FIPI Post Budget Analysis 2024


FIPI Post Budget Analysis 2024

The Interim Budget for the year 2024-25 was announced by the Hon’ble Finance Minister of India Smt. Nirmala Sitharaman on 1 February, 2024. Keeping up with FIPI’s long tradition, FIPI organized its flagship FIPI Post Budget Analysis 2024 session on 2nd February with EY as the knowledge partner. The Budget session was attended by nearly 100 delegates (virtually) and was appreciated in terms of content by everyone. The objective of the session was to analyze the recently presented Interim Budget and weigh the impact of the Budget on the Economy and India’s oil and gas industry. The session was attended by many senior dignitaries from across the industry.

In his opening remarks, Mr. Vivekanand, Director (Finance, Taxation and Legal), FIPI, welcomed all the panelists during the budget analysis session organized by FIPI. He said that the Budget presented by the honorable Finance Minister had laid special focus on wide spectrum of energy including green energy areas such as bioenergy; incentives provided for solar rooftop, EVs; bio manufacturing and bio foundry and allocation of funds for research related work. Further, he highlighted that India is on a growth trajectory as India’s GDP is projected to grow in real terms by 7.3% in 2023-24. With robust economic growth, he mentioned that average monthly gross collection of GST amounted to Rs. 1.66 lakh crores. He also said that the growth of the economy is supported by higher capex on infrastructure expansion with an infrastructure budget allocation of Rs. 11, 11,111 crores.

Setting the context for the session, Ms. Neetu Vinayek, Partner, EY, provided a backdrop to the Interim Budget 2024 by highlighting India as one of the fastest growing economies in the world despite the global headwinds faced during the current year. With India’s real GDP growth estimated at 7.3% for FY 2024, emphasis on PLI incentive schemes have made Make in India a significant reform within Indian economy. She further highlighted that the tax reforms implemented by the Government have led to complete digitization of tax compliance as the prevalence of triangulation of GST, TDS and TCS have enhanced formalization. She mentioned some of the impact of tax reform measures including -widening of tax base to 32% increase in GST filers in comparison to April 2018 and an 123% increase in individual income tax filers in comparison to FY 2014 data. Another significant outcome has been - 80% of the tax refunds being currently issued within 30 days of filing last tax return, showing significant acceleration of the tax refund process.

She further said that for Indian economy to achieve the target of becoming 7 trillion USD economy by 2030, several challenges need to be addressed such as – evolution of AI and its impact on the employment, managing energy security with energy transition, easing up compliances for the MSME sector, ensuring gender balance in the labor workforce and impact of geopolitical fragmentation on India’s trade and growth.

She then highlighted the policy announcements that have an overall impact on the economy including the infrastructure sector. To achieve the targeted economic growth, the Government has increased the capital outlay by 11% to Rs. 11 lakh crores (~3.4% of GDP) towards various sectors. There is an increased focus on transportation through the Gati Shakti Programme where the 3- railway corridor programmes for multi-modal connectivity which will help in achieving efficiency along with lower logistic cost. As far as policy announcements in the energy sector is concerned, she said that 1 crore households have been mandated to obtain up to 300 units of free electricity every month under the rooftop solarization.  Secondly, viability gap funding has been announced for the offshore wind energy platform with an initial capacity of 1 GW; which will provide the necessary impetus to the offshore wind industry.

Further, to reduce the dependence on crude oil imports, Government has mandated setting up a capacity of 100 MT of coal gasification and liquefaction by 2030. In field of CBG, budget allocation of Rs. 150 crores have been announced towards collection of raw material such that blending of CBG in CNG and PNG can take place. To strengthen the EV ecosystem, Government has made additional allocation of Rs. 2500 crore under the FAME policy and an allocation of Rs. 3500 crores under the PLI scheme to ensure that the EV manufacturing and charging infrastructure are in place. Further, she said that regarding R&D in the sunrise sector (including energy sector), Rs. 1 lakh crore corpus for 50-year interest free loan is a welcome step which will boost innovation and use of modern technology.

Speaking about direct taxes, Mr. Hiten Sutar, EY talked about the tax incentives available to start ups and MSMEs who are important part of our ecosystem as service and technology providers. He said that the Section 80-IAC which was a 3-year tax holiday for startups out of their 10 years of incorporation, was expiring on 31st March 2024, have now been extended to 31st March, 2025. Further, the units in Gift City, which were into leasing of aircraft and ships including the oil and gas vessels, were eligible for incentives such as exemption of capital gain as well the royalty/interest payment made to the non-residents - these sunset clauses have been extended up to 31st March, 2025. He also said that the sunset date for notification of Faceless scheme for undertaking transfer pricing assessment and dispute resolution proceedings have been extended from 31st March 2024 to 31st March 2025.

Ms. Uma Iyer, Partner, EY highlighted the provisions made under the indirect tax. She highlighted that there were no rate changes proposed under Customs and GST. Further, she highlighted that there was a change made in the law pertaining to input service distributor (ISD) wherein ISD registration was made mandatory to be obtained to avail and transfer input tax credit (ITC) on third party/self – Reverse Change Mechanism (RCM) invoices in respect of services received for or on behalf of other registrations.

The presentation on budget was followed by ‘Panel Discussion on Interim Budget 2024-25, focusing on the outcome for oil and gas companies in the interim budget. The panel comprised of Shri A K Tiwari, Member, PNGRB; Shri. Hitesh Vaid, CFO, Cairn Oil & Gas, Vedanta Ltd and Shri Vinod Tahiliani, CFO, RBML.  The panel discussion was moderated by Ms. Neetu Vinayek, Partner, EY.

During the discussion, the panelists highlighted the key positive outcomes of the interim budget in terms of increased focus on renewables and bio-energy. The panelist welcome the incentives provided to new sources of energy such as facilitating rooftop solar and large-scale adoption of rooftop solar across cities, providing financial assistance in procuring the machinery for biomass aggregation, assistance of VGF for offshore wind energy, fund allocation towards R&D in the sunrise sectors etc.  Further, to ensure green mobility, the government allocation of funds under the FAME policy to develop a robust EV ecosystem within India, was also considered a positive step towards energy sustainability.

The panel had a consensus on inclusion of all petroleum products including natural gas under GST to avoid losing significantly in terms of input tax credits due to its non-inclusion under GST.  Further, they highlighted that the necessary gas infrastructure is being laid down in the North- eastern region through the 12th CGD bidding round so that the Govt’s vision of India becoming a gas-based economy can be achieved. The panelists believed that due to intermittency of renewables, combining solar/wind with natural gas can help in encouraging and defining the role of natural gas in the economy.

Ms. Uma Iyer and Ms. Neetu Vinayek from EY conducted the Q&A session and provided their views and opinions on various queries posted by participants.

In the concluding remarks, FIPI thanked all the panelists and the subject matter experts for providing their insights on the Interim Budget 2024-25 and its implications on the oil & gas industry and the economy.