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Cyril Amarchand Mangaldas (CAM): Analysis of Union Budget 2022-23

​Overview: Perspective of Mr. Cyril Shroff, Managing Partner, Cyril Amarchand Mangaldas:”This is a good sequel to last year’s pathbreaking budget. The biggest point is the capex spending, and it comes from a position of confidence. The other aspects are the focus on ESG, and promotion of domestic industry. The growth aspiration of 9.2% is exciting. Announcements around private equity investments are interesting and should help removing regulatory cholesterol. Announcements on GIFT City should provide additional impetus to the existing initiatives.”Perspective of Mr. Viswanathan, Partner & Chair – Finance & Projects; Cyril Amarchand MangaldasOverview and macro perspective:”The budget speech of the Finance Minister has emphasized on several important themes including digitalization, privatization, renewed and continued focus on infrastructure and promotion and encouragement of the IFSC. Amendments are proposed to enhance the efficiency of resolutions under IBC and also to facilitate cross-border insolvency and these will be keenly watched. The commitments made by the Prime Minister at COP26 Summit also find lot of attention in the budget speech towards creating a sustainable development path.Setting up of an international arbitration center in the GIFT City will boost investor confidence and will also help promote the GIFT City as a destination for attracting international capital. GIFT City also has a potential to emerge as a center for providing services to global capital for sustainable and climate finance. The introduction of the digital currency is the first step in recognizing and accepting the use of block chain and other technologies to promote digital economy. The proposal to tax digital assets is a useful pointer in the emerging conversation on creation and trading of digital assets in the country.On the whole, significant trust towards digital initiatives, climate change and continuing efforts to intensify investment in infrastructure.”Perspective on proposal for voluntary winding up of companies:”The proposal to facilitate voluntary winding up of companies in less than six months is ambitious and laudable. It reinforces the path taken by the Government that digital initiatives can usher better Governance and can simplify processes in a timely manner without compromising on the necessary safeguards. It is expected that the process engineering will ensure that voluntary winding up is completed in a short time frame. This will be an important step towards giving confidence to entrepreneurs that exit would be a smooth process and would also improve in ease of doing business. Lot of capital and energy can be unlocked by faster liquidation which can be recycled for new and sustainable business.”Perspective on extension of ECLGS Scheme:”The ECLGS Scheme has been extended till March 2023 with an additional amount earmarked for the hospitality and related enterprises. Enterprises in the hospitality industry have borne the brunt of the pandemic. The scheme includes facilities with a cap on interest and moratorium period and waiver of certain charges. It is expected that this facility will help businesses in the hospitality sector that have been affected by the pandemic to come back to normalcy through access to credit provided by the Scheme.”Perspective of Mr. SR Patnaik, Partner & Head – Taxation, Cyril Amarchand Mangaldas.”Cryptocurrencies have been subjected to tax at the rate of 30% (plus surcharge and education cess) without allowing for any deduction on the transfer of such assets. In case such an asset is gifted, the recipient has to pay tax on the same. This is expected to cover cryptocurrencies as well as other virtual digital assets like nun-fungible tokens (“NFT”s). While the term cryptocurrency has not been mentioned explicitly, it is evident that the target has been cryptocurrencies because of the manner in which the term virtual digital asset has been defined.”Perspective of Mr. Kunal S Savani, Partner Tax and PCP, Cyril Amarchand Mangaldas, in relation to LTCG proposal”The government in order to promote further investments in start-ups has capped the surcharge on long term capital gains on unlisted equity to 15%, akin to long term capital gains arising on sale of listed equity shares. Currently, angel investors (individuals) are subject to a surcharge of 37% on capital gains from sale of equity shares exceeding INR 5 crores. With the proposed amendment capping the surcharge to 15%, the effective capital gains tax rate for resident investors may get reduced up to ~2-4.5%. This proposal is likely to attract more long-term investment in start-ups and help push India in further in the direction of ‘Atma Nirbhar Bharat’Perspective of Santosh Janakiram, Partner & Head – Projects, Cyril Amarchand Mangaldas on Projects, Infrastructure and Project Finance related proposals in Union Budget 2022″The highway expansion and the hill connectivity framework are important steps to increase connectivity as also improve logistics. It is an important step to drastically improve connectivity infrastructure as also to monetising existing operational roads. The follow-on positive impact on construction sector is also significant.””The new railway connectivity and logistics framework as part of Gatishatki will also go a long way in improving connectivity together with the road proposals in the budget.””The master plan for expressways could be the icing on the cake for this sector. Whilst we await working out the details, the very announcement on this account is cause for optimism.””The announcement of sovereign green bonds to be used for public sector greening and sustainability projects is a very important one. This demonstrates that the Government of India wants to lead the way. Now we wait for the RBI to take further steps to enable banks and their constituents to be incentivised to do the same.””The battery swapping policy was a much awaited, welcome step in the right direction. While we await the details, to make it attractive for private players – FAME incentives should now extend to them; and the key is to ensure that govt comes out with clear technical guidelines for smooth inter-operability amongst various battery makers.”Real Estate: Perspective of Ashish Jain, Partner, Cyril Amarchand Mangaldas”The budget lays a lot of thrust on digitization of revenue records. The measure to facilitate transliteration of land records across multiple languages, and promotion of of one nation one register are extremely welcome measures.”Infrastructure and Energy: Perspective of Ajay Sawhney, Partner, Cyril Amarchand Mangaldas”The development of battery swapping policy and interoperability standards is an important announcement for the EV sector. Introduction of battery swapping policy will help in resolving, amongst others, the problem of space requirement for establishing charging infrastructure in metro cities. The development of interoperability standards is also a crucial move which will help in bringing uniformity in the deployment and utilisation of batteries in EV vehicles, removing the consumer anxiety over replacement of batteries, and bolstering the penetration of EVs in the market.””The allocation of INR 19,500 crores under the PLI scheme for solar modules manufacturing is a well-timed move. Access to additional sources of funding will bolster the manufacturing capacity of local OEMs and will be considered as another vital step not only in the creation of an Atmanirbhar solar module manufacturing industry but also in enhancing the competitive ability of local OEMs.””The inclusion of data centres and energy storage systems to the harmonised list of infrastructures is a welcome move. The development of a robust renewable energy storage system and upgradation of grid infrastructure has been limited due to their capital-intensive nature. The announcement by FM will ensure availability of credit lines for the much-required energy storage systems and grid infrastructure.”Aerospace & Defence: Mr. Anuj Prasad, Partner & Head Aerospace and Defence, Cyril Amarchand Mangaldas.”Allocation of 25% of the defence R&D budget for industry, startups and academia should be a gamechanger for the defence ecosystem. It will encourage the best and brightest including in the startup ecosystem to concentrate on defence sector innovations and solutions.””68% of the capital procurement budget (up 10% from 58% in 2021-2022) being reserved for the domestic industry will provide further impetus to existing players and encourage others to enter the sector. That said the Government needs to ensure that access to state of the art defence equipment (meeting global standards) continues to be made available to our Armed Forces.”

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