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Continuing the focus on the ‘Make in India’ initiative, Finance Minister Nirmala Sitharaman, in the Union Budget 2023-24, made a slew of announcements that could benefit the retail sector. Sitharaman announced a rejig in custom duties on various commodities and products.

The FM has announced a reduction in the basic customs duty rate, other than for textile & agriculture, from 21 percent to 13 percent. This is aimed at making the country a manufacturing hub and an investment destination.

“As a result, there will be minor changes in the basic custom duties, cesses and surcharges on some items, including toys, bicycles, and automobiles,” Sitharaman said.

In a bid to boost the demand and penetration of smartphones, the FM announced relief in customs duty on import of certain parts and inputs of smartphones such as camera lens. Custom duty exemptions will also be provided for the manufacturing of lithium-ion batteries for another year. This will help drive the broadening of the local component ecosystem and increase domestic value-addition.

Focus on local manufacturing

Experts believe that this move is targeted at making India a manufacturing hub and reduce dependency on imports of various electronic parts. But this may not necessarily translate into significant reduction in retail prices of smartphones.

Tarun Pathak, Research Director, Counterpoint Research, highlighted that the customs duty cuts will help localise manufacturing, but whether it will bring down the cost for consumers will depend on the original equipment manufacturers (OEMs).

“It is to be noted that the government has reduced the duty on camera lens, which is a part of the overall camera module. The lens, where the duty has been cut, accounts for only 1-1.5 percent of the overall manufacturing cost. However, this move will make smartphone manufacturing further localised in India. I must highlight that only 33 percent of the wearables (smartwatches) category are being locally assembled. So, there is still a lot of room for more to be done,” he explained.

Meanwhile, in the consumer durables category, the FM announced the reduction of basic customs duty on open cells of TV panels to 2.5 percent. However, industry executives believe that this move is also aimed at promoting local manufacturing. It will have an implication on retail prices only in the long term.

“There are not many players making open cells of TV panels in the country. It could benefit customers only in the long run once manufacturing starts here,” said an industry executive on condition of anonymity.

AI to create cross-industry opportunities

The retail industry seems excited about the government’s focus on emerging technologies, such as artificial intelligence (AI). The FM has announced that India will set up three centres of excellence (COE) for AI at top educational institutions to develop cutting-edge AI solutions in the country.

Satish NS, President, Haier India, told Moneycontrol that with the advent of AI in the consumer appliances and electronics segment, it has opened a wide array of possibilities, given the massive size of the electronics market.

Biswapriya Bhattacharjee, Director – B2B Technology, Insights Division, Kantar, noted that the setting up of ‘Make AI in India’, along with 100 labs for 5G services, will open up significant opportunities for the digital devices space. “Productisation of these solutions will also open up global opportunities for monetisation of solutions that are created in India,” he added.

Amongst other announcements, the FM said that to rectify the inversion of duty structure and encourage the manufacture of electric kitchen chimneys, the import duty is being raised from 7.5 percent to 15 percent, while that on the chimneys' heat coil is being reduced from 20 percent to 15 percent. FM Sitharaman also announced increase in taxes on cigarettes by 16 percent making them costlier for consumers. Diamond, gold and silver utensils got costlier.

Ankur Bisen, Senior Partner & Head - Retail, Consumer Products and Food, Technopak Advisors, thinks that these announcements need to be looked at from a wider lens as they are not necessarily being made to bring down the retail cost of products.

“These announcements are aimed at creating incentives for manufacturing to move into India. The manufactured cost depends on multiple market-related factors, which eventually decide the retail prices. Also, it depends on the consumer brand, whether the saving will be included in its profit or passed on to consumers as better price,” he noted.

Union Budget 2023 also rejigged personal income tax by increasing the rebate limit. Experts say this will mean more money in the hands of the people. However, the tax exemptions are a positive development for the lower end of consumption, as the lower and middle class will have more disposable income. This will benefit companies that operate in the value segment across categories, such as fashion & lifestyle, food and technology.

Budget 2023: Retail sector to benefit from push towards local manufacturing

The last few months have been all about recognition and regulation for the gaming and esports industry in India. The 2023 Union Budget continued the recognition feat for the industry. The announcement of removing the minimum threshold of Rs 10000 for TDS on online gaming and the introduction of a new section 194BA in direct taxes provides much needed clarity on taxability in the space.

