The infrastructure sector has been one of essentially the most impacted because of the pandemic and firms have come beneath appreciable monetary stress.
The promise of a Budget like ‘never before’ by the finance minister appears to be apt with the daunting job of addressing points attributable to COVID-19 pandemic i.e. subdued funding, consumption and commerce. The want is to
speed up progress and augmenting avenues for income mobilisation.
While fiscal 21-22 will see extra spend on vaccines, agriculture and different schemes, the buoyant GST collections may assist steadiness out the fiscal deficit and permit the federal government to spend on Infrastructure with the final word purpose of having a multiplier influence on the financial system.
Out of the projected funding of Rs 111 lakh crore on infrastructure initiatives by FY 2024-25 as per National Infrastructure Pipeline (NIP), initiatives price Rs 44 lakh crore (roughly 40 p.c) are beneath implementation and price Rs 22 lakh crore initiatives (roughly 20 p.c) are beneath growth levels.
While the federal government spend on infrastructure has taken a backseat because of the allocation of funds for the pandemic bundle, a brand new door has been opened by permitting insurance coverage firms to fund infrastructure initiatives.
Given that insurance coverage firms have seen an increase in premiums throughout this pandemic, it’s seemingly that sustainable infrastructure initiatives will entice the funding to switch spending by authorities. Issuance of lengthy-time period
infrastructure tax-free bonds by the non-public sector by offering extra deduction beneath Section 80C of the Act in fingers of taxpayers may additionally obtain the dual goal of fostering funding necessities in addition to offering reduction to particular person taxpayers.
The success of the Development Finance Institution (DFI) has been witnessed earlier close to the event of numerous industries within the nation, e.g. IFCI, ICICI, IDBI, and so on. Considering that the current instances require innovation within the kind of numerous monetary devices /mechanisms to fund infrastructure initiatives, a devoted infrastructure DFI appears to be a a lot-wanted shot within the arm for the infrastructure sector.
India is about to host the G20 meet in 2022 and accordingly, it might be crucial that numerous initiatives viz. highways, roads, ports and so on. attain clean closure.
Recently, NITI Aayog and Quality Council of India (QCI) launched ‘National Program and Project Management Policy Framework’ (NPMPF) to herald sweeping reforms in the way in which execution of infrastructure initiatives in India. This welcome initiative is anticipated to pave the way in which for higher accountability and transparency within the execution of initiatives.
Despite COVID-induced challenges, 8,169 km of nationwide highways have been constructed from 1 April 2020 to 15 January 2021 within the present monetary 12 months 2020-21, up Eight p.c throughout the identical interval a 12 months in the past. NHAI’s Infrastructure
Investment Trust (InVIT), the primary InvIT to be sponsored by any authorities entity within the nation, is seemingly on the cusp of being launched and is anticipated to spur the expansion agenda for the street infrastructure.
The Indian Ports Bill 2020 (at draft stage, open for public session which shall exchange Indian Ports Act, 1908) seeks to foster structured progress and sustained growth of ports. The key can be to supply a strong
roadmap for the identical maintaining in thoughts numerous issues of stakeholders.
Given the extreme influence of the pandemic on the aviation sector, it might be fascinating to see how the federal government reacts to varied asks by stakeholders; e.g. flexibility to function on distant and loss-making routes, a free hand in ticket pricing, bringing jet gas beneath GST, and so on.
In order to incentivise infrastructure initiatives, the federal government should lengthen decrease company tax price of 17.16 p.c (presently obtainable to new manufacturing firms together with electrical energy technology firms) to different
The infrastructure sector has been one of essentially the most impacted because of the pandemic and firms have come beneath appreciable monetary stress. A framework for fiscal consolidation for the infrastructure firms may very well be
launched. This may allow firms with a number of horizontal SPVs to have the ability to set off the losses incurred in a single SPV in opposition to the earnings earned by different SPVs. The fiscal consolidation would go a great distance in easing the stress of the trade gamers by reducing their tax prices.
In the hybrid annuity mannequin (HAM), in respect of building price of street belongings by contractor, 40 p.c of the funds are paid by National Highways Authorities of India (NHAI) throughout building phases whereas the remaining 60 p.c is paid as variable annuity quantity after the completion of the challenge and over the upkeep part.
In as far as taxability of the annuity is anxious, there are apprehensions of the identical that it could be taxed throughout the building part (i.e. a lot earlier than the receipt thereof) which might result in numerous hardships. Suitable clarifications could also be supplied for taxability of the identical over the upkeep part.
Infrastructure continues to be the spine of progress and employment technology and therefore it’s extensively anticipated that Budget 2021 will present for numerous measures to propel infrastructure growth which is able to go a protracted solution to obtain the larger aim of $5 trillion financial system by 2025.
The author is Tax Partner-Infrastructure sector, EY India. Ankit Kochar, senior tax skilled with EY India has additionally contributed to this text.
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