MakeinIndia Campaign & Sharing Ideas

Presented by CA. Namrata Shah

BFSI & Capital Markets Study Group Meeting

Why Make in India?From Automobiles to Agro-products. From Hardware to Software. From Satellites to

Submarines. From Televisions to Telecom. From Pharma to Biotech. From Paper to

Power Plants. From Roads to Bridges. From Houses to Smart Cities. From Friendship to

Partnership. From Profit to Progress. Whatever you want to make: Make in India.'

Objective• Promote India as a global manufacturing hub nationally and abroad

• Generate employment for over 10 million youth each year

• Boosting the country’s economic prospect

• Encourage FDI and Make India more competitive

• Increase contribution of manufacturing sector to GDP from 15% to 25%

Sectors covered in MakeinIndia Campaign• Automobile• Automobile

Components• Aviation• Biotechnology• Chemicals• Construction• Defence

Manufacturing• Electrical Machinery• Electronics System• Food Processing• IT and BPM

• Leather• Media and

Entertainment• Mining• Oil & Gas• Pharmaceuticals• Ports• Railways• Renewable Energy• Roads and Railways• Space• Textile and Garments

• Thermal Power• Tourism and

Hospitality• Wellness

Sectors covered in MakeinIndia Campaign• Automobile• Automobile

Components• Aviation• Biotechnology• Chemicals• Construction• Defence

Manufacturing• Electrical Machinery• Electronics System• Food Processing• IT and BPM

• Leather• Media and

Entertainment• Mining• Oil & Gas• Pharmaceuticals• Ports• Railways• Renewable Energy• Roads and Railways• Space• Textile and Garments

• Thermal Power• Tourism and

Hospitality• Wellness

Eight Core areas of Reform1. Starting a business (Rank 179)

• Reduce time taken for registration from 27 days to 1 day

• Integrate DIN, name availability and payment of registration fees and stamp duty.

• Remove provisions related to company seal, minimum paid-up capital

• Single registration for all labour reforms

• Introduce unique company Id

2. Dealing with construction permits (Rank 182)• 35 procedures takes around 168 days

• Remove overlapping, contracting laws, consolidate and streamline building laws at national and state level

• one stop construction permit portal to be introduced at centre and state level

3. Getting electricity (Rank 111)• 67 days and 7 procedures to get electricity connection – reduce it to 1 procedure and approval

within a week

• remove requirement of pollution control certificates

Eight Core areas of Reform4. Registering property (Rank 92)

• 5 process requires around 30 days

• Take process online with online payment facility

5. Paying Taxes (Rank 158)• Annually, 33 tax payments and approx 243 hours spent in filing taxes

• reduce number of taxes, simplify tax processes and allow online payment

• expedite implementation of direct taxes code, GST

• abolition of minimum alternate tax for developers of special economic zones

• simplification of VAT refund and advance ruling of tax for state level taxes on the lines of Income tax Act

6. Enforcing Contract (Rank 186)• The trial and judgement – 3 years; enforcing a judgement - 305 days

• Specialized fast track commercial courts with time bound decision with a proposed limit of 60 days

• provisions for not more than one adjournment for each party and make it enforceable

Eight Core areas of Reform7. Trading across borders (Rank 132)

• For export – 9 documents, takes 16 days & cost $1,170

• For Import – 11 documents, takes 29 days & cost $1,250

• Reduce to 3 documents - bill of lading, commercial invoice and custom declaration

• Allowing electronic submission

• Only risk-based inspections

8. Resolving insolvency (Rank 121)

• 4 laws - Company's Act, Sick Industrial Companies Act, SARFAESI Act and RDB Act

• Introduce - Single bankruptcy law

• Law to cover - aspects of recovery, revival, reconstruction and winding up and also domestic and cross border insolvencies

Automobiles

Automobiles Growth Driver

• Growing working population and an expanding middle class

• Increasing disposable incomes in the rural agriculture sector

• Availability of skilled and semi-skilled workers and a strong educational system

• The availability of a variety of vehicle models meet diverse needs and preferences

• Easy finance schemes and increase in car finance penetration

Key Statistics

• Contribution to GDP - 7%

• Employs - 19 Million people both directly and indirectly.

• Average annual production - 17.5 Million vehicles, of which 2.3 Million are exported.

• Automobile market - is estimated to become the 3rdlargest in the world by 2016 & approx 5% of global vehicle sales.

