Although devoid of sops for middle-class, finance minister Nirmala Sitharaman’s budget strives for ambitious growth; several proposals of particular interest to NE
New Delhi: A further push to infrastructure creation, encouragement to entrepreneurship and incentives to encourage wider adoption of electric mobility or electric vehicles (EV) were among the main highlights of Nirmala Sitharaman’s first budget as finance minister on Friday.
Unlike the Interim Budget presented in February this year that was claimed by many to be somewhat populist with an eye on the general elections, the Union Budget seeks to enhance foreign direct investment (FDI), including examining the possibility of increasing foreign participation in sectors such as aviation, animation, media and insurance.
“Our economy was at approximately $1.85 trillion when we formed the government in 2014. Within five years it has reached $2.7 trillion,” she told Parliament in her marathon speech, adding, “Hence, it is well within our capacity to reach the $5 trillion in the next few years,” Sitharaman said echoing Prime Minister Narendra Modi’s vision for the world’s sixth largest economy by 2024.
But that reiteration by the finance minister came at a time when the Economic Survey 2018-19 document released a day earlier emphasised synergising demand, jobs, exports and productivity to achieve and sustain 8% growth to reach that target. The economic growth rate for 2018-19 was under 7%.
Taxes and incentives
Although there was no relief for the middle-class in terms of revision in the current income tax slabs, additional surcharges were announced for the very wealthy. Tax rates for individuals having taxable income from ₹2 crore to ₹5 crore and ₹5 crore and above were increased by around 3% and 7%, respectively.
With PAN and Aadhaar card being made interchangeable, income tax payees not having a permanent account number (PAN) would be able to file their income tax returns by simply quoting their Aadhaar number.
Petrol and diesel became expensive after the finance minister increased both the special additional excise duty and road and the infrastructure cess by Rs 1 per litre on petrol and diesel. This would result in a Rs 2 per litre increase in petrol and diesel prices.
In a relief to home buyers, finance minister provided for an additional deduction of Rs 1.5 lakh on interest paid on loans borrowed up to March 31, 2020, on purchase of a house up to Rs 45 lakh.
An additional income tax deduction of Rs 1.5 lakh on interest paid on loans taken to purchase EVs was proposed to encourage their sales. The government has asked the GST Council to reduce the tax rate on EVs from 12% to 5%.
The finance minister indicated that making digital payments would get cheaper and review of archaic rental laws.
Corporate tax on companies with turnover of up to Rs 400 crore was cut to 25% from the current 30%. The finance minister said the move would likely benefit 99.3% of companies in the country.
Addressing the angel tax issue faced by startups, she said entities that filed requisite declarations would not be subjected to any kind of scrutiny in respect of valuation of share premium. With a mechanism of e-verification being put in place, the funds raised by startups would not invite any tax scrutiny. This would especially benefit firms in newly established start-up hubs in places like Ukhrul in Manipur.
Customs duty on gold and precious metals was raised from 10% to 12.5%. Basic customs duty was also hiked on tiles, cashew kernels, vinyl flooring, auto parts, certain varieties of synthetic rubber, digital and video recorder and CCTV camera in a bid to provide a boost domestic manufacturing.
Excise duty of Rs 5 per 1,000 was imposed on cigarettes of length exceeding 65 mm, while 0.5% duty has been levied on chewing tobacco, tobacco extracts and essence.
Hike in allocation for Northeast
In response to a question at the post-budget press conference in New Delhi on the absence of any mention of Northeast from her budget speech, Sitharaman said, “Just as there was no mention of defence but it had increased. Northeast you’d like to know. BE (budget estimated) 2018-19, 0.47 lakh crore (Rs 47,000 crore). Now, it is 0.59 lakh crore (Rs 59,000 crore) for the Northeast region as a whole; a 25% increase would you say?”
The budget estimate for ministry of development of North Eastern Region (MoDER) for 2019-20 fiscal was increased to Rs 3,000 crore as compared to the revised estimate of Rs 2,629 crore in 2018-19.
