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How Budget 2018 benefitted the services industry at large

  • Highlights

  • The services industry has been driving India’s GDP growth

  • The government provided incentives to support the sector

  • The industry is looking for easy access to credit

  • Bajaj Finserv offers easy credit access with Business Loans up to Rs. 30 lakh

The services sector is one of the key drivers of India’s GDP growth. It covers a range of industries such as transport and logistics, trade, hotels and restaurants, financial services, business services and social and personal services. The sector has contributed nearly 58 per cent to India’s Gross Value Added (GVA) in FY 2018-19 and has been going from strength to strength in the past few years.

Government support

The Government promoted growth across by providing several incentives in the recent past. For instance:

- Under the Mid-Term review of Foreign Trade Policy (2015-20), undertaken in the past year, the Central Government increased incentives under the Services Export from India (SEIS) by 2%.

- The Government stated its priority to work towards trade facilitation agreement (TFA) to enhance prospects for the services industry. India has submitted a proposal to the World Trade Organisation (WTO) to negotiate a TFA. The TFA focusses on issues like an easier visa regime especially for the business services professionals who need the flexibility to move freely across borders for trade.

Ease of doing business

The efforts taken thus far have borne fruit. For instance, India is 24 in the World Bank’s Ease of Doing Business “Getting Electricity” ranking. This is a considerable achievement, given India’s ranking at 137, four years ago. Timely regulatory interventions, too, have been market friendly. Further, the rollout of landmark reform, such as the rollout of the Goods and Services Tax (GST) has paved the way for the Indian business services industry to enhance competitiveness. Currently, GST is in its early days yet, which makes it difficult to assess a full impact; increased cost efficiencies, due to the input credit availability for the services industry could result in a 17% CAGR till 2020, and the industry is expected to surpass the U$19 billion mark.

GST simplification

The services industry expects the Union Budget of 2019-20 to play a facilitating role in enhancing the pace of reforms, to boost its competencies. Since its introduction, GST has been simplified to benefit and understand stakeholders across the supply chain. Further simplification of the GST structure would help small business-services providers to accept and comprehend tax compliance as a way of doing business.

This would translate into the sector willingly coming under the tax ambit. As a result, there would be a significant rise in organised trade and business services organisations, down to the last -mile service provider. With the government’s focus on alleviating stress for the micro, small and medium enterprises (MSMEs), it could be a focus area in the upcoming Budget.

Bajaj Finserv with Business Loans up to Rs. 30 lakh makes access to credit easy, hassle-free and quick for the services sector. These loans can be availed in 24 hours by submitting just 2 documents.

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Conclusion

Although services-industry exponents believe that a focus on the sector is desirable, recurrent changes in setting GST slabs have challenged business service providers in the past two years. Thus, in addition to enhancing credit availability and simplifying GST, the services industry is eager for the lowering of dividend tax and 100% tax allowance on endeavours related to skill development in underdeveloped areas.

Business service providers are thus looking forward to budgetary announcements that will increase support to the sector and focus on critical areas of trust, taxation and better credit access.

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