational institutions to start apprenticeship embedded degree/diploma courses by March 2021  Proposal of a National Police University and a National Forensic Science University in the domain of policing science, forensic science, cyber-forensics  New Education Policy to be announced soon and steps will be taken to source External Commercial Borrowings and FDI to get better teachers and labs  Degree level full-fledged online education programme to be offered by top-ranked institutions  To tackle the shortage of qualified medical doctors, proposal to attach a medical college to district hospitals under PPP model (would receive Viability Gap Funding).  “Study In India” programme - Ind- SAT proposed in Asian and African countries for benchmarking foreign candidates who receive scholarships for higher education in India © C O I N M E N C O N S U L T A N T S L L P

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15. B O O S T I N G M A N U F A C T U R I N G H O L I S T I C A L L Y PROPOSED REFORMS CUSTOMS DUTY REMOVED ON  A scheme focused on encouraging manufacture of mobile phones, electronic equipment and semi- conductor packaging; Can also be applied to manufacturing of medical devices with suitable modifications  Specific items of metals such as lead, zinc and tin  Machinery used for certain projects such as electricity generation, specified metro projects, as well as on specified goods required for construction of roads  National Technical Textiles Mission from 2020-21 to 2023-24 (allotted INR 1480 Crore) to promote export of technical textiles from India  Copper metal and articles used thereof in manufacturing of specified electronic items  Sulphur fuel oil of certain standards, and polyester liquid crystal polymers used in manufacture of connectors  All ministries to issue quality standard orders throughout the course of the year for “Zero Defect – Zero Effect” initiative in manufacturing Customs duty has been reduced from 10% to 5% and 7.5% respectively for calcined petroleum coke and calendared plastic sheets used in smart card manufacturing. It has also been reduced rom 12.5% to 7.5% for specific usage of platinum and palladium in the manufacture of precious metal colloids and compounds. © C O I N M E N C O N S U L T A N T S L L P

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17. E N C O U R A G I N G D O M E S T I C M A N U F A C T U R I N G For the auto components sector, among others, a scheme of INR 1000 crore will be anchored by EXIM Bank together with SIDBI, both contributing INR 50 crore each. This INR 100 crore would be achieved towards equity, R&D and technical assistance. Debt funding of INR 900 crore from banks would be made available.  Change in customs duty to encourage local manufacturing of vehicles are as follows:  S. NO. COMPONENT EXISTING RATE NEW RATE 1 Catalytic converter 10% 15% Noble metal solutions and compounds used in manufacturing of catalytic converter and its parts 2 5% 10% Platinum or palladium used in manufacturing of catalytic converter and its parts 3 5% Applicable Rate Parts and other specified inputs for manufacture of catalytic converters 4 5% 7.5% Completely Built Units (CBUs) of commercial vehicles (other than EVs) from 1stApril 2020 30% 40% 5 © C O I N M E N C O N S U L T A N T S L L P

18. E N C O U R A G I N G D O M E S T I C M A N U F A C T U R I N G Basic Customs Duty (BCD) for catalytic converters, which are used in BS VI engines, is now 15% against 10% earlier.  BCD for components used in the manufacture of catalytic converters such as certain ceramic parts and metal parts/solutions/compounds has been raised to up to 10% from 5%.  Changes in customs duty under Phased Manufacturing Programme for electric vehicles (from 1stApril 2020) are as follows:  S. NO. TYPE OF UNITS EXISTING RATE NEW RATE 1 Completely built units of buses and trucks 25% 40% Semi Knocked Down (SKD) units of buses, trucks, and two- wheelers 2 15% 25% 3 SKD units of passenger vehicles and three-wheelers 15% 30% Completely Knocked Down (CKD) units of passenger vehicles, two-wheelers, three-wheelers, buses and trucks 5 10% 15% © C O I N M E N C O N S U L T A N T S L L P

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20. I N D I A F O R T H E F U T U R E New policy to enable private industry players to build Data Centre parks throughout the country.  Fibre To The Home (FTTH) connections through Bharatnet will link 100,000 Gram Panchayats this year - INR 6000 crore assigned to Bharatnet programme in 2020-21.  Outlay of INR 8000 crore over a period of 5 years for the National Mission on Quantum Technologies and Applications - new frontiers in computing, communications, cyber security with wide-spread applications.  Proposal to develop 5 new smart cities in collaboration with states in PPP mode.  Knowledge Translation Clusters would be set up across different technology sectors including new and emerging areas.  For designing, fabrication and validation of proof of concept, and further scaling up Technology Clusters, harboring such test beds and small-scale manufacturing facilities would be established.  © C O I N M E N C O N S U L T A N T S L L P

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22. N E W R A T E C U T S A N D D E D U C T I O N S INTEREST ON HOME LOANS Proposal to extend by 1 more year the additional deduction of INR 1,50,000 for interest paid on home loans taken for buying affordable homes. TAX RELIEF Tax holiday on profits earned by developers on affordable projects approved by 31st March 2020 Extension of the date of approvals on affordable projects for availing this benefit by 1 more year. CONSIDERATION VALUE LIMIT Currently, if the consideration value is less than circle rate by more than 5 percent, the difference is counted as income both in the hands of the purchaser and seller Proposal to increase the limit of 5% to 10%. © C O I N M E N C O N S U L T A N T S L L P

23. At Coinmen, our aim is to provide financial expertise to help set up your business and provide profound advisory for its grow. This presentation is put together by our team to ensure that you’re prepared well in advance before setting up a business in India and can navigate swiftly through the required compliances. T H A N K Y O U . Disclaimer This publication does not constitute as professional advice. The information in this publication has been obtained or derived from sources believed by Coinmen Consultants LLP (Coinmen) to be reliable but Coinmen does not represent that this information is accurate or complete. Any opinions or estimates contained in this publication represent the judgment of Coinmen at this time and are subject to change without notice. Readers of this publication are advised to seek their own professional advice before taking any course of action or decision, for which they are entirely responsible, based on the contents of this publication. Coinmen neither accepts or assumes any responsibility or liability to any reader of this publication in respect of the information contained within it or for any decisions readers may take or decide not to or fail to take. © C O I N M E N C O N S U L T A N T S L L P