2021 budget expectations by EY :

1. Automobile sectors :-
 To make the Indian automotive industry Atmanirbhar the production-linked incentive
scheme should specifically focus on incentivizing manufacturing of components currently
being imported by the vehicle manufacturers and the gestation period involved in
development of supply chain in India.
 The for high income earners rate cut on two-wheelers and entry level cars has been an ask
of the industry for quiet long. Similarly, interest paid on loan for purchase of EVs shall be
considered for availability of tax deduction. Both these measures by the Government in the
budget are likely to boost the demand in the sector.

- The focus for Indian automobile sector should be incentivizing manufacturing of

components, that are being imported by vehicle manufacturers.
- Interest paid on loan for purchase of EVs should be considered for tax deduction, which will
boost the demand in the sector

2. Defence :-
 In the coming budget, the defence sector is expected to be the driving force behind Make in
India initiative of the Govt. and some of the strategic programs such as: carrier based
fighters, P-75I, Artillery modernisation program, are expected to see constructive
development to cater towards the need of modernisation of armed forces. Considering the
recent R&D initiative and missile tests by DRDO, slight increase is expected in the budget
catered for R&D. The budget catered for Indian Air Force and Indian Navy is expected to
slight increase due to the major projects lined for the coming year.
3. Infrastructure :-
 Fiscal 2021-22 will see the government spending on vaccines, agriculture and other
schemes, which could create a dent in fiscal deficit. On the other hand, GST collections have
been quite strong, and a continuing trend could balance out fiscal deficit, thereby allowing
the government to spend on infrastructure.
 Out of projected investment of Rs 111 lakh crore on infrastructure projects by FY 2024-25 as
per National Infrastructure Pipeline. Projects worth Rs 44 lakh crore (approx. 40%) are under
implementation and worth Rs 22 lakh crore projects (approx. 20%) are under development
stages. It would also be interesting to see whether the Budget lays the blueprint for setup of
Development Finance Institution to meet the financing needs of the infrastructure sector.
Issuance of long-term infrastructure tax free bonds by private sector could also foster
funding requirements.

Budget could establish blueprint for development finance institution to meet financing needs of the
sector.

Issuance of long term infrastructure tax free bonds to foster funding requirements

 Benefit of lower corporate tax rate of 17.16% is provided to new manufacturing companies
(including generation of electricity) by Tax Ordinance (Amendment) Act, 2019. Similar
benefit should also be provided to other infrastructure companies.
 Relaxation to stressed infrastructure companies in respect of carry forward and set-off of
business losses due to restructuring/change including introduction of consolidation at group
level (i.e. fiscal consolidation), and clarity on taxability of revenues for companies operating
in road sector under the HAM model.
4. Retail :-
 Instantaneous relaxations expected by the Retail sector orbit around additional tax
deductions for overheads like store outlet costs, salaries, rent and electricity during
pandemic wedged period.
 Restructuring tax benefits around employment generation, tax rate alignments, extension of
GST audit deadlines and deferral of e-invoicing implementation timelines are also on the list.
 Long term reforms expected by Retail sector include relaxed time lines for carry forward of
losses, for set off, structural reforms around pillars identified in National Retail Policy like
complete automation to reduce wait period for around 25 plus licenses, investment in retail
infrastructure specially in Tier II and Tier III cities, liberalizing multi brand FDI norms around
less sensitive and employment generating sectors such as consumer durables, thereby
providing more access to capital and expertise.
 Certain GST challenges around cross state returns, refund for input tax on services, input tax
credit on civil construction costs, clarity regarding Input tax credit on samples, marketing
material, brand reminders, point of sale materials etc need to be addressed to promote
vision of One Country, One Tax, One Market approach.