• 2nd largest two-wheeler manufacturer & 5th largest commercial vehicle manufacturer

Automobiles • By 2015 – estimated to be 4th largest automotive market by volume globally

• Automotive clusters -

• Delhi-Gurgaon-Faridabad in the north,

• Mumbai-Pune-Nashik- Aurangabad in the west,

• Chennai-Bengaluru-Hosur in the south

• Jamshedpur-Kolkata in the east.

• NATRiP (National Automotive Testing and R&D Infrastructure Projects) centers – promoting R&D

• Positive response from Hyundai, Suzuki, GM to set up an R&D base

• Global car manufacturers interested in catering to growing domestic demand and plans to set up export-oriented production hubs

• Electric cars are likely to be a sizeable market segment in the coming decade.

• India’s car market has the potential to grow to 6+ Millions units annually by 2020.

Automobiles – Financial Incentive • Extension for payment of lower Excise Duty till Dec 2014

• Small cars, motorcycles, scooters – reduced from 12% to 8%.

• Commercial vehicles and SUVs – reduced from 30% to 24%.

• Mid-segment cars – reduced from 24% to 20%

• Large cars – reduced from 27% to 24%

• R&D Incentives applicable under Income Tax Act, 1961

• A weighted tax deduction of 200% u/s 35 (2AA) for payment made for scientific research within a program approved by the prescribed authority.

• A weighted tax deduction of 200% u/s 35 (2AB) for both capital and revenue expenditure incurred on scientific research and development.

• Concessional excise duty of 6% - for manufacturers of batteries supplying to producers of electrically operated vehicles upto Mar 31, 2015.

• Exemption from basic customs duties on lithium-ion automotive batteries for manufacture of lithium-ion battery packs for supply to manufacturers of hybrid and electric vehicles.

Electronic Systems

Electronic SystemsGrowth Driver

• Current demand: 65% is met by imports

• Electronics Manufacturing Clusters (EMC) Scheme - near Bangalore, Kochi, Hyderabad, Delhi, Bhopal and Jabalpur

• Strong focus by venture funds on electronics components

• Skills Councils have been set up imparting outcome-oriented skills

• Focused electronic products: mobile phones, flat panel display TVs, notebooks, desktops, digital cameras, inverters / UPS, memory cards/USB drives, LCD monitors and servers

Reason to Invest

• Third largest pool of scientists and technicians globally

• Availability of skilled manpower available in Semiconductor Design and Embedded Software

• Strong design and R&D capabilities in automotive and industrial electronics

• Government schemes favoring digitization and broadband reach till remotest village

Electronic Systems – Financial Incentive • Encouragement for Assembly operations

• Nil BCD on LCD and LED TV panels, E-books reader

• Exempt SAD on all imports/components used in the manufacture of personal computers

• Exempt SAD on PVC sheets and ribbon used in the manufacture of smart cards.

• Levy of Education cess and secondary and higher education cess on imported electronic products

• Additional Depreciation under Income tax Act, 1961

• additional depreciation @ 15% of cost of new P&M to companies investing more than INR 1billion in plant & machinery acquired and installed between 01.04.2013 to 31.03.2015

• additional depreciation @ 15% of cost of new P&M to existing companies investing morethan INR 250 million until Mar 31, 2017

• U/s 35 AD of ITA, investment- linked tax incentive - allowing deduction for whole of capitalexpenditure (other than expenditure on land, goodwill and financial investments) -- Setting upand operating a semiconductor wafer fabrication manufacturing unit, if such a unit is notified bythe board in accordance with the prescribed guidelines.

Food Processing

Food ProcessingGrowth Driver

• Population - 1.2 billion people. Youth population –572 Million ~ 48% (under the age of 24)

• Rising income levels, increasing spending power and growing middle class

• Increasing desire for branded food

• Consumption in India is driven towards packaged and ready-to-eat foods

• One-third of the population will be living in urban areas by 2020.

• Favorable economic and cultural transformation

• Shift in attitudes and change in lifestyles

• Awareness and concern for wellness and health.

