Thursday, 22 October 2020

Union Budget 2019-20 Major Points

Updated: July 20, 2019 1:04 pm
  •  Capital Infusion to Public Sector Banks: Rs. 70,000 crore proposed to be provided to PSBs to boost credit.
  •  Direct Tax measures: A surcharge will be levied on individuals with taxable income of Rs. 2 to 5 crore and Rs. 5 crore and above. The effective tax rates for these categories will increase by 3 percentage points and 7 percentage points respectively. Tax rate reduced to 25% for companies with annual turnover up to Rs. 400 crore. Direct Tax revenue has increased from Rs. 6.38 lakh crore in 2013-14 to Rs. 11.37 lakh crore in 2018-19; an increase by over 78 per cent in five years.
  •  Indirect Tax Measures: Customs duty on gold and precious metals to be hiked from current 10 per cent to 12.5 per cent. A special additional excise duty of Rs. 1 per litre to be imposed on petrol and diesel. Basic Customs Duty increased on cashew kernels, PVC, tiles, auto parts, marble slabs, optical fibre cable, CCTV camera etc. Defence equipment not manufactured in India exempted from basic customs duty.
  •  GST measures: Finance Minister said that in initial phase GST faced certain problems; however, GST rates have been reduced where relief of about Rs. 92,000 crores per year has been given. Taxpayers with an annual turnover of less than Rs. 5 crore will have to file only quarterly returns. A simplified single monthly return is to be worked out. Further work to be done to ease filing returns and tax compliance with fully automated GST refund system to be implemented.
  •  Boost to Electric Vehicles: Additional income tax deduction of Rs. 1.5 lakh on interest paid on electric vehicle loans. Customs duty exempted on certain parts of electric vehicles. Outlay of Rs. 10,000 crore for 3 years approved for Phase-II of Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME) Scheme.1
  •  Affordable Housing: Interest deduction up to Rs. 3.5 lakh for affordable housing as against Rs. 2 lakh earlier now to be available until 31 March 2020.
  •  Encourage cashless transactions: FM said that to discourage the practice of making business payments in cash, the government proposes to levy TDS of 2 per cent on cash withdrawal exceeding Rs. 1 crore in a year from a bank account.
  •  Digital Transactions to be promoted further: BHIM, UPI, NEFT, RTGS will be further enhanced to promote less cash economy. Business establishments with annual turnover of Rs. 50 crore will be required to use such modes of payments with no charges or merchant discount rates will be imposed on customers or merchants. RBI and banks will absorb these costs.
  •  Measures to deepen bond markets: Stock exchanges to be enabled to allow AA rated bonds as collaterals. User-friendliness of trading platforms for corporate bonds to be reviewed.
  •  Social stock exchange: Electronic fund raising platform under the regulatory ambit of SEBI for Listing social enterprises and voluntary organizations, who can raise capital as equity, debt or as units like a mutual fund. SEBI to consider raising the threshold for minimum public shareholding in the listed companies from 25% to 35%.
  •  The Securities Transaction tax (STT) is proposed to be restricted to the difference between settlement and strike price in case of exercise of options.
  •  Interchangeability of PAN and Aadhaar: Those who don‟t have PAN can file tax returns using Aadhaar and Aadhaar can be used wherever PAN is required.
  •  Measures related to MSMEs: For the MSME sector, Rs. 350 crore has been allocated for FY 2019-20 under the Interest Subvention Scheme, for 2% interest subvention for all GST registered MSMEs, on fresh or incremental loans. The Government will create a payment platform for MSMEs to enable filing of bills and payment. This will help eliminate delays in payment and give a boost to investment in MSMEs.
  •  It has been decided to extend the pension benefit to about three crore retail traders and small shopkeepers whose annual turnover is less than Rs.1.5 crore under a new Scheme Pradhan Mantri Karam Yogi Maandhan Scheme. Enrolment into the Scheme will be kept simple requiring only Aadhaar and a bank account and rest will be on self-declaration.
  •  Relief for Start- ups: Angel tax issue resolved- start-ups and investors filing requisite declarations and providing information in their returns not to be subjected to any kind of scrutiny in respect of valuations of share premiums. Funds raised by start-ups to not require scrutiny from Income Tax Department. An e-verification mechanism for establishing identity of the investor and source of funds to be implemented. No scrutiny of valuation of shares issued to Category-II Alternative Investment Funds. Relaxation of conditions for carry forward and set off of losses.
  •  NBFCs: Interest on certain bad or doubtful debts by deposit taking as well as systemically important non-deposit taking NBFCs to be taxed in the year in which interest is actually received. Requirement of creating a Debenture Redemption Reserve will be done away with to allow NBFCs to raise funds in public issues. Steps to allow all NBFCs to directly participate on the TReDS platform; Return of regulatory authority from NHB to RBI proposed, over the housing finance sector.
  •  Interchangeability of PAN and Aadhaar: Those who don‟t have PAN can file tax returns using Aadhaar and Aadhaar can be used wherever PAN is required.
  •  Measures related to MSMEs: For the MSME sector, Rs. 350 crore has been allocated for FY 2019-20 under the Interest Subvention Scheme, for 2% interest subvention for all GST registered MSMEs, on fresh or incremental loans. The Government will create a payment platform for MSMEs to enable filing of bills and payment. This will help eliminate delays in payment and give a boost to investment in MSMEs.
  •  It has been decided to extend the pension benefit to about three crore retail traders and small shopkeepers whose annual turnover is less than Rs.1.5 crore under a new Scheme Pradhan Mantri Karam Yogi Maandhan Scheme. Enrolment into the Scheme will be kept simple requiring only Aadhaar and a bank account and rest will be on self-declaration.
  •  Relief for Start- ups: Angel tax issue resolved- start-ups and investors filing requisite declarations and providing information in their returns not to be subjected to any kind of scrutiny in respect of valuations of share premiums. Funds raised by start-ups to not require scrutiny from Income Tax Department. An e-verification mechanism for establishing identity of the investor and source of funds to be implemented. No scrutiny of valuation of shares issued to Category-II Alternative Investment Funds. Relaxation of conditions for carry forward and set off of losses.
  •  NBFCs: Interest on certain bad or doubtful debts by deposit taking as well as systemically important non-deposit taking NBFCs to be taxed in the year in which interest is actually received. Requirement of creating a Debenture Redemption Reserve will be done away with to allow NBFCs to raise funds in public issues. Steps to allow all NBFCs to directly participate on the TReDS platform; Return of regulatory authority from NHB to RBI proposed, over the housing finance sector.

