The Kerala Budget – 2024

The Kerala State Budget - 2024
The Kerala Budget – 2024
KORAH AND KORAH, CHARTERED ACCOUNTANTS

The Kerala model of development, with its focus on achieving a high human development index and progressing in sustainable development goals, has played a crucial role in its upward trajectory

The finance minister declared that government departments will implement a strategy of destroying used cars and furniture. He went on, estimating revenue of ₹200 Crores.

  • Liquor prices to go up further   

Gallonage fee on Indian Made Foreign Liquor to be increased by ₹10 per litre. An additional revenue of ₹200 Crores expected.

  • Funds allocated for the NoRKA Department Project for Returned Emigrants Scheme
  1.  The NoRKA Department Project for Returned Emigrants project, which was established to assist returnees in earning a living, has been allocated ₹25 Crores.
  2. Additionally, ₹44 have been set aside for the restoration program that would be applied to these sections.
  • Further investments to boost tourism at 20 spots
  1. Steps will be adopted to attract investments of ₹50 Crores towards the tourism industry. 20 destinations will be developed for the purpose.
  2. In the first phase, Varkala, Kollam, Munroe Thuruth, Alappuzha, Munnar, Fort Kochi, Ponnani, Beypore, Kozhikode and Bekal have been identified for this  purpose.
  •         State to attract investments in higher education
  1. A new task force of Pravasi academic experts to be formed to improve the quality of higher education.
  2. Expert meet from Europe, US, Singapore and Middle East will be held in May and June. A higher education transformation initiative global conclave has also been planned.
  3. State will explore the feasibility of setting up foreign universities in Kerala.
  4. Each district will get one upgraded model school. A new grading system will be implemented to evaluate school quality, accompanied by the introduction of residential training programs for teachers.
  5. Furthermore, the General Education Department is set to provide training in artificial intelligence (AI) as part of the state’s proactive approach in  addressing challenges presented by AI and deepfake technology.
  • New Fishing Harbour at Pozhiyoor

A new fishing harbour to come up at Pozhiyoor in Thiruvananthapuram. INR 5 Crores allocated as a preliminary measure.

  • 5 Lakh Houses to be built by next year

INR 1132 Crores allocated for LIFE housing project. 3,71,931 houses have been completed after spending INR 17,104.84 Crores.

  • Safari Parks to be set-up in North Kerala D

Safari parks will be set up in North Kerala to boost tourism. Park will be set up in Nadukani in Taliparamba, Kannur, and a Tiger Safari park in Muthukad in  Kozhikode.

  • Malabar International Port to be developed

An allocation of INR 9.65 Crores have been made for developing the Malabar International Port that is bound to benefit north Kerala and south Karnataka.

  • KSRTC to get new BS6 Standard Buses

The state road transport gets an allocation of INR 128.54 Crores. It will get new BS6 standard buses.

  •  Boost for Startups
  1. INR 10 Crores earmarked for expanding KSUM’s (Kerala Startup Mission) LEAP Centres state-wise.
  2.  INR 6 Crores allocated for startup support initiatives under the “Innovation Acceleration Scheme”
  3.  INR 9 Crores provided as interest subvention for Chief Minister’s Special Assistance scheme for benefiting MSME’s and startups.
  4.  INR 20 Crores earmarked for establishing the Technology Innovation Zone in Kalamasseri KINFRA Hi-Tech Park.
  5.  ‘Unnathi’ – a new scheme to promote entrepreneurship among the ST community, providing financial assistance of INR 10 lakhs to startups.
  6.  KSUM to set up work pods in scenic Kerala locations, attracting global entrepreneurs with innovative ideas.
  • Other Proposals
  1. Sabarimala master plan gets INR 27 Crores.
  2. The MSME sector will receive INR 215 Crores.
  3. The cashew sector has been earmarked INR 53 Crores.
  4. Operation Breakthrough, a project to address flash floods in Kochi city during rains, has been allocated INR 10 Crores.
  5. The Zoological park in Thrissur will be developed to an international level with an allocation of INR 6 Crores.
  6. A Tiger safari park will be established at Muthukad in Kozhikode.
  7. INR 2 Crores has been set aside for the primary expenses of the Naadukani Safari park project, which is estimated to cost INR 300 Crores.
  8. INR 83 Crores have been allocated for soil protection, and INR 78 Crores has been set aside for the safe vegetable project.
  9. INR 40 Crores has been allocated for the Punergeham project, aimed at rehabilitating those living in the coastal areas facing severe erosion. This is double
    the amount allocated in the previous budget.
  10. The government claims to have created 2.36 lakh job opportunities in the agricultural sector.
  11. An investment of INR 200 Crores is envisaged for the Digital University.
  • Concluding Remarks
  1. Despite the Union government’s efforts to stifle Kerala’s economy, Finance Minister K.N. Balagopal asserts that the state’s economic resilience cannot be
    undermined.
  2. Balagopal likens Kerala’s economy to a sunrise, rapidly ascending due to advancements in science and technology.
  3. The Kerala model of development, with its focus on achieving a high human development index and progressing in sustainable development goals, has played a crucial role in this upward trajectory