• Higher demand from Middle East and Southeast Asia for Processed food exports

• Abundant raw materials, supply and cost advantages for food industry

Statistics

• India’s food processing sector ranks fifth in the world in exports, production and consumption

• Contribution to GDP – 9.8% (2012-13)

• About 38.6% of the total consumption expenditure of households was spent on food & food products in 2011-12

Food ProcessingReason to Invest

• 127 agro-climatic zones have been identified

• Strategic geographic location and proximity to food-importing nations

• Network of food processing training, academic and research institutes

• 42 mega food parks are being set up in public-private partnership

• Low cost of skilled manpower

• 121 cold chain projects are being set up to develop supply chain infrastructure.

Food Processing – Financial IncentiveDeduction of expenditure under ITA : For the investment made in the previous year and

prior to commencement of its operations.

• Businesses permitted 100% deductions:

• Setting up and operating a cold chain facility

• Setting up and operating warehousing facilities for storage of agricultural produce

• Businesses permitted 150% deduction

• Beekeeping and the production of honey and beeswax

• setting up and operation of a warehousing facility for the storage of sugar

Deduction of Tax from Profit:

@ 100% tax exemption for the first 5 years of operations for new units in the business of processing, preservation and packaging of fruits or vegetables, meat and meat products, poultry, marine or dairy products.

Food Processing – Financial IncentiveCustom Duty

• Full exemption from customs duty is being granted for import of to de-oiled soya extract, groundnut oil cake/cake meal, sunflower oil cake/cake meal, rice bran/rice bran oil cake and palm kernel cake until Dec 31, 2014

• All goods related to food processing, imported as part of the project - entitled to uniform assessment at a concessional customs duty of 5%, plus countervailing duties as applicable

Service Tax is exempted from:

• The construction, erection, commissioning or installation of original works pertaining topost-harvest storage infrastructure for agricultural produce, including cold storage forsuch purposes

• Mechanized food grain handling system, machinery or equipment for units processingagricultural produce as foodstuff, excluding alcoholic beverages

• Agencies for transportation of fruit, vegetables, eggs, milk, food grains or pulses

• Loading, unloading, packing, storage or warehousing of agricultural produce

Food Processing – Financial Incentive

Central Excise Duty

• Nil excise duty in milk, milk products, vegetables, nuts & fruits – both fresh and dried

• Against a standard excise duty of 12%, processed fruits and vegetables carries a merit rate of 2% without CENVAT or 6% with CENVAT

Food Processing Machinery and parts:

• All refrigeration machinery and parts used for the installation of cold storage, cold room or refrigerated vehicles for the preservation, storage, transport or processing of agricultural, apiary, horticultural and marine produce as well as dairy and poultry, are exempt from excise duty

• Machinery for pasteurizing, drying, evaporating, etc. used in the dairy sector is exempt from excise duty

Textile and Garments

Textile and GarmentsGrowth Driver

• Rising per capita income, favourable demographics and a shift in preference for branded products is expected to boost demand.

• Favourable trade policies and superior quality will drive textile exports.

• Increase in domestic demand is set to boost cloth production.

• Pointed and favourable policies instituted by the government will give the industry a fillip.

• Changing lifestyles and increasing demand for quality products are set to fuel the need for apparel.

Statistics

• Contribution to GDP – 4.0%

• Employs - over 45 Million people

Textile and GarmentsReasons to Invest

• Second largest manufacturing capacity globally.

• Comparative advantage - skilled manpower, low cost of production

• Abundant raw material and increasing demand for exports to boost fibre production.

• Abundant availability of raw materials such as cotton, wool, silk and jute.

• Increased penetration of organized retail, favourable demographics and rising income levels to drive textile demand.

• Indian textile industry - 24% of the world’s spindle capacity

• Highest loom capacity (including hand looms) with 63% of the world’s market share

• 14% of the world’s production of textile fibre and yarn

• Largest producer of jute and the second largest producer of silk and cotton

Textile and GarmentsCustom Duty

• Specified goods imported for use in the manufacture of textile garments for export are fully exempt from Basic Customs Duty (BCD) and Countervailing Duty (CVD)

Income tax Act

• Additional Depreciation under Income tax Act, 1961

• additional depreciation @ 15% of cost of new P&M to companies investing more than INR 1 billion in plant & machinery acquired and installed between 01.04.2013 to 31.03.2015

• additional depreciation @ 15% of cost of new P&M to existing companies investing more than INR 250 million until 31.03.2017

R&D Incentives under Income Tax Act, 1961:

• Industry/private-sponsored research programmes:

• weighted tax deduction of 200% of contribution for scientific research u/s 35 (2AA) of the ITA

• Companies engaged in manufacture having an in-house R&D centre:

• weighted tax deduction of 200% for capital (excluding land & building) and revenue expenditure incurred on scientific research and development u/s 35 (2AB) of the ITA

Tourism and Hospitality

Tourism and HospitalityGrowth Driver

• Skills imparting hotel management and food craft institutes

• Visa On Arrival facility - influences tourists’ travel plans to any country

• Initiatives by GoI - Incredible India! and Athiti Devo Bhava

• fresh category of visa – the medical visa or M visa, to encourage medical tourism in India.

Statistics

• Employs – every USD 1 Million invested in tourism creates 78 jobs

• 3rd largest foreign exchange earner after gems, jewellery and readymade garmentsReason to Invest

• Contribution to GDP - 6.8% & third largest foreign exchange earner

• Ranking 42nd – UN World Tourism Organization rankings for foreign tourist arrivals

• 16th most visited country in the world

• Offers geographical diversity, attractive beaches, 30 World Heritage Sites and 25 bio-geographic zones.

• Diverse portfolio of niche tourism products – cruises, adventure, medical, wellness, sports, MICE, eco-tourism, film, rural and religious tourism

• Domestic tourism contributes to three-fourths of the tourism economy

Tourism and Hospitality – Financial Incentive• State governments incentive include

• subsidized land cost,

• relaxation in stamp duty, exemption on sale/lease of land,

• power tariff incentives,

• concessional rate of interest on loans,

• backward areas subsidies and special incentive packages for mega projects.

• Incentives from the ministry of tourism:

• Assistance in large revenue-generating projects.

• Support to Public Private Partnerships in infrastructure development such as viability gap

funding.

• Schemes for capacity-building of service providers.

Tourism and Hospitality – Financial Incentive• Service tax exemption

• Indian tour operators to foreign tourists in relation to tours wholly conducted outside India

• World-class tourist facilities are being developed to promote Sarnath-Gaya-Varanasi

Buddhist circuit.

Income tax Act, 1961

• An investment-linked deduction under Section 35 AD of the Income Tax Act is in place for

establishing new hotels in the 2-star category and above across India, thus permitting a

100% deduction in respect of the whole or any expenditure of a capital nature excluding

land, goodwill and financial instruments incurred during the year.

Construction

ConstructionGrowth Driver

• Shortage of urban housing - 18.8 Million dwelling units (2012).

• Shortage of rural housing - 47.4 Million units (2012)

• Inadequate levels of urban infrastructure , Need for re-generation of infrastructure in urban areas, Creation of new, inclusive 100 smart cities, Develop cities of religious and tourist importance.

Statistics

• Contribution to GDP – around 10%

• Employs more than 35 Million people.

• 50% of the demand for construction activity in India comes from the infrastructure sector.

• construction industry is valued at over USD 126 Billion

• New rising demand for - Housing for seniors

• As per industry estimates, the Indian real estate market is estimated to be approximately USD 78.5 Billion in 2013 and is expected to grow to approximately USD 140 Billion by 2017.

ConstructionProjected Investment of USD 1,000 until 2017

• 40% of which is to be funded by the private sector• 45% of infrastructure investment will be funneled into construction activity • 15% set to modernize the construction industry

Smart cities:• Contribution towards development of 100 smart cities• Requirement of the built-up area and capital conditions for FDI is being reduced from

50,000 sq. mts. to 20,000 sq. mts., from USD 10 Million to USD 5 Million respectively. • National Industrial Corridor Authority - emphasis on Smart Cities linked to transport

connectivity to spur growth in manufacturing and urbanizationREITS and INVITS:

• A new tax structure for real estate and infrastructure investments trusts. Both of them have been given pass-through status.

Other State level incentive • offers additional incentives for investments and special incentive packages for mega

projects

ConstructionTax Exemption

• Income Tax exemption on income derived from the business of development of the SEZ in a block of 10 years, in 15 years under Section 80-IAB of the Income Tax Act.

• Exemption from Central Sales Tax (CST) & Service Tax

• Exemption from customs/excise duties for development of SEZs for authorized operations approved by the BOA.

Incentives for developing electronic manufacturing clusters:

• Brownfield EMC: upto 75% of project costs, subject to the ceiling of INR 0.5 Billion

• Greenfield EMC: upto 50% of the project cost subject to ceiling of INR 0.5 Billion for every 100 acres of land.

• Other Area-based incentives

Thank You