Budget 2022 which seeks to lay the blueprint for the next 25 years for growth for India has been widely recognized by the business community as a growth and infrastructure-focused budget that will put the country on the right trajectory. In terms of performance, the government has done well in collecting tax revenues, keeping spending tight, and is now taking steps towards long-term fiscal stability. The key areas of attention are future income and employment-generating capex. Rs 317,643 crore will be allocated to grants-in-aid, including MNREGA.

ETILC hosted an exclusive post-budget analysis session attended by over 70 CEOs engaging with experts from KPMG in India.

“This budget has restressed the Government’s policy of ‘Atmanirbhar bharat’ promoting make in India and reducing import dependence, especially in defence sector with a mandatory percentage on domestic procurement. The proposal on phasing out project import will certainly benefit Atmanirbhar Bharat – however this may also adversely impact projects in the pipeline. There seems to be detailed changes in the Customs duty rates which also work in the favour of Atmanirbhar Bharat, this will need to be examined in specifics to see the larger impact. Overall, the budget announcements focused on economic revival, development of infrastructure paving way for stability and growth.”
Rajeev Dimri, Partner and National Head of Tax, KPMG in India

The Key Numbers

As far as expenditure is concerned, the government proposes to spend Rs 39,44,909 crore in 2022-23, which is 4.6% higher than the updated estimate of 2021-22. The receipts (excluding borrowings) in 2022-23 are estimated to be Rs 22,83,713 crore, an increase of 4.8% over the revised estimate of 2021-22. The expectation from tax collections is higher than last year, which is expected to come in from direct taxes, both on personal and corporate income.

The FM has estimated GDP growth of 9.27% which is among the highest in the world’s large economies. The nominal GDP growth rate has been estimated at 11.1%.

Revenue deficit in 2022-23 is estimated at 3.8% of GDP. The fiscal deficit in 2022-23 is targeted at 6.4% of GDP, which is lower than last year. And Interest expenditure at Rs 9,40,651 crore is estimated to be 43% of revenue receipts.

The budget has not relied on EBR (Extra Budgetary Resources) or loans from the National Small Savings Fund. As far as ministry allocation is concerned the highest percentage-wise increase is seen for the Ministry of Communications, Ministry of Road Transport and Highways, and Ministry of Jal Shakti.

Industry Impact

Banking: There is a proposal to set up 75 Digital Banking Units in 75 districts by Scheduled Commercial Banks. The other significant announcements for this sector are the increased allocations for capital expenditure and the extension of ECLGS (Emergency Credit Line Guarantee Scheme)

Agriculture: Technology enablement in agriculture and farming sectors due to Kisan drones will aid various activities like crop assessment, spraying, and maintenance of land records. There is a focus on long-term sustainable growth and continuity.

Auto: The EV segment will benefit from the announcements. The battery-swapping announcement is a welcome one. There are also plans for EV penetration in public transport and creating special mobility zones for EVs.


Real-Estate: Announcement of investments providing clean drinking water and access to the housing via PM Awas Yojana were positive. The Rs. 48,00 crore allocation for rural and urban schemes will give a thrust to affordable housing.

Infrastructure: The replacement of the SEZ Act with the new legislation will help make states partners in creating development hubs. Apart from the large capex investments, the reforms in customs administration will aid SEZs in withstanding disruptions in the global supply chain.

Education: As per the budget, allotted spending for education stands at Rs 69,907.23 crore, of which Rs 59,819.37 crore comes from the Department of School Education and Literacy (DoSE&L) of the Union Ministry of Education (MoE). Also, there was a proposal to increase expenditure on children’s education and development in absolute terms. But there was a drop in the share as a percentage of the overall budget. On digital developments in the sector, there was welcome news.

“With hybrid learning being the future of education, the Budget has advanced the vision of digitizing education, with the formation of a Digital University, regional e-content delivery, and a personalized learning experience accessible anytime, anywhere. A great step in expanding the reach of education,” says Vijay TS, MD, Chegg India

Direct Tax

In this area, the government’s attention is on promoting investments and reducing litigation. A welcome move for manufacturing firms is that the 15% corporate tax rate for manufacturing under Section 115BAB got extended by one year to 31 March 2024. A positive announcement for startups is that the last for the incorporation of eligible start-ups for claiming deduction under section 80-IAC extended by one year to 31 March 2023. Surcharge on all long-term capital gains and AOPs to be reduced from 37% to 15%. One amendment that companies could find challenging is that as far as dividend from foreign companies goes, the concessional rate of 15% is to be phased out from FY2022-23.

Indirect Tax – Customs Proposals

Under Atmanirbhar Bharat, a PMP announced for boosting domestic manufacturing of smart devices (smart watches, smart hearable devices, and smart meters). Also, Costumes Duty exemptions on capital goods being gradually withdrawn. Concessional rates for project imports will be phased out, and the duty rate standardized to 7.5%. An announcement that has come in the are of dispute resolutions, where advance rulings are to valid for 3 years or till there is a change in law or facts.

Member Q&A

Dinesh Aggarwal, Joint MD, Panasonic Life Solutions India: While energy savings has been given infrastructure status, is there anything to look forward to from a tax point of view? Are there any SOPs for smart metering?

Expert Panel: For the first part of the question, nothing specific from a direct or indirect perspective at least at this point. Smart metering is part of the category of wearable devices or hearable devices. The parts of the smart meter will have a concession. If you are importing a finished product, the duty is 20-25%. But if you are importing parts of it, the duty could be 0-5% this year and in a phased manner it will go up. So this category is getting an incentive, if you import parts and use local manufacturing, you get a duty arbitrage.

Ravi Raghavan, MD, Bharat Fritz Werner: Is the 7.5% duty for all capital goods? or for goods that are manufactured in India?

Expert Panel: If I am importing under project import as per the scheme, for all items of plant, machinery, and equipment, currently I am eligible for 2.5-5% depending on what type of project I have. Those concessional rates will be taken up to 7.5% which is the general rate applicable for capital goods by and large today. Thus, the concession is being removed. However, the facilitation measure to classify all separate items under plant, machinery, and equipment under one category – which helps streamline the customs process will continue. However, the additional benefits of setting up a plant will no longer be available starting Apr 30, 2022.

Sunil Sethi, Executive Chairman, Modenik Lifestyle: The government had proposed to increase GST to 12 % from 5% on certain textile industry products but this decision was deferred. Is any indication of this being implemented in March or April 2022?

Expert Panel: This will be a GST council decision and not a budget decision.

JS Gavankar, MD, Safran Helicopter Engines(India): The RBI’s digital currency RDC, Is it not the same as digital money (without blockchain technology) since the Sovereign is backing it? What is the real purpose of launching it?

Expert Panel: On cryptocurrencies, the government has been tracking these transactions since 2015. The tax authorities have found there have been a lot of different ways in which people have been accounting for income made from investment in these. Some have classified it as ‘other income’, some have classified it as ‘business income’ and some have not disclosed it at all. For standardization purposes and to provide clarity to both taxpayers and their internal departments, income from VDA will be taxed at 30%.