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New Section 43B (h) of the Income Tax Act, – Boon or Bane ?

New Section 43B (h) of the Income Tax Act, – Boon or Bane ?

KORAH AND KORAH, CHARTERED ACCOUNTANTS

The Central Government through an amendment in the Income Tax Act, has sought to address the issue of delayed payments that the small-scale sector faces on its sale invoices. Will it adversely affect you?

 

A. Introduction

The Central Government through an amendment in the Income Tax Act, has sought to address the issue of delayed payments that the small-scale sector faces on its sale invoices. While the stated objective of this amendment is laudable, it could have an unintended detrimental effect on various industries & sectors, which would in turn negatively impact the small-scale sector in a major way due to a drop in sales orders for their products & services. To understand the issue, let’s first understand how Section 43B of the Income Tax Act,1961, works.

B. Understanding Section 43B

Section 43B lists certain expenditure like duties, cess, fees, employer’s contribution to PF, gratuity, interest on Bank loans and so on, which as per this Section, can be claimed as business expenditure for arriving at your income tax dues, only after the payment or remittance of such expenditure is done.

In case the business entity has not remitted or paid the amount as on the last day of the Financial Year viz 31 March, this Section gives time till the due date of filing the Tax Return applicable to the Business entity. For easy understanding, let’s take an example:

 

ABC Pvt Ltd has shown Rs 25 lakhs as Gratuity expenses during FY 23-24. However as on 31 March 2024, it has not made this payment. If it however, makes payment on or before 31 Oct 2024, which is the due date for filing the Income Tax Return of companies, then ABC Pvt Ltd would be able to claim the Gratuity as a legitimate business expense for arriving at the taxable profit for FY 2023-24.

C. Section 43B(h) relating to payments to Micro & Small Enterprises

An amendment which is creating heartburn among business owners has been done by inserting clause (h) in Section 43B.

Clause (h) states “any sum payable by the assessee to a micro or small enterprise beyond the time limit specified in section 15 of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 (27 of 2006),”

On a quick reading of this clause, it would appear that like the other expenditure items listed in the other clauses of Section 43B, these amounts payable to micro & small enterprises, will, if not paid before the year end, get the extended time for payment, till the due date of filing the Income Tax Return.

However on a further reading of the Section, we find that this benefit of extended time will not apply to this new clause (h). In other words, if there are any amounts remaining payable to micro & small enterprises as on 31 March & if they are not paid within the time limits specified in section 15 of the MSMED Act, then these amounts would be disallowed as business expenses, while computing the tax payable of your Business.

This could result in huge tax & interest liability for FY 2023-24, if your Business has large outstanding payables to micro & small enterprises as on 31 March 24.

D. Applicability & Time Limits specified in the MSMED Act, 2006

You may have seen from the above, that clause (h) refers to micro & small enterprises as defined under the MSMED Act.

Those entities with an investment in Plant & Machinery below INR 10 Crores & an Annual Turnover of INR 50 Crores or less, will come under this definition. Many of your Vendors would therefore, based on these thresholds, be ‘Micro & Small’ enterprises. One major exception to this would be ‘Traders’, since only Manufacturers & Service Providers are covered under the definition of ‘enterprise’ as per the MSMED Act.

 

Now, coming to time limits to make the payments. Well, this depends on whether you have an agreement with the micro/small vendor. If there is an agreement, then the time limit would be the time specified as per the Agreement However, in such cases it cannot exceed 45 days (even if the Agreement stipulates a longer credit period). In case there is no Agreement, then the time limit for settling invoices is as short as 15 days!

