Sameer Kochar is a businessman running a kids’ cycle manufacturing plant in Ludhiana. His business had been doing well, but has been slowly losing its luster due to the competition from cheap imports from China. Sameer has been dejected not because he failed in the business due to his lack of dedication or focus but was forced to lose ground due to unfriendly government policies in the past. With the new NDA government in the center and the Finance Minister all set to present his first full Union Budget, Sameer along with other members of his industry made a number of requests to the Finance Minister.
Here is lowdown on what the business community is looking for in this Union Budget.
Availability of Easy Capital: If you thought availing a personal loan or home loan was hard work, try asking a businessman seeking a working capital loan or any other loan for his business about his experience. While the Reserve Bank of India has laid out guidelines for banks and NBFCs to offer loans to entrepreneurs, the ground reality is that banks are often reluctant to offer such business loans. Without capital, no business can grow. While established businessmen have the means to offer their assets as collateral, new and budding entrepreneurs or small-time businessmen are the worst-affected. Businessmen would thus be expecting the Finance Minister to make sure that there is a clear policy for business loans that can help them seek working capital without getting stymied by the system.
Low Interest Rates for Business Loans: Doing business in India may have become easier with time but the country still charges business loan borrowers a hefty interest rate. Compared to other thriving economies like China, Vietnam and Brazil, India has the highest interest rate for all business loans. Businessmen would hope for a policy intervention that can reduce the interest rate for such loans, ushering in more development and enabling easier repayment of all business loans. Charging high interest rates is like killing the goose that lays the golden egg. Now, the ball is in the court of the Ministry of Finance. What would they rather have – a dead goose or golden eggs for the rest of their term?
Clear Policy on Startup Taxation: There are a number of indirect taxes that startups need to pay in case they receive funding from any angel investor or venture capitalist. Such taxes have been embedded in the system in such a way that they are indirectly limiting the growth of new companies. Ever since such indirect taxes have been introduced, the number of Indian startups receiving big funding has dropped big-time. Businessmen are looking for an end to all such indirect taxes promoting inflow of funds into various startups that can develop into new industries.
Replacing VAT with GST: If businessmen in India are given a magical wand that would fulfill one of their wishes, an overwhelming majority would seek the abolishing of VAT tax structure. VAT not only makes businessmen compete with rivals in an unfair manner since a product needs to be sold at a different price in each state, it also makes them suffer the brunt of tax inspectors and harassment in general. The good news is that the Finance Minister has taken up GST as his pet project but whether he would be able to deliver the implementation of GST this Budget season remains to be seen.
Higher Depreciation Benefits: Just like the common man, small businessmen are also seeking an increase in the quantum of depreciation benefits in this Annual Budget. Businessmen have become reconciled to high costs of machinery, labor and raw materials. In such a scenario, if the Finance Minister offers some tax depreciation benefits, it would bring back a smile to the business community in general.
Long Term Tax Sops: ThatIndian businessmen are facing tough global rivalry today has become a given. In some sectors, there are comprehensively losing ground to China which is selling products at far lower costs than Indian firms can operate at. If the government offers some tax sops in such sectors, it can revive the business sectors that are under imminent threat of a wipeout due to global competition.