A CORPORATE PERSPECTIVE Insights of Union Budget 2019
PREFACE The Hon ble Finance Minister Shri Piyush Goyal presented the Interim Budget on 01 st February 2019, also known as Vote on Account Budget. It is the last budget of the current government before completion of its elected term of 5 years which ends in May 2019. This budget is being termed as a medium of the country s development journey. With a strong eye on upcoming General Elections, the Interim Budget focuses on optics and populist measures. The Indian economy has witnessed a steady growth in the fiscal year 2018-19 as GDP grew at 7.2% against the budget of 6.7% and is expected to stabilize at 7.2% for the year 2019-20. Further, the Current account deficit is estimated at 2.5% of GDP for 2019-20 which is almost half of what it used to be in 2013-14. The inflation rate has reduced and in December 2018 it was as low as 2.19%. Political experts have pegged this budget as the final electoral pitch of the current government, which is focused on garnering maximum political support ahead of the 2019 Parliament Elections. India is poised to become a Five Trillion Dollar Economy in the next five years and aspires to become a Ten Trillion Dollar Economy in the next 8 years thereafter. This objective is based on a ten-fold dimensional agenda of the existing government wherein several key pointers have been laid out in the Budget 2019 as under: - Build physical as well as social infrastructure - Create a Digital India reaching every sector of the economy - Making India a pollution free nation by promoting electric vehicles - Clean Rivers with safe drinking waters - Expanding rural industrialization using modern digital technologies - Development of infrastructure in vast coastline - Becoming the launch-pad of satellites for the World - Making India self-sufficient in food and thereby exporting to the rest of world - Investment in health infrastructure - Transforming India into a Minimum Government Maximum Governance nation On the tax front, major policy announcement has been made to provide tax relief to small individual tax payers having annual taxable income up-to INR 5 lacs. The direct tax collections are estimated at 13.80 lakh crores averaging about 6.6% of GDP for 2019-20 whereas Indirect tax collections are budgeted at INR 11.66 lakhs crores for the year 2019-20. Further, the GST collections for the year 2018-19 has been INR 97,100 crores which represent an increase of 8.25% over the previous year even when the GST rates have been reduced on most items as compared to the pre-gst regime thereby providing a relief of about INR 80,000 crores to the end consumers. This clearly signifies the beginning of stabilization phase of the GST in a dual and complex tax structure economy of India. We are pleased to provide you with the synopsis of the Union Budget of 2019 and hope the same shall be useful at your end. Thanking You, To your success, Mayur Batra Group 1st February 2019
1. MACRO ECONOMIC OVERVIEW India being the fastest growing major economy in the world with an annual average GDP growth during last five years higher than the growth achieved since economic reforms began in 1991. From being the 11th largest economy in the world in 2013-14, it is today positioned as 6 th largest economy in world. Further, it is poised to become 5 trillion dollar economy in next 5 years and a 10 trillion dollar economy in next 8 years thereafter based on existing growth story and key government initiatives to be taken based ten-fold agenda as a vision for the next decade -2030. average inflation is brought down to 4.6% and even in December 2018 inflation was down to 2.19% only. Deficit Position 2 Fiscal deficit as a percentage of GDP for the FY 2019-20 is estimated at 3.4% similar to FY 2018-19 (based on revised estimates). Current account deficit (CAD) is likely to be 2.5% of GDP during 2019-20 as against 5.6% in 2013-14. Revenue deficit was projected at 2.2% of GDP in revised estimates 2018-19 which has been estimated to remain the same in 2019-20. Growth 1 Indian economy isestimated to achieve a growth of 7.2% (as per first advance estimates released by Central Statistics Office) in 2018-19, higher as compared to 6.7% recorded in 2017-18. Budget Expenditure 2 India has attracted massive Foreign Direct Investment (FDI) of around $ 239 billion during the last 5 years. India witnessed rapid liberalization of the FDI policy, allowing most FDI to come through the automatic route. Inflation 2 Policies of Government of India have helped in keeping commodity prices under check during the year 2018-19. The 1 Source: Estimates by Central statistics office. Revenue Expenditure is estimated to be INR 24.47 lakh crore in budget estimates 2019-20 as compared to INR 21.40 lakh crore in revised estimates 2018-19. This reflects an increase of INR 3.07 lakh crore in Budget estimates 2019-20 over revised estimates 2018-19 which is mainly on account of support to the agricultural sector. Capital Expenditure is estimated to be INR 3.36 lakh crore in budget estimates 2019-20 as compared to 3.16 lakh crore in revised estimates 2018-19. Gross Tax Revenue 2 Direct tax collections has been estimated to be INR 13.80 lakh crore in 2019-20, with increase of 15% over revised estimates of 2018-19 which are estimated at INR 12 lakh crores. It is 2 Source: Union Budget 2019 estimates of Medium Term Fiscal Policies cum Fiscal Policies Strategy Statement. Page 3 of 9