"The inclusion of a specific provision for online gaming under Sec 194B of the Income Tax Act is not only progressive but also a win-win scenario for both the government and the industry,” says Siddharth Sharma, VP Business Strategy, Head Digital Works.

According to Sharma, the move shows how the government has applied itself to solve for the needs of both the gamers and the industry. He says deducting TDS on net winnings at the end of a financial year will catalyze the growth of this sector even further.

Roland Landers, CEO of All India Gaming Federation points out another direct advantage of this new section in direct taxes. “The Finance Bill carves out the distinction between betting and gambling activities and online games, through introducing a new section 194BA which taxes a user’s net winnings from online games at the end of the financial year,” he says.

Stakeholders, however, are awaiting further clarifications and guidelines from the Central Board of Direct Taxes on this.

More good news as mobile production and 5G get boost 

Moving on from gaming, Lokesh Suji, Director of Esports Federation of India & Vice President of the Asian Esports Federation, says the esports community is awaiting clarity on the taxability for Esports, we are hopeful that the decisions will be in favour of the community and impact it positively.

Even though the budget didn’t specifically bring out the matters of concern related to Animation, Visual Effects, Gaming and Comic (AVGC) sector, stakeholders in the esports space are glad that attention is given to bring in development that would positively impact the sector. However, the increased mobile phone production and the announcement of focus on 5G based applications are good news for esports brands.

“The increased mobile phone production in India will directly impact the growing interest in mobile gaming. We are also looking forward to the progress of 100 labs for apps development using 5G services that will be set up in engineering institutions. Hopefully this could be the beginning of the 5G era in India,” said Rohit N Jagasia, Founder and CEO of Revenant Esports.

Interdependence of gaming ecosystem and mobile industry

As per a recent report from the Internet and Mobile Association of India, the number of mobile gamers in India is projected to increase to 650 million by 2025. Naturally the community is pleased with the budget.

Animesh Agarwal, Founder & CEO, 8bit Creatives explains the interdependence of the gaming ecosystem and the mobile industry.

“Developer dedication to expanding mobile gaming in India and the advent of different employment opportunities through mobile gaming have all contributed to an increase in the number of Indians adopting mobile gaming. This has also contributed to the growth of the mobile device sector, as professional gamers frequently seek to upgrade their devices as they progress in their career,” he says.

“The commitment of the mobile device companies towards strengthening their presence in the gaming community through dedicated efforts and investments shows in the numerous gaming-specific launches from brands like devices such as One Plus, ASUS, Samsung and others. It will be fascinating to observe the next growth surge of gaming in India and how it contributes to and parallels the rise of the electronics industry,” Agarwal adds.

Budget 2023 impact

While the increased focus on mobile phone production and 5G will directly impact the industry, some other overall touchpoints of the budget will also impact the gaming and esports industry.

Simplifying the KYC system and process for instance will further help in realizing digital India and will enable a seamless experience for consumers. 

Gaurav Kapoor, Chief Finance Officer, Baazi Games says, “The Make in India vision will get aboost with a focus on 'Make AI in India and Make AI work for India', online gaming companies can develop new AI-based advancements that can provide a first-of-its-kind experience to users.”

The focus on startups is also a plus for the space.

"India is now the third largest ecosystem for start-ups globally, and ranks second in innovation quality among middle-income countries," says Rahul Tewari, Chief Financial Officer, Games24x7. Tewari adds, "With global attention towards gaming and the advent of new technology in the sector, India can capitalize on its burgeoning domestic gaming industry to realize Hon'ble PM Shri Narendra Modi's vision of making India a global gaming innovation hub." 

Union Budget 2023: More on section 194BA

194BA. (1) Notwithstanding anything contained in any other provisions of this Act, any person responsible for paying to any person any income by way of winnings from any online game during the financial year shall deduct income-tax on the net winnings in his user account, computed in the manner as may be prescribed, at the end of the financial year at the rates in force:

 Provided that in a case where there is a withdrawal from user account during the financial year, the income-tax shall be deducted at the time of such withdrawal on the net winnings comprised in such withdrawal, as well as on the remaining amount of net winnings in the user account, computed in the manner as may be prescribed, at the end of the financial year.

 (2) In a case where the net winnings are wholly in kind or partly in cash, and partly in kind but the part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of the net winnings, the person responsible for paying shall, before releasing the winnings, ensure that tax has been paid in respect of the net winnings.

