The 2022 budget announced by the Government of India has touched on various technology verticals and will affect how you interact with technology, access services online and pay taxes on virtual assets. There is now confirmation of the launch of a digital version of the rupee as currency, a tax structure for investments in virtual assets such as cryptocurrencies, confirmation of the 5G spectrum auction this year and impetus for electronics production in the country.
There has been a positive response from the industry, with the expectation that the proposals will lead to an impetus for local production as well as employment. “The initiatives aimed at stimulating innovation and manufacturing are a major impetus for helping the boom of the country’s electronics and telecom industry – helping to promote economic growth, creating jobs, “says a spokesperson for Xiaomi India, in a statement shared with HT.
“We are confident that the exemption from duties on parts of selected electronic items will further stimulate domestic electronics manufacturing under the PLI scheme,” said Alok Dubey, Chief Financial Officer, Acer India.
Digital Rupee rolls out in 2022
The announcement of the digital rupee confirms that India will now join the list of countries experimenting with digital currency. The Reserve Bank of India (RBI) will introduce a new digital rupee in the coming fiscal year. The Central Bank Digital Currency (CBDC) will be a legal tender, and on par with the rupee as we have known it in the paper version all along.
“The Central Bank Digital Money (CBDC) will help improve the digital economy by making currency management more efficient and less expensive,” said Kavitha Subramanian, co-founder, Upstox. The Minister of Finance said in the budget speech that the digital currency is more efficient and cheaper to manage.
How this will be taxed, transacted and any specific regulations are expected to be announced by RBI, in the coming months. “Introducing Central Bank Digital Currency (CBDC), the use of blockchain technology will affect digital transactions and hence their implementation process will be something to pay attention to,” says Madhusudan E, co-founder and CEO at KreditBee.
Last year, China became the first major economy to issue CBDC as part of a large-scale test. As of June, e-CNY (Digital Yuan) wallets in China clocked 24 million users. Transactions of 62 billion Yuan have been done since November 2021, according to Mu Changchun, head of the PBOC’s Digital Currency Institute. Countries including the United Kingdom and Japan have also begun discussions on introducing CBDCs.
5G is coming this year
It has been confirmed that 5G spectrum auctions will be held this year, allowing telecom companies including Bharti Airtel, Vi and Reliance Jio to soon roll out commercial 5G networks. The budget move confirmed that the spectrum auction will be conducted in 2022 to facilitate the rollout of 5G mobile services by 2022-2023 by private telecom providers.
“We are pleased to see the focus on improving digital connectivity and the announcement of the required spectrum auction in 2022 for the launch of 5G mobile services. The proposal to make progressive decisions in promoting affordable broadband and mobile services by facilitating PLI scheme for 5G equipment, laying glass fiber cables via PPP model under BharatNet project are welcome steps, “says Lt. Gen (retd) SP Kochhar, DG COAI, or the Cellular Operators Association of India.
A production-led design scheme will also be launched, to help build an ecosystem for 5G services. This will form part of the production-linked incentive scheme (PLI). “Design-driven initiatives for 5G under the PLI scheme and 5% of USOF for R & D purposes will strengthen the ‘Make in India’ initiative, and contribute to making India a global manufacturing hub,” says Nitin Bansal, managing director , India & Head Networks – Southeast Asia, Oceania and India by Ericsson.
Tax on Crypto Coins
Taxing on cryptocurrencies is something that has also been indicated in the past, and the 2022 budget has confirmed the intentions. The new cryptocurrency tax will cover all private cryptocurrencies such as Bitcoin and Ethereum, as well as stable currencies linked to the value of fiat currency (as Tether is linked to the US $).
Each transaction in digital virtual assets will have a flat tax rate of 30% – this will apply to short term and long term virtual assets. “The Government’s regulatory guidance on taxation promotes the mainstreaming excitement of this emerging asset class with more than $ 6bn worth of investment in India,” says Ashish Singhal, founder and CEO, CoinSwitch.
There were fears that the government could ban cryptocurrencies altogether, but the tax plans have confirmed that this is not the case. “With the announcement of taxes on cryptocurrencies, the Union Budget 2022 has indicated that instead of a blanket ban, regulation will be the way forward for cryptocurrencies and other virtual digital assets,” said Pritam Baruah, Dean-School of Law, BML Munjal University.
“The move to tax virtual digital assets gives the entire ecosystem, including investors and exchanges, transparency on the road ahead. 30% tax on virtual digital assets income, although high, is a positive step because it legitimizes crypto , “says Avinash Shekhar, CEO of ZebPay.
According to the Finance Bill, a virtual digital asset is any information or code or number or token (not Indian currency or foreign currency), created by cryptographic means or otherwise, by any name, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or acting as a store of value or a unit of account including the use in any financial transaction or investment, but not limited to investment scheme, and may be transferred, stored or traded electronically .
“It is disappointing to see that the government has decided that the revenue from the transfer of digital assets will be taxed at 30%, which seems to be too high,” said Malviya, president, Tezos India, a blockchain company.
“NFTs, cryptocurrencies and space for digital assets are already booming and have enormous potential for the economy in the near future,” he adds.
The budget also proposes to tax the recipient of all gifts of virtual assets, such as cryptocurrencies. Losses in these investments cannot be offset against other income. “Virtual digital asset investment is an indirect endorsement of cryptocurrencies, although it comes with a caveat, ie without compensation for loss of other income,” says Avinash Gupta, CEO and CEO – India, Dun & Bradstreet.
Boost to technical production
The budget 2022 gives an impetus to electronics factory in the country. The Minister of Finance says that tariffs for custom duties are calibrated to provide a graded tariff structure to facilitate domestic manufacturing – there is a specific focus on portable devices, audible devices and electronic smart meters.
There will also be mandatory concessions on parts used in the manufacture of chargers for mobile phones and camera lenses. “Concessions for the domestic manufacturing of high-growth electronic items such as parts of telephone chargers, transformers, wearables will provide the necessary impetus needed to upgrade the sector,” said Mandeep Manocha, co-founder and CEO, Cashify.
This would allow companies in India to produce locally, which would give a new impetus to the Government’s In India ‘initiative. The production of smartphones should also give phone makers some space in terms of pricing. India is one of the biggest smartphone brands in the world. In the space for wearables, Indian brands like Boat and Noise, to name a few, put in robust sales numbers for smartwatches, fitness bands and wireless earbuds.