Saturday, March 17, 2012

Sector Impact of Union Budget 2012 :

Infrastructure: Marginally positive

• Funding related proposals a positive for entire sector (Both local & global)
• Viability Gap Funding allowed for irrigation projects, Tax free bonds for certain infrastructure
agencies increased to 60k cr

• Attracting external flows - ECB allowed to part finance rupee debt of existing power projects. The
withholding tax for ECB in power, airlines, roads & bridges, ports & shipyards, affordable housing,
fertilizer and dams has been reduced to 5% from 20% for three years. Restriction on Venture
Capital Funds to invest in only 9 sectors has been removed.
• Overall larger expectations such as Annuity Fund or Land Bank Corporations have remained

Financials: Marginally positive

• Measures to increase deposit flow to the banking system – by giving tax exemption on interest
upto Rs 10,000 (Rs 25 lac of deposits) on Savings Bank Deposits
• Opening new avenues for Corporate India to raise resources by liberalizing access to ECB
market reduction in withholding tax and allowing QFIs to Participate in Corporate Debt market
• Capital infusion - Capitalization of Rs 17000 Cr of banks, RRBs and Nabard
Telecom: Overall Mild negative
• Increase in service tax to 12% is a mild negative as it would not be easy for the telecom
companies to increase headline tariffs immediately
• Fixed network for telecommunication and telecom towers made eligible for Viability Gap funding
• Budgeted receipts from telecom is very high at 58k Cr and could put additional strain

Pharma: Overall neutral

• Non LLP partnerships brought under MAT.
• NHRM allocation increased to 20000 crs from 18000 crs ( minor increase) positive for branded
generic players
• Rs 5000 deduction for individuals who go for preventive health check up

Autos: Overall Positive

•Only 2% excise duty hike and large vehicles up by 4-5% Hike will be passed on to final consumers.
•Custom duty on “completely built vehicles” have been increased to 75% from 60%. No significant
impact from the same on listed players.
•No much talked about diesel tax imposed which is a positive
Metals & Mining: Marginally positive
•Import duty on flat rolled steel has been increased to 7.5% (from 5% earlier).
•Cut customs duty on mining machinery to 7.5% from 10.0%

Oil & Gas: Marginally negative
• Cess on crude production increased from Rs2500/ton to Rs4500/t
• Exemption of custom duty on LNG for power
• Oil subsidies are kept at 40000 cr INR only.

IT services: Marginally positive

• Repatriation of dividends from foreign subsidiaries of Indian companies to India at a lower tax rate of
15 per cent as against the tax rate of 30 per cent has been allowed for one more year i.e. upto March
31, 2013.
• Increases in budget for UID to fund enrolment of another 400 mn people.
Cement: Neutral
• Excise duty is now same irrespective of selling price. Change in rates and move to selling price (less
30% abatement) will lead to Rs1-2/bag increase or decrease in duty
• Removal of custom duty on steam coal positive for space

Retail: Neutral

• Customs duty on Gold now 4% (in Jan it was increased to 2%, earlier it was fixed a fixed amount)
• Tax collected at source (TCS) of 1% for Jewellery above Rs. 200,000 purchased in cash (seller
to collect tax).
• Abatement for computing Excise on apparels increased from 55% to 70%.
Real Estate: Marginally positive
• A TDS of 1% will be on all property (other than agricultural) transactions above 50 Lakhs in
specified areas and above 20 lakhs in other areas.
• Extension of 1% interest subsidy by another year for home loans upto 15 lakhs for transaction
values upto 25 lakhs
• Adjusting for abatement of effective service tax rate: - If land cost included ->tax increased from
2.58% to 3.09% and if land cost not considered -> from 3.43% to 4.12%
Source : relianceMF

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