(3) If any difficulty arises in giving effect to the provisions of this section, the Board may, with the previous approval of the Central Government, issue guidelines for the purposes of removing the difficulty.

(4) Every guideline issued by the Board under sub-section (3) shall, as soon as may be after it is issued, be laid before each House of Parliament, and shall be binding on the income tax authorities and on the person liable to deduct income-tax.

Rates for deduction of tax at source

1.On income by way of winnings from lotteries, puzzles, card games and other games of any sort (other than winnings from online games)- 30 per cent

2. On income by way of winnings from horse races- 30 percent

3. On income by way of winnings from online games- 30 percent

Budget 2023: Gaming community applauds introduction of section 194BA for winnings from online games

The Union Budget 2023 rejigged the personal income tax by increasing the rebate limit, with experts saying it will put more money in the hands of the people. Experts, however, are divided on how far it will boost consumption.

Presenting the Budget 2023, Finance Minister Nirmala Sitharaman gave a rebate on tax on income earned up to Rs 7 lakh, up from Rs 5 lakh earlier under the new tax regime. The basic exemption limit in the regime has been raised to Rs 3 lakh, up from Rs 2.5 lakh earlier.

Slab rejig

The number of slabs under the new IT regime has now come down to five from six. For taxable income of up to Rs 3 lakh, there is no liability. For incomes between Rs 3-6 lakh, it is 5 percent. For taxable income between 6-9 lakh, it is 10 percent. For taxable income between 9-12 lakh, it will be 15 percent. For taxable income between 12-15 lakh, 20 percent and for those with income above Rs 15 lakh, 30 percent.

Sitharaman said an individual with an annual income of Rs 9 lakh will be required to pay only 5 percent of his or her income or Rs 45,000 from Rs 60,000, a reduction of 25 percent on what is paid now. Similarly, an individual with an income of Rs 15 lakh would be required to pay only Rs 1.5 lakh or 10 percent of his or her income, a reduction of 20 percent from the existing liability of Rs 1.8 lakh. 

More cash to spend

The extra cash in the hands of people will mean more spending on brands, travel, among others. The tax exemption is a positive development for the lower end of consumption as the lower and middle class will have more disposable income, said analysts.

"The increase in their (salaried class) spending capacity due to reduced tax burden will allow them to spend on products such as two-wheelers and consumer durables, that continue to be the lifelines of this digital economy,” Aalesh Avlani Founder at Credit Wise Capital.

“This will put more cash in the hands of individuals, which will be utilized in investments. The additional liquidity will help improve the economic scenario as well, as it will enhance overall spending. A huge impetus has been given to the youth to make strategic investments and insurance will also witness a huge boost. The money saved from tax rebates is expected to be invested into health and life insurance categories," said Aatur Thakkar, Co-Founder and Director at Alliance Insurance Brokers.

Consumption push

It’s a very high capex spending budget so this is the government’s way of putting money in the hands of the consumer to revive consumption, said Rajat Wahi, partner, Deloitte India.

"There continues to be a lot of focus on agriculture such as the building of horticulture crops, fisheries and also setting up cooperative schemes in these areas. There is a clear focus on enabling the farmers and improving farmer incomes to improve their well-being as it has a direct impact on rural consumption. Hopefully, these initiatives will go into driving rural purchases of autos, tractors and FMCG products," said Wahi.

It is a common’s man budget, he said. "This is a pro-growth and pro-development budget which will eventually help the aam aadmi (the common man) and the Indian economy."

On the other hand, Ankur Bisen, senior partner & head, Technopak Advisors, said that the Budget is a mixed bag because there is no direct connection to measures that can spur consumption on an immediate basis.

"The tax rates have been standardised, there are relaxations in tax slabs and the announcement on the exemption limits so one would think that it would put disposable income in the hands of the consumers. But then there is a 30 percent tax rate on the Rs 15 lakh and above income bracket and that includes a lot of consumers who are doing aspirational consumption."

But, he added, that at the value end of the segment, the tax exemption should give some respite and motivation as far as consumption is concerned.

Increasing the capital expenditure outlay will have a multiplier effect on consumption because it creates jobs for real estate, construction workers. "This will create consumption opportunities in the lower income group segments," said Bisen.