Govt’s Off-Balance Sheet Expenditure Estimated at INR 1.5 Lakh Crore


According to estimates2 about INR 1.5 lakh crore worth of expenditure may have been pushed off-balance sheet as borrowings at Food Corporation of India (FCI), PowerGrid Corporation, and a few other entities. Of total incremental off-balance sheet borrowing, FCI garners about three-fourths. The government plays an important role in the business model of FCI. The agency procures food at minimum support prices (MSP). However, the difference between prices of foods under the public distribution system and market prices result in a gap.

The Centre has funded this gap through food subsidy, which is part of the government’s expenditure. In the last few years, a part of food subsidy not paid by the government is supported by the borrowings of the FCI due to revenue shortfall. The government has provided food subsidy bill of INR 1.8 lakh crore in the interim budget for FY20.

Fiscal Deficit could be understated due to borrowings of the FCI to fund food subsidy bill, but public debt is not grossly under-represented if borrowings are mainly supported by funds gathered through the National Savings Schemes (NSS).

FCI borrowings increased to INR 1.96 lakh crore under FY19 revised estimates (RE) compared with INR 0.71 lakh crore in budget estimates (BE) for same period. Under-recoveries in food subsidy were funded by the additional borrowing on the balance sheet of FCI. Consequently, debt at FCI has increased to INR 2.18 lakh crore in FY19 compared with 0.96 lakh crore in FY13. Incremental borrowing at FCI was financed by NSS funds. FCI borrowed INR 70,000 crore and INR 51,000 crore from NSS in FY17 and FY18 and this accounted for 59% and 32% of the total NSS funds raised during the same year. According to the interim budget of FY20, FCI is expected to pay back INR 27,000 crore. Thus, borrowings of FCI are expected to decline.

Similarly the National Highway Authority of India (NHAI) has been raising debt to top up budgetary support. Total debt of NHAI has increased to INR 1.2 lakh crore in FY18 compared with INR 0.24 lakh crore in FY14. The government has been servicing interest payments on debt raised by NHAI. This model works perfectly if toll collections are equivalent to the amount of interest paid by the government.

 

Source: ‘Govt’s Off-Balance Sheet Expenditure Estimated at INR 1.5 L Cr’(5 July 2019) Economic Times.