The budget proposals for setting up of clusters for traditional industries such as bamboo, honey and khadi, creation of payment platform for the MSME sector, overdraft facility of Rs 5,000 and loan of up to Rs 1 lakh under the MUDRA Scheme for women in village self-help groups, imparting of new age skills and training in foreign languages to youth and expansion of Khelo India Programme would also be of particular interest to the region.
Earlier in the day, the first full-time woman finance minister of the world’s largest democracy created a flutter when in a departure from the past she carried the budget documents not in a briefcase but in a four-fold red cloth symbolising a traditional bahi-khata or ledger.
While Sitharaman’s bahi-khata was a major talking point in New Delhi’s corridors of power through the day, Assam state finance minister Himanta Biswa Sarma also caused a stir when he presented the state budget from a tablet last year. The entire document was also downloadable from the Google Play store app.
Hailed as the budget for new India, the Union Budget 2019 was vetted by leaders from the industry. Here are a few reactions:
“Government’s intent to raise a greater part of its borrowing requirements internationally will have a positive effect on government yields with a benign impact on interest rates. It will also reduce the crowding out effect of government borrowing, making more capital available for private investments. The measure to extend the 25% corporate tax rate to companies with an annual turnover of Rs 400 crore, from the current cap of Rs 250 crore, is an important policy signal towards government’s commitment to reduce corporate taxes.”
- Chandrajit Banerjee, Director General, Confederation of Indian Industry (CII)
“We see a clear action plan for realising the vision of making India a US$ 5 trillion economy over the next few years with a focus on ease of living. The budget maintained its focus on infrastructure development. While the government would continue with its existing major national programs like Bharatmala, Sagarmala, rural roads, UDAN and inland waterways scheme, the vision of taking connectivity to the next level through ‘One Nation One Grid’ for electricity and a similar plan for gas grids, water grids, i-ways and regional airports is indeed ambitious and would be transformational in its impact.”
- Sandip Somany, President, Federation of Indian Chambers of Commerce & Industry (FICCI)
“There is a visible push for new age technologies and digital solutions as the budget specifically mentioned the importance given to artificial intelligence, internet of things, big data and Digital India, which are an integral part of the long-term vision. With an eye to boost up the economic growth and Make in India, the proposal to launch a scheme to invite global companies to set up mega-manufacturing plants is laudable.”
- Anil Chaudhry, Zone President & Managing Director, Schneider Electric India
“The budget has laid special emphasis on the much-awaited infrastructural development where the government will invest ₹100 Lakh crore in this segment for the next five years. The power sector has seen phenomenal growth achieving the electrification of almost 96% of households in the last five years. This large growth in the sector can be attributed to the infrastructure boom in India creating more avenues for companies like ours.”
- Anil Gupta, CMD, KEI Industries Ltd
“We are confident of turning India from an importer of MRO services to a net exporter and create over 1,00,000 direct jobs and revenues exceeding ₹35,000 crore in the next five years. India is the world’s fastest-growing aviation industry and creating an MRO ecosystem within the country will be both economically and strategically beneficial for this great country of ours.”
- Pulak Sen, Founder Secretary General, MRO Association of India
“The removal of IT scrutiny for angel funding will further help in resolving tax issues for the startups. Overall the budget comes as a support for startups by creating a specialised pool of talent and an environment for smooth business operations.”
- Amit More, Founder & CEO, Finzy
Union Budget 2019-20: Key takeaways
Push to physical infrastructure through a slew of measures such as Sagarmala, Jal Marg Vikas and UDAN schemes to improve logistics in a bid to reduce the cost of transportation and increase the competitiveness of domestically produced goods
Implementation of essential elements of the regulatory roadmap for making India a hub for aircraft financing and leasing activities
Suitable policy interventions to create a congenial atmosphere for the development of maintenance, repair and overhaul (MRO) in the country
Encourage faster adoption of EVs by way of offering an upfront incentive on their purchase and also by establishing the necessary charging infrastructure
A comprehensive restructuring of national highway program to ensure that the national highway grid of desirable length and capacity is created using a financeable model
Development of inland waterways to shift a significant portion of inland cargo movement from road and rail
Use of public-private partnership (PPP) for faster development and completion of tracks, rolling stock manufacturing and delivery of passenger freight services
Blueprint for 'One Nation, One Grid' for developing gas grids, water grids, i-ways and regional airports
Review and a further improvement in Ujjwal DISCOM Assurance Yojana aimed at the financial and operational turnaround of state DISCOMs
Overhaul of archaic rental laws and preparation of a model tenancy law
Development of public infrastructure and affordable housing on land parcels held by central ministries and central public sector enterprises (CPSE)s
Ease of Living
With PAN and Aadhaar becoming interchangeable, those not having a PAN number can file income tax returns by simply quoting their Aadhaar number and also use it wherever they are required to quote PAN
Creation of a payment platform for MSMEs to enable filing of bills and payment thereof on the platform itself
Extension of pension benefit to about 3 crore retail traders and small shopkeepers whose annual turnover is less than ₹1.5 crore under the new Pradhan Mantri Karam Yogi Maandhan Scheme
Initiation of steps towards creating an electronic fund-raising platform, a social stock exchange, under the regulatory ambit of Securities and Exchange Board of India (SEBI) for listing social enterprises and voluntary organisations
Electricity and cooking gas connection for all rural households, except those unwilling to do so, by 2022
Upgradation of 1,25,000 km of road length over the next five years, with an estimated cost of ₹80,250 crore under Pradhan Mantri Gram Sadak Yojana (PMGSY)
Facilitate setting up of 100 Common Facility Centres (CFC) to facilitate cluster-based development to make the traditional industries with a focus on bamboo, honey and khadi clusters to enable 50,000 artisans to join the economic value chain
Support to private entrepreneurship 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
Doubling of farmers' income through Zero Budget Farming
Piped water supply to all rural households by 2024 under the Jal Jeevan Mission
New National Education Policy to transform India’s higher education system to one of the global best education systems
Establishment of a National Research Foundation (NRF) to fund, coordinate and promote research in the country
National Sports Education Board for development of sportspersons to be set up under Khelo India Scheme
To prepare the youth to also take up jobs overseas, increased focus on skill sets including language training; focus also on new-age skills like artificial intelligence (AI), internet of things (IoT), big data, 3D printing, virtual reality and robotics
Streamlining of multiple labour laws into a set of four labour codes to ensure that the process of registration and filing of returns will get standardised and streamlined
Expansion of Women Self Help Group (SHG) interest subvention program to all districts with overdraft facility of Rs 5,000 to every verified member having a Jan Dhan Bank Account
One woman in every SHG to also be eligible for a loan up to 1 lakh under the MUDRA scheme
Scheme to invite global companies through transparent competitive bidding to set up mega-manufacturing plants in sunrise and advanced technology areas such as semiconductor fabrication (FAB), solar photovoltaic cells, lithium storage batteries, solar electric charging infrastructure, computer servers, laptops, etc.
Income tax returns of startups not to be subjected to any kind of scrutiny in respect of valuations of share premiums
Central Board of Direct Taxes (CBDT) to make special administrative arrangements for pending assessments of startups and redressal of their grievances
Additional deduction of up to Rs 1,50,000 for interest paid on loans borrowed up to March 31, 2020, for purchase of an affordable house valued up to Rs 45 lakh
Pre-filled tax returns will be made available to taxpayers which will contain details of salary income, capital gains from securities, bank interests, and dividends, etc. and tax deductions
Launch of faceless assessment in electronic mode involving no human interface in a phased manner
Electronic invoicing system to capture transaction details in a centralised system at the time of issuance from January 2020.