Budget 2023 is for the aam aadmi but will it spur consumption?

Finance Minister Nirmala Sitharaman on February 1 announced the reduction in the basic customs duty rate, other than textile & agriculture, from 21 percent to 13 percent.

“As a result, there will be minor changes in the basic custom duty duties, cesses & surcharges on some items including toys, bicycles, automobiles,” Sitharaman said.

In a bid to boost the demand and penetration of smartphones, the FM announced relief in customs duty on import of certain parts and inputs of smartphones such as camera lens. Custom duty exemptions will also be provided for the manufacturing of lithium-ion batteries for another year. This will help drive the broadening of the local component ecosystem and increase domestic value addition.

This will boost demand for smartphones, especially in the mid-price segment.

According to Counterpoint, the Indian smartphone market suffered reverses in 2022. Component shortages that hit the market at the start of the year were a significant contributing element. Since rising component prices and inflation resulted in higher retail prices, this sluggish demand was particularly noticeable in the entry and mid-level price bands. The current announcement is expected to boost demand and sales of smartphones.

TV sets may get cheaper

Meanwhile, bringing cheer to the consumer durable category, FM announced the reduction of basic customs duty on open cells of TV panels to 2.5 percent. To rectify the inversion of duty structure and encourage the manufacture of electric kitchen chimneys, the import duty is being raised from 7.5 percent to 15 percent, while that on the chimneys' heat coil is being reduced from 20 percent to 15 percent.

FM Sitharaman also announced to increase taxes on cigarettes by 16 percent making them costlier for consumers. Diamond, gold and silver utensils got costlier.

Budget 2023: FM announces reduction in customs duty; smartphones, TV sets to get cheaper

The Union Budget presentation by Finance Minister Nirmala Sitharaman went on for about one and a half hours before the parliament was adjourned. Here's a break-up of what the Budget 2023 holds for Gen Z.

Skill Digital India Platform - It enables demand-based formal skilling, linking with employers and facilitating access to entrepreneurship schemes.

Centres of excellence for artificial intelligence - Three centres for AI to be set up realising the vision of 'Make AI in India and Make AI Work in India'.

National Apprenticeship Promotion Scheme - To provide stipend support to 47 lakh youngsters in three years through Direct Benefit Transfer.

Pradhan Mantri Kaushal Vikas Yojana 4.0 - On-job training, industry partnership, and alignment of courses with needs of the industry.

The Finance minister also had an announcement for kids and adolescents during her Budget presentation. Nirmala Sitharaman declared the setting up of a national digital library for children and adolescents for facilitating the availability of quality books across the country.

"National digital library for children and adolescents will be set up for facilitating the availability of quality books across geographies, languages, genres and levels, and device agnostic accessibility," she said.

"States will be encouraged to set up libraries for them (children) at panchayat and ward levels and provide infrastructure for accessing the national digital library's sources."

Additionally, to build a culture of reading, and to make up for pandemic-time learning loss, the National Book Trust, the Children's Book Trust, and other sources would be encouraged to provide and replenish non-curricular titles in regional languages and in English to physical libraries, the minister added.

"Collaboration with NGOs that work in literacy will also be a part of this initiative," Nirmala Sitharaman said. "To inculcate financial literacy, financial sector regulators and organisations will be encouraged to provide age-appropriate reading material to these libraries."

Budget 2023: What's in it for Gen Z?

Hotel stocks moved higher as investors cheered Finance Minister Nirmala Sitharaman's push for the tourism industry in the Budget 2023.

Sitharaman emphasised on the huge scope for job creation and entrepreneurship in the tourism sector. "Promotion of tourism will be taken up on mission mode with the active participation of states' convergence of government programs and public-private partnership," Sitharaman said in her budget speech.

The announcement triggered strong buying within hotel stocks, lifting shares of EIH, Indian Hotels Company, EIH Associated Hotels, Thomas Cook (India), Taj GVK Hotels & Resorts, Lords Ishwar Hotels, Oriental Hotels and Lemon Tree Hotels 2-8 percent higher.

The push will likely support the recovery for hotel companies hit hard by the coronavirus pandemic.

Sitharaman also allocated the highest-ever capital outlay at Rs 2.4 lakh crore for the railways. The capital expenditure push for railways is also seen aiding sentiment for tourism-related stocks.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

BUDGET 2023