E. The Pain Points

Various Industry Associations have sent appeals & memoranda to the Prime Minister, Finance Minister & the Industries Minister, requesting re-consideration of the strict timelines for payment to Vendors, which will result in large amounts of expenses being disallowed, which in turn will mean huge Tax & interest liabilities.

Many large businesses who usually enjoy a 60-to-90-day credit period, have started cancelling orders that they had placed on micro & small enterprises during the recent past.

This in turn has had a huge negative impact on such small-scale vendors, who anticipating the usual stream of orders had made purchases of raw materials & consumables.

Hence an amendment that should have helped such vendors improve their liquidity, could actually result in plummeting sales, which in turn will drastically affect their liquidity position !

F. As a business person, what steps should you take now?

  1. First identify your vendors, who are Manufacturers or Service Providers.
  2. Then check with them, if they are Micro or Small enterprises as per the thresholds of investment in Plant & Machinery and Turnover stipulated in the MSMED Act.
  3. If yes, obtain a Declaration from them confirming their status.
  4. Thereafter, make sure you clear their outstanding balance before 31 March 2024 to the extent possible, especially older invoices which would cross the 45-day limit as on 31 March.

 

Alumni Acumen

Alumni Acumen

Corporate governance should drive organizational culture

(Mr Thomas Abraham, K&K Alumni and Partner E&Y)

Organizations are required to transact fairly with all stakeholders including its shareholders, creditors, customers, employees and regulators. Businesses are no longer viewed as providers of goods and services, but as organizations that have a vital role to play in solving humanity’s greatest challenges. Capital (including human capital) constantly shift from organizations that create value only for their shareholders to those that create value in the long term, across a broader group of stakeholders, including employees, consumers, society and shareholders. The history of corporate businesses is littered with organizations which have sought to deceive and profit in the short term, only to be destroyed by its own greed; ruining not only itself but also various stakeholders who have engaged with it. It has consistently been proven that organizations which have placed trust and fairness foremost in its dealings have prospered in the long run and created value for its stakeholders.

Underpinning trust and fairness are the entity’s corporate governance philosophy which sets the ethos and culture of the organization. While each member of the organization is responsible for embodying and reflecting the culture of the entity; the tone and direction is set by those charged with its governance; whether it is the Board of Directors, Trustees or even the Family Board depending on the form and legal structure of the organization.

The Board of Directors is the most common form of governance board, given the prevalent nature of the organization in the business world. In a complex world; it is important that this apex body of governance is staffed with the right level of competence; bringing together specialized knowledge and diversity to ensure that the organization is guided appropriately. It is even more important that Directors are people of integrity and ethics; with sufficient independence and authority to ensure that they do not function as a rubber stamp of powerful Chief Executive Officers. In several corporate scandals in the recent past; post-mortems have demonstrated that there was minimal understanding of the business by those tasked with its oversight.  Shareholder activist organizations and director trainings have sought to improve the general level of awareness of the Directors of their responsibilities. However, a review of director board compositions across several corporates still produces extensive examples of Directors who have been selected for their acquiescence rather than value to the entity.

In an age when the scale and breadth of information dissemination is instantaneous and global and when a tweet of 280 characters can destroy entities which have taken decades to be built; the importance of corporate governance and the cultural ethos of entities has never been more omnipotent and entities can only ignore this at their own peril. Stakeholders are now able to keep tabs on companies like never. Sustainability and ethical standing are as important as traditional measures of financial strength and market share; as factors that are indelibly tied into investment decision-making.

Regular reviews of the corporate governance framework and how the entity measures itself on the key principles of trust, transparency and accountability must be critically examined. Boards should constantly evaluate if they have ensured that they have effective oversight over the internal controls, performance measurement, accounting integrity and management of the external and internal risks on the organization. Directors should ensure incentive structures that encourage behaviors that fit in with the stated culture. Vital cultural metrics and insights should be collected, reported to and analyzed by the board. These should include various datapoints including social media, employee review sites, turnover rates and exit interview data.

Board members should continuously be questioning themselves on how:

  • The organization is generating and measuring long-term value for multiple stakeholders?
  • Are they re-evaluating executive remuneration to incentivize long-term value creation?
  • What opportunities are they overlooking to redefine the culture the business should aspire to?
  • Were they truly living their business’ culture and purpose? With hindsight what would they do differently?
  • Do they receive reporting on HR and cultural issues from the business? If yes, are they enough to facilitate strategic dialogues and decision-making?
Experts Speak

Experts Speak

The way forward

(Mr Stanley Kunjippalu, Senior Partner, Korah & Korah)

Since December 2019, all that we believed in has taken a tumble. The way forward is not very clear to many. It is indeed time for frank introspection on what is it that was perceived as our goals. What was our vision for the future? What was our mission in life? Both personal and professional. Having done that, we need to sit back and try to understand where is it that we, as a community went wrong. Could we have done what we did any differently? Would we have been in a situation different from that where we find ourselves today, if as a community, we had done things differently? Our mindset has to evolve to visualise and meet the challenges of the future. And for that to happen, it is incumbent on all of us as individuals, as a group, as a community, to creatively visualise what will be the best for all in terms of how we conduct ourselves, how we contribute to the group we belong to and how the groups come together to take the community forward.

We at Korah & Korah believe this to be true. We understand the need to ensure that all those who are with us will need to adapt to the new reality. That they will need to visualise the way forward in the “new environment that is evolving”. We believe that it is our responsibility to assist those connected to us in creating this vision for each of them.

Businesses need to think afresh as to what their “Vision – Mission – Goal” statements are in the changed environment. Some will adapt; many will need to change; a few will slowly die out. New business models will evolve, many a business plan will need to be recreated, visualised afresh and mindsets will have to change certainly. We at Korah & Korah, are therefore working towards ensuring new solutions to our clients, equipping our teams with the know-how required to meet the challenges of the future, to work in virtual environments, to support our clients and associates in their endeavour to meet the challenges of change.

The world around us has changed in the past six months. How it will evolve in the future is rather challenging to comprehend. But what is certain is that most definitely, our attitude to life will need to change. And change big time. Virtual reality is here to stay. The concept of working from home, spending quality time with family, the pattern of consumption of goods and services, purchasing habits are all in the change mode. We need to adapt to this reality and focus ourselves towards this way of life.

With the emphasis on efficiency of utilisation of resources becoming the rule of the day, with personal and family health and relationships taking pride of place for the good of the community, restoring the environment being of primary concern, it is indeed time that we come together to ensure that our lifestyles change for the benefit of all.

Come, let us together meet the challenges of the times ahead and work together, make our world a better place to be in.

Industry Trends

Industry Trends

The sleep solutions industry in India is going through a revolutionary transformation.

(Mr Mathew Chandy, MD & Chairman, Duroflex)

The sleep solutions industry in India is going through a revolutionary transformation. This transformation is led by increased consumer awareness about the importance of sleep, technological advancements in sleep products manufacturing and advanced research in sleep science. The mattress industry which forms a significant part of the sleep products industry is becoming more organised with the branded sector growing at 17% CAGR in the last 5 years. This an indication that consumers are understanding the importance sleep and its rich health benefits and are seeking out research backed, high quality sleep products from trusted brands. This is a very exciting time to be part of this burgeoning industry.

Duroflex is India’s leading and the fastest growing sleep solutions company with over 5 decades of expertise. Today we have a national footprint, cutting edge products, many exclusive technologies and fully backward integrated manufacturing facilities making it India’s fastest growing mattress brand.

Duroflex, as a brand, is well known for quality, innovation & comfort. We design mattresses based on consumer needs and have perfected the art of manufacturing Hybrid Mattresses with Spring, Rubberized Coir and Foam. We also manufacture accessories like Pillows, Bed Sheets, Mattress Protectors and other soft furnishing products, using good quality raw materials and state-of-the-art machines. We have been known for our industry-first innovations and that has helped us be flag bearers of the latest in sleep technology. Putting consumer needs first, we were first in the category to put forward a portfolio of products based on their needs rather than input material. Our three signature mattress ranges include Duropedic, Energise and Natural Living, all designed to address customer needs.  Duropedic is also India’s only certified orthopaedic mattress range.

Duroflex is also the first mattress company to be ISO 9001 certified. Our stringent quality controls, adaptation of the latest technology and constant effort in research & development has enabled the brand to export its products to various international markets.

As an ever-growing and leading brand, one of key to our success has been the support we get from our trustworthy and expert partners. We have been closely associated with Korah & Korah for many decades. Their acumen and expertise have been instrumental helping us grow from strength to strength.