What does the India Budget mean for UK businesses in India?

The India budget this year, dubbed as booster shot budget has skipped any big bang reforms and tweaks, however, focussed on strengthening sustained momentum towards growth, investment, jobs, and infrastructure creation through increased capital expenditure. It also lays the foundation and steers the economy from India@75 years of independce to India@100 with focus on upcoming sectors and digitalisation.

Against the backdrop of the ongoing pandemic, the budget estimates the GDP to grow at 9.2% - highest among all large economies. The fiscal year beginning April 2022 proposed a massive 35% jump in capital expenditure to approximately £75 billion, coupled with rationalisation of customs duty, an extension of time for setting up new manufacturing companies and plans for starting a digital currency and tax crypto assets.

As called for by the CBI in our flagship report ‘Sterling Access’ in 2019 and 2020 Review publication, the budget introduced Ease of Doing Business 2.0 and Ease of living as the second run of process reforms for simplification, standardisation, and promotion of trust-based supervision for businesses. These reforms will help businesses operating in India.

The businesses welcomed the budget proposals, highlights below for reference:

• Key Benefits to the NRI community
• The introduction of the digital rupee might benefit NRIs in reducing the cost of cross-border remittances.
• E-passports with the embedded chip will help in managing arrival and departure with ease. The chip will help in linkages of data with the Indian Ministry of External Affairs and tax authorities.
• Updated tax return can be filed up to 2 years.
• Infrastructure: 5G spectrum auctions to be conducted in 2022, along with design-led manufacturing for 5G will be part of production-linked scheme. To award contracts to lay optical fibre in rural areas, completion in 2025. Push for affordable housing in 2022/23 with budget of £4.7 billion.
• Sustainability and Climate Action sits at the heart of the budget with push to green bonds, solar power, battery swapping policy.
• Education - push for digital university, the world-class universities will be allowed to establish campuses in India, without following local regulations.
• International Arbitration Centre will also be set up in Gujarat International Finance Tec-City (GIFT city). Accelerated Corporate Exit: The Centre for Processing Accelerated Corporate Exit (C-PACE) with process re-engineering, will be established to facilitate and speed up the voluntary winding-up of these companies from the currently required 2 years to less than 6 months.
• Push for Special Economic Zones and Exports: The Special Economic Zones Act will be replaced with a new legislation that will enable the states to become partners in ‘Development of Enterprise and Service Hubs’ to optimally utilise available infrastructure and enhance competitiveness of exports.
• Direct Tax Proposals: Second year of no change in income tax rates for individuals or corporates. The focus is on tax revenue buoyancy, ease compliance and faceless income tax dispute resolution this year.
• Recognition of Cryptocurrency through taxation - Taxation of virtual digital assets proposed at 30% (no deduction allowed): loss cannot be set off against any income; TDS on transfer of virtual digital asset at 1% or such other threshold; gift also to be taxed in hands of recipients.