Days ahead of the Union Budget, NewsX was recently joined for a riveting discussion on ‘2021 Union Budget: My Expectation’ presented by Akshaya Motors. Considering how 2020 and the pandemic went for all, it’s important that we have a well-balanced budget to give a boost to most of the sectors. This show included experts namely DN Prahalad, Former Independent Director, Infosys, & Founder, Surya Software, Dr. MP Shyam Shetty, President, FADA, Karnataka, and K Gururaj Acharya, leading CA in Bengaluru. They spoke about the various industries and what they expect from the Budget this year and sharing insights on their respective sectors.
Since work from home became the new normal Mr. Prahalad talked about how the industry has done during this time. He said, “It’s a mixed bag out there. The industry can be divided into services and products. In services, those companies who operate above 100crore will do well because first, they were able to get people working from home very fast. 95% of the workforce was working from home effectively, within a month. Therefore, most customers believe they should be bet on. We have a phenomenon called vendor consolidation happening, so IT companies will do well. When it comes to productivity, work from home has thrown the Jekyll and Hyde phenomenon. People who were productive before have increased their hours of productivity whereas people who weren’t productive before, have gone down to zero. Therefore, work from home has had its ups and downs but I expect people to get back to the office soon. I expect 30-40% of the workforce to continue working from home. Lastly, we’ll have profits because we have not been traveling for projects, sales and it amounts to 2% or more of expenses, so we’ll show profits but they will be pseudo profits because the sales are cannibalized of later years. Overall, the industry is resilient and will prosper the moment traveling starts”.
Automobiles was one of the sectors which took a hit by the lockdown for the first two quarters, sharing his insights, Dr. Shyam said, “The automobile industry has bounced back after the pandemic. The problem it is facing today is the problem of supply, not demand. Because of this pandemic, people have come back to the dealerships to buy personal cars due to safety concerns about using public transport. The industry has come back and 2021 will be a good year for the industry. Due to the pent-up demand, since the market was down in March, April, May, and June, July and August were slow. Demand picked up during the festival season but as of now dealers have less inventory and there is a backlog with almost all companies and they have sold out the 2020 stock. The problem is of stock supply to the dealers”.
For taxmen, it’s been an equally tough year as deadlines have been extended on a number of occasions. Mr. Acharya, said, “Timelines were pushed for individuals and companies. The time given was sufficient but those who do not want to pay taxes will ask for more extensions. When govt announced the ‘aatmanirbhar’ scheme they did good and went to the extent of reducing the TDS rates by 25% and leaving that much money in the hands of the payer. There is still a grudge against the government, questioning what has been given. Whatever reduction has been done in TDS will come back in the form of advance tax, if we look at the person who’s suffering real losses, he’s actually left with that much more money which would’ve earlier been paid to the tax department. That way, the reduction of TDS rates by the government is welcomed. Our institute gives a lot of recommendations to the government about what should be added to the budget. This time we haven’t asked for reduction in the rates because the government has already reduced the rates to rock bottom. Pre-pandemic, the government had slashed the corporate rates and made them as low as 15%. Reduction in taxes even for individuals, they are given the option.”
Mr. Prahalad further spoke about how beneficial were the ‘Aatmanirbhar’ packages provided by the government. He said, “If you see it only from the point of view of the IT industry, I don’t think it’s relevant because most IT companies have a positive cash flow or they are well-funded. For MSME’s in general, the credit guarantee scheme for me is fantastic as it didn’t cost anyone anything but helped everyone instead. People got credit guarantee under this scheme, it should be seen whether this guarantee scheme should be given to big companies because the banks can’t lend, so they need to create opportunities”. Referring to the financial fugitives in India, Mr. Prahalad said, “We should not have uncontrolled lending and the crookedness of an individual doesn’t depend on the scheme or the bank. There will always be people who will defraud but they need to be punished. The credit guarantee scheme really worked for people”.
Talking about the automobile industry, the recent tensions with China, and whether the government could’ve done better, Dr. Shetty said, “What the government could do is that a lot of dealers fall under MSME category, under 400 crores and a lot of them are partnership firms. Corporate taxation should be reduced for proprietary companies and partnership firms as that will help the automobile industry because it directly employs almost 2.5 million people and 5 million people indirectly. The second thing to look at is, there is a high rate of taxes on luxury cars, the GST is 28%, which can be reduced to boost demand. Third, 80% of the vehicles sold are two-wheelers, three-wheelers, and light vehicles so, public transport isn’t very good in the country and people are scared after the pandemic. So, reducing taxes on two-wheelers because it’s what the common man wants”.
Coming to taxation and talking about the need of the hour, things that are archaic and can be done away with in order to help taxation at all levels, Mr. Acharya said, “What we have recommended is to reduce the burden on businessmen and focus on the ease of doing business. The industry wants a reduction in paperwork, archaic laws, and various rules and inconsistencies in Acts. The wish list is, first, tax the untaxed, those who work under the radar. Second, reduce the burden. Third, dividend income was taxed last year but if it was a loan, eventually people may have to incur losses. Fourth, set on of losses or carry backward of losses. Certain companies do very well but a lot of them have incurred losses but this year the turnover has reduced drastically to provide support in present times. While work from home has been a boon for many industries, the real estate sector has suffered because this sector needs to be handheld. They have inventory that is unsold, the company holding the inventory ought to pay taxes on the notional rent that has to be collected. I would like to put personal taxes on two levels- the businessman’s personal tax and the salaried man’s personal tax. This country traditionally survives on a salary man’s taxes and I’d ask the government to look into- an increase of standard deduction and give certain relaxations and liberalize some rules”.
The software industry enjoys certain perks, talking about his expectations for the software industry, Mr. Prahalad said, “The tax rate has reduced already. Two things, product companies have a rough time because the first five years are an investment and they need support, I would suggest there be no tax on them because the reduction will give them money to grow, create employment and companies between 10-100 crores”.
Speaking about startups and the schemes for those, Mr. Prahalad said, “Socially, we must understand that failures are okay because our society thinks it’s bad. Second, people have given up in the beginning but they shouldn’t for the first five years. Startups should have zero complaints in the beginning”.
Giving the wish list of the automobile sector, Dr. Shyam said, “We’re thankful that the government has brought in the new depreciation scheme which is valid till March 2021 and should be extended to 2022 so that people can buy more vehicles. Second, individuals should be allowed depreciation in their hands so that they can purchase vehicles. Third, reduction of corporate tax for companies, we request the government to do so for partnership firms and proprietary firms because the auto dealers come under this category. Fourth, auto dealers should be kept out of the annual TCS because every transaction with banks, there’s a payment of 0.1% TCS and this leads to blockage of funds. Lastly, an attractive scrap age policy. This would boost the industry and hopefully the government comes out with such a policy to boost the manufacturing sector in automobiles, lead to the higher collection of GST, boost sales, and have 360-degree benefit”.
Watch the telecast here: