Contributed by CA Bimal Jain
Ms. Nirmala Sitharaman today presented the full budget of 1st Year of 2nd term of Modi Government amid subdued economic growth and challenging fiscal situation. Taking into consideration, the need of time, with a vision to become $5 trillion economy by 2025, various sectors including social sectors were generously rewarded in this Budget.
Inter-alia few areas like Make in India, Blue Economy, water management, clean rivers, space programmes, self-sufficiency and export of food grains, pulses, oilseeds, fruits etc., healthy society with the help of Ayushman Bharat, well-nourished women & children, safety of citizens etc., were in the limelight of Budget.
During the Budget 2019 speech, Ms. Nirmala Sitharaman quoted Chankaya Niti Sutra and said “Karya purusha karena lakshyam sampadyate” which means, “with determined human efforts, the task will surely be completed.”
Lauding the efforts of GST, Ms. Sitharaman said that, “GST witnessed certain teething problems in initial phase which was natural considering the scale of the reform. However, the Council, Centre and States proactively worked to resolve these issues. GST rates have also been reduced significantly, where relief of about 92,000 crore per year has been given.”
On the Customs side however, few changes were made which range from securing our borders, achieving higher domestic value addition through make in India, reducing import dependence, protection to MSME sector, promoting clean energy, curbing non-essential imports, and correcting inversions. In order to provide domestic industry a level playing field, basic customs duty is being increased on items such as cashew kernels, PVC, Vinyl flooring, tiles, metal fittings, mountings for furniture, auto parts, certain kinds of synthetic rubbers, marble slabs, optical fibre cable, CCTV camera, IP camera, digital and network video recorders etc. Rates of Special Additional Excise duty and Road and Infrastructure Cess each were proposed to be increased by one rupee a litre on petrol and diesel.
In Nutshell, Union Budget, 2019 kept its focus mainly on investment in infrastructure, industrial development, Growth and Macro-Economic stability.
Rural Economy/ Agriculture and Fisheries
- Govt to invest widely in agriculture infrastructure
- Every single rural family, except those who are unwilling to take the connection will have an electricity and a clean cooking facility
- Support private entrepreneurship in value addition in agriculture
- Proposes Pradhan Mantri Matsya Sampada Yojana to address critical infrastructure gap in fisheries sector
- Support private entrepreneurships in driving value-addition to farmers’ produce from the field and for those from allied activities, like Bamboo and timber from the hedges and for generating renewable energy
- Government to introduce new education policy to transform India’s higher education system to one of the global best education systems
- Propose to set up a National Research Foundation (“NRF”) to fund, coordinate and to promote research in the country
- A draft legislation for higher education commission of India would be presented in the year ahead
- Proposes ‘Study in India’ programme to attract foreign students in our higher educational institutions
- National Sports Education Board to be set up under ‘Khelo India scheme’
- Allocate Rs 400 crore for ‘World-class institutions’ in FY2019-20
- Use of Public-Private Partnership to unleash faster development and completion of tracks, rolling stock manufacturing and delivery of passenger freight services
- Railways to be encouraged to invest more in suburban rail network via special purpose vehicles (SPVs) and enhance metro rail network through public-private partnerships
- Railway station modernisation programme will be launched this year.
- To extend the pension benefit to about three crore retail traders & small shopkeepers whose annual turnover is less than 1.5 crore under a new Scheme namely Pradhan Mantri Karam Yogi Maandhan Scheme.
- No scrutiny in respect of valuation of share premium shall be made for startups, who alonwith it’s investor provide requisite details in returns.
- Centre will create a payment platform for MSMEs for payment of bills and payment thereof
- Proposes to expand the ‘Women Self Help Group (“SHG”)’ interest subvention programme to all districts. Every verified women SHG member having a Jan Dhan Bank Account, an overdraft of 5,000 shall be allowed. One woman in every SHG will also be made eligible for a loan up to 1 lakh under the MUDRA Scheme.
- Bharatmala phase 2 to be launched to help develop state road networks.
- To enter into aircraft financing and leasing activities from Indian shores for development of a self-reliant aviation industry, creating aspirational jobs in aviation finance.
- Jal Marg Vikas project and Sagarmala initiatives: improving logistics, reducing transportation cost and increasing competitiveness.
- Govt to streamline multiple labour laws into a set of four labour codes.
- To focus on training new age skills like AI, robotics, 3D printing.
Boost in Investment
- To implement enabling measures to boost International Financial Service Centres (IFSCs)
- To set up a Credit Guarantee Enhancement Corporation
- To liberalise FDI in aviation, media, animation and insurance intermediaries
- To initiate steps for electronic fund-raising programme for listing of social enterprises, voluntary organisations
- Considering whether govt holding can go below 51 percent in certain CPSEs on case-to-case basis
- To hike statutory limits for foreign investments in some companies
- Expert committee to be set up to make recommendations on infrastructure finance
- Asks SEBI to evaluate hiking minimum public shareholding to 25 percent from 35 percent
- Proposes rationalising and streamlining of KYC norms for Foreign Portfolio Investors (“FPIs”) to make it investor-friendly
- NRI portfolio route to be merged with FPI for seamless investment in stock markets
- Credit Guarantee Enhancement Corporation will be set up in 2019-20, action plan to deepen markets for long-term bonds with specific focus on infra sector to be put in place
- Will take up measures to make RBI and SEBI depositories inter-operable
- To allow FPIs/NRIs to subscribe to listed debt papers of REITs and InvITs
- To bring ETFs in line with equity-linked savings schemes of mutual funds to encourage retail investors
- Public sector banks to get Rs 70,000 crore capital to boost credit
- To allow FIIs and FPIs investment in debt securities issued by NBFCs
- Empower accountholders to remedy the current situation in which they do not have control over deposit of cash by others in their accounts
- Requirement of Debenture Reservation Reserve to be done away with for NBFCs
Highlights of changes in Indirect Tax
With objective of securing boarders achieving higher domestic value addition through make in India, reducing import dependence, protection to MSME sector, promoting clean energy, curbing non-essential imports, and correcting inversions, following major amendments were proposed:
- increase the effective rate of Road and Infrastructure cess, as additional duty of customs, on petrol and diesel.
- exempt specified defense equipment and their parts from Basic Customs Duty for a period of 5 years
- amendment made to increase the effective rate of Basic Customs Duty on petroleum crude
- reduce the export duty on EI tanned leather and Hides, skins and leathers, tanned and untanned, all sorts.
- Increase the effective rate of Road and Infrastructure Cess as additional duty of excise on Petrol and Diesel.
- Seeks to increase the effective rate of Special Additional Excise Duty on Petrol and Diesel.
- Seeks to exempt crude petroleum oil produced in specified oil fields under production sharing contracts or in the exploration blocks offered under the New Exploration Licensing Policy (NELP) through international competitive bidding.
Major Amendments in Direct Tax
Direct tax amendment proposals were mainly focused to stimulate growth, promoting digital economy, incentivise affordable housing, simplified tax administration, encouraging start-ups by releasing entrepreneurial spirits and bringing-in greater transparency. Following were major proposed amendments in direct tax:
- Lower rate of 25% corporate tax will apply on companies with up to Rs 400 crore turnover, as against 250 crore. It will cover 99.3 percent of corporate India.
- Propose to enhance surcharge on individuals having taxable income from 2 crore to 5 crore and 5 crore and above so that effective tax rates for these two categories will increase by around 3% and 7% respectively.
- Rs 1.5 lakh income tax deduction on Electric Vehicles loans
- To make the filing of Income Tax Returns (“ITRs”) easy, pre-filled ITRs would be made available by integrating information collected from Banks, Stock exchanges, mutual funds, etc.
- TDS @2% is proposed to be levied on cash withdrawals exceeding 1 Cr.