expected that direct taxes would be 6.6 % of GDP at the end of 2019-20. Indirect tax collections are budgeted at INR 11.66 lakhs crores for 2019-20 showing an increase of 11.8% over revised estimates for 2018-19.The increase is mainly on account of improvement in GST collections anticipated in 2019-20. Defence Budget 3 For securing borders and to maintain preparedness of the highest order, the defence budget has been set of INR 3 lakh crore for the first time in the Budget estimates of 2019-20. 2. DIRECT TAXES Simplification of direct tax system to benefit tax payers The Income Tax Department now functions online. Returns, assessments, refunds and queries are all undertaken online. Last year, 99.54% of the incometax returns were accepted as they were filed. There is massive use of path breaking, technology intensive project to transform the Income-tax Department into a more assessee-friendly one. All returns will be processed in twenty-four hours and refunds issued simultaneously. Within the next two years, almost all verification and assessment of returns selected for scrutiny will be done electronically through anonymised back office, manned by tax experts and officials, without any personal interface between taxpayers and tax officers. There is no change in income tax rates for Financial Year 2019-20. This being an interim budget in course of ensuing general elections 2019, there are no such major changes proposed by the finance minister in his budget speech. There are no announcements for corporate sector. Some tax reliefs have 3 Source: Union Budget 2019 estimates of Medium Term Fiscal Policies cum Fiscal Policies Strategy Statement. still been given to middle class individual tax payers. Relief in tax for annual taxable income uptors. 5 lakhs Individual taxpayers having annual taxable income upto INR 5 lakhs will get full tax rebate upto INR 12,500/- and therefore will not be required to pay any income tax. Earlier the provisions were applicable for taxpayers having annual taxable income upto INR 3.5 lakhs wherein tax rebate of INR 2,500/- was provided. The amendment is effective from Assessment Year 2020-2021 relevant to Financial Year 2019-2020. Increase in threshold limit for Standard Deduction under Salary Income Standard Deduction threshold for salaried persons has been proposed to increase from existing INR 40,000/- to INR 50,000/- per annum. The amendment is effective from Assessment Year 2020-2021 relevant to Financial Year 2019-2020. Reduced tax burden on persons having more than one self-occupied house property Income tax shall not be levied on notional rent on a second self-occupied house in case any person has more than one selfoccupied house. This will reduce the tax burden of the middle class which has to maintain families at two locations due to their job, children s education, care of parents etc. The amendment is effective from Assessment Year 2020-2021 relevant to financial year 2019-2020. Increase in TDS threshold u/s 194A TDS threshold on interest earned on bank / post office deposits is being raised from INR 10,000/- to INR 40,000/- per annum. This will benefit small depositors and nonworking spouses. The amendment is effective from Assessment Year 2020-2021 relevant to Financial Year 2019-2020. Increase in TDS threshold u/s 194I TDS threshold for deduction of tax on rent is proposed to be increased from Rs. Page 4 of 9
1,80,000/- to Rs. 2,40,000/- per annum for providing relief to small taxpayers. The amendment is effective from Assessment Year 2020-2021 relevant to Financial Year 2019-2020. Benefit of rollover of capital gains u/s 54 extended to two residential houses Exemption of capital gains u/s 54 can now be availed for investment in two residential houses for a tax payer having capital gains up to INR 2 crores vis-à-vis only one residential house at present. This benefit can be availed once in a life time. The amendment is effective from Assessment Year 2020-2021 relevant to Financial Year 2019-2020. Extension of time period u/s 80-IBA Time limit for obtaining approval of housing projects under Affordable Housing Scheme (House for All) has been extended for one more year upto 31st March, 2020. This initiative will make more homes available under the said scheme. The amendment is effective from Assessment Year 2020-2021 relevant to Financial Year 2019-2020. Relief for Real Estate Sector It has been proposed to extend the time period of availing exemption from levy of tax on notional rent, on unsold inventories in the real state sector, from one year to two years, from the end of the year in which the project is completed. This will reduce the tax burden of this sector on a large scale. for reduction of GST burden on home buyers. The average monthly GST collections for FY 2018-19 (till date) increased by 8.25% of the GST collections made last year i.e. INR 97,100 crores from INR 89,700 crores. Customs Rationalization of custom duties and procedures in order to promote Make in India initiative. Comprehensive Digitalization of export/import transactions and leveraging RFID (Radio Frequency Identification) technology to improve export logistics. Simplified custom procedures after introduction of revised systems. 4. KEY POLICY INITIATIVES Banking Reforms and Insolvency and Bankruptcy Code (IBC) The Insolvency and Bankruptcy Code has institutionalized a resolution-friendly mechanism, which is helping in recovery of non-performing loans while preserving the underlying businesses and jobs. The government will make an investment of INR 2.6 lakh crores under recapitalisation plan to restore the health of public sector banks. 3. INDIRECT TAX PROPOSALS GST Continuous rationalization of GST rates on consumer products, provided relief of around INR 80,000 crores annually to consumers. New GST returns filing procedure to be introduced allowing 90% of the GST tax payers to file quarterly returns. Cleanliness India has achieved 98% rural sanitation coverage and as many as 5.45 lakh villages have been declared "Open Defecation Free." Poor and backward classes INR 60,000 crores is being allocated for MGNREGA in FY 2019-20. Group of ministers to be appointed by GST council to examine and recommend Page 5 of 9
Under the Pradhan Mantri Gram Sadak Yojana, construction of rural roads has been tripled. Pradhan Mantri Gram Sadak Yojana (PMGSY) is being allocated INR 19,000 crores in FY 2019-20 as against INR 15,500 crores in FY 2018-19. By March, 2019, all willing families will get electricity connection under 'Saubhagya Yojna'. In mission mode, around 143 crore LED bulbