Breakfast meeting on Impact of Union Budget on the Manufacturing and Technology sectors
AMCHAM’s Tamil Nadu Chapter organized a breakfast meet with the topic for discussion being the impact of the budget on manufacturing and technology for MNC’s” on Wednesday, 8th February 2017 at the Westin, Chennai. This meeting was attended by over 38 participants and included CFO’s, CEO’s and tax managers. This event was facilitated and sponsored by Deloitte, Chennai.
Mr. Rajesh Srinivasan, Partner, Deloitte, opened the session with a general introduction to the economy and the expectations from the budget. He, then, gave a detailed overview on the direct tax provisions announced and shared some detailed information on the impact of these provisions.
Mr. Srinivasan added that after demonetization and its consequent impact on GDP, the manufacturing sector has been hoping to generate greater demand through the budget proposals. In the past couple of years, the government seems to be focusing on building a long term growth plan for the manufacturing sector by investing resources in infrastructure and rural market development. The finance budget 2017 provides for substantial allocation towards these areas. On the tax front, government has already committed to bring down the tax rate to 25% in a phased manner. However, in the current budget, the Finance Minister has proposed to incentivize only the small and medium sector with a turnover of INR 500 million or less by reducing the tax rate to 25% and continued the existing base corporate rate of 30% for others. No change has been proposed in the MAT provisions, which was expected on account of introduction of Indian Accounting Standards (Ind AS) and Income Computation and Disclosure Standards (ICDS). However, the budget provisions seem to give clarity only on tax positions to be adopted in relation to adjustments in the books of account for adoption of Ind AS by the corporates. As anticipated, no change has been proposed to the base line tax rate on service tax and other indirect tax levies as the government is committed to implement GST from 1st July 2017.
To get an understanding of the impact from the industry perspective, we invited Mr. David Schock, CFO, Ford Motor Company, to share his views. Ms. Schock said that the auto industry was hoping for some major reforms which could bolster the sector. However, no announcement was made to this effect. The sector expected a reduction in tax on R&D expenditure and reduction in interest rates to boost sales. However, an announcement was made about big investments in improving infrastructure especially roads and bridges. The budget did not make any announcement on the government decision to scrap old vehicles which has only commercial vehicles on the policy framework so far.
Mr. L. Sayee Mohan, Partner Indirect Taxation, Deloitte, gave an overview of the indirect tax provisions and its implications for corporates. He also shared some detailed information on goods and service tax (GST), its impact etc. In view of the implementation of GST, the budget made no radical changes to the indirect tax segment.
The meeting ended with an interactive session and participants fielded many questions on transfer pricing and GST.