 

Other Related Measures: Rs. 100 lakh crore investment in infrastructure intended over the next five years. Committee proposed to recommend the structure and required flow of funds through development finance institutions. Steps to be taken to separate the NPS Trust from PFRDA. Reduction in Net Owned Fund requirement from Rs. 5,000 crore to Rs. 1,000 crore proposed: To facilitate on-shoring of international insurance transactions and To enable opening of branches by foreign reinsurers in the International Financial Services Centre.

  •  Strategic Disinvestments for Public Sector Enterprises: Target of Rs. 1, 05,000 crore of disinvestment receipts set for the FY 2019-20. Government to reinitiate the process of strategic disinvestment of Air India, and to offer more CPSEs for strategic participation by the private sector. Present policy of retaining 51% Government stake to be modified to retaining 51% stake inclusive of the stake of Government controlled institutions.
  •  Direct Tax Incentives for International Financial Services Centre (IFSC): 100 % profit-linked deduction in any ten-year block within a fifteen-year period. Exemption from dividend distribution tax from current and accumulated income to companies and mutual funds. Exemptions on capital gain to Category-III Alternative Investment Funds (AIFs).Exemption to interest payment on loan taken from non-residents.
  •  New series of coins of One Rupee, Two Rupees, Five Rupees, Ten Rupees and Twenty Rupees, easily identifiable to the visually impaired to be made available for public use shortly.
  •  Measures to make India a more attractive FDI destination: FDI in sectors like aviation, media (animation, AVGC) and insurance sectors can be opened further after multi-stakeholder examination. Insurance Intermediaries to get 100% FDI. Local sourcing norms to be eased for FDI in Single Brand Retail sector. Government to organize an annual Global Investors Meet in India, using National Infrastructure Investment Fund (NIIF) as an anchor to get all three sets of global players (pension, insurance and sovereign wealth funds).
  • Foreign Portfolio Investments and NRIs: Statutory limit for FPI investment in a company is proposed to be increased from 24% to sectoral foreign investment limit. Option to be given to the concerned corporate to limit it to a lower threshold. FPIs to be permitted to subscribe to listed debt securities issued by ReITs and InvITs. NRI-Portfolio Investment Scheme Route is proposed to be merged with the Foreign Portfolio Investment Route. Proposal to consider issuing Aadhaar Card for NRIs with Indian Passports on their arrival without waiting for 180 days. Cumulative resources garnered through new financial instruments like Infrastructure Investment Trusts (InvITs), Real Estate Investment Trusts (REITs) as well as models like Toll-Operate-Transfer (ToT) exceed Rs. 24,000 crore.
  • Faceless e-assessment: Faceless e-assessment with no human interface to be launched; to be carried out initially in cases requiring verification of certain specified transactions or discrepancies.
  • Grameen Bharat / Rural India: Electricity and clean cooking facility to all willing rural families by 2022. Pradhan Mantri Awas Yojana – Gramin (PMAY-G) aims to achieve “Housing for All” by 2022: Eligible beneficiaries to be provided 1.95 crore houses with amenities like toilets, electricity and LPG connections during its second phase (2019-20 to 2021-22). A robust fisheries management framework through Pradhan Mantri Matsya Sampad Yojona (PMMSY) to be established by the Department of Fisheries. Pradhan Mantri Gram Sadak Yojona (PMGSY): Target of connecting the eligible and feasible habitations advanced from 2022 to 2019 with 97% of such habitations already being provided with all weather connectivity. 30,000 kilometers of PMGSY roads have been built using Green Technology, Waste Plastic and Cold Mix Technology, thereby reducing carbon footprint. 1,25,000 kilometers of road length to be upgraded over the next five years under PMGSY III with an estimated cost of Rs. 80,250 crore.
  •  To enhance traditional industries, under the Scheme of Fund for Upgradation and Regeneration of Traditional Industries (SFURTI), 100 new clusters to be setup during 2019-20 with special focus on Bamboo, Honey and Khadi, enabling 50,000 artisans to join the economic value chain.
  •  10,000 new Farmer Producer Organizations to be formed, to ensure economies of scale for farmers. Government to work with State Governments to allow farmers to benefit from e-NAM. Zero Budget Farming in which few states farmers are already being trained to be replicated in other states.
  •  India’s water security: New Jal Shakti Mantralaya to look at the management of our water resources and water supply in an integrated and holistic manner; Jal Jeevan Mission to achieve Har Ghar Jal (piped water supply) to all rural households by 2024.
  •  Shahree Bharat/Urban India: Target of achieving Gandhiji‟s resolve of Swachh Bharat to make India Open Defecation Facility (ODF) by 2nd October 2019. To mark this occasion, the Rashtriya Swachhta Kendra to be inaugurated at Gandhi Darshan, Rajghat on 2nd October, 2019. Gandhipedia being developed by National Council for Science Museums to sensitize youth and society about positive Gandhian values.
  • Boost for Railways: Railways to be encouraged to invest more in suburban railways through SPV structures like Rapid Regional Transport System (RRTS) proposed on the Delhi-Meerut route. Proposal to enhance the metro railways initiatives by –encouraging more PPP initiatives, ensuring completion of sanctioned works, Supporting transit oriented development (TOD) to ensure commercial activity around transit hubs. Rs. 50 lakh crore investment needed in Railway Infrastructure during 2018-2030. 657 kilometers of Metro Rail network has become operational across the country.
  • Youth: Major initiatives includes Rs. 400 crore provided for “World Class Institutions”, for FY 2019-20, more than three times the revised estimates for the previous year. “Study in India” proposed to bring foreign students to study in Indian higher educational institutions. Draft legislation to set up Higher Education Commission of India (HECI), to be presented. Khelo India Scheme to be expanded with all necessary financial support.
  •  Ease of Living: Approximately 35 crore LED bulbs distributed under UJALA Yojana leading to cost saving of Rs. 18,341 crore annually.
  •  Labour laws: Multiple labour laws to be brought under four codes.
  • Connectivity/Infrastructure: In order to take connectivity infrastructure to the next level the Government will make available a blueprint this year for developing gas grids, water grids, i-ways, and regional airports. This is based on the successful, One Nation, One Grid model that has ensured power connectivity to states at affordable rates. Public-Private-Partnership proposed for development and completion of tracks, rolling stock manufacturing and delivery of passenger freight services.
  •  Cargo Transportation: Four times increase in next four years estimated in the cargo volume on Ganga, leading to cheaper freight and passenger movement and reducing the import bill. The Jal Marg Vikas Project for enhancing the navigational capacity of Ganga, and said that two multi-modal terminals at Sahibganj and Haldia and a navigational lock and Farrakka would be completed this year.
  •  Aviation & aircraft financing: Policy interventions to be made for the development of Maintenance, Repair and Overhaul (MRO), to achieve self- reliance in aviation segment. Regulatory roadmap for making India a hub for aircraft financing and leasing activities from Indian shores, to be laid by the Government.
  •  National Highway Pro- gramme to be restructured to ensure a National Highway Grid, using a financeable model. Government will carry out a comprehensive restructuring of National Highway Programme to ensure that the National Highway Grid of desirable length and capacity is created using financeable model. After completing the Phase 1 of Bharatmala, states will be helped to develop State road networks in the second phase.
  •  Measures to enhance the sources of capital for infrastructure financing: Credit Guarantee Enhancement Corporation (CGEC) to be set up in 2019-2020. Action plan to be put in place to deepen the market for long term bonds with focus on infrastructure.
  •  Power: Power at affordable rates to states ensured under “One Nation, One Grid.” Cross subsidy surcharges, undesirable duties on open access sales or captive generation for industrial and other bulk power consumers to be removed under Ujjwal DISCOM Assurance Yojana (UDAY). Package of power sector tariff and structural reforms to be announced soon.
  •  Rental Housing: Reform measures to be taken up to promote rental housing.
  •  Tourism: 17 iconic Tourism Sites being developed into model world class tourist
  •  Women: Major points include extending women SHG interest subvention programme to all districts; One woman per Self Help Group (SHG) to be eligible for a loan up to Rs. 1 lakh under MUDRA Scheme.

1In order to promote manufacturing of electric and hybrid vehicle technology and to ensure sustainable growth of the same, Department of Heavy Industry is implementing FAME-India Scheme- Phase-I [Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India] from 1st April 2015. The scheme, which was initially upto 31st April 2017, has been extended upto 31st March, 2019 or till Notification of FAME-II, whichever is earlier. The Phase-II of the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME-India) Scheme proposes to give a push to electric vehicles (EVs) in public transport and seeks to encourage adoption of EVs by way of market creation and demand aggregation.

Infomerics Ratings

 

 

 

 

Leave a Reply

Your email address will not be published. Required fields are marked *

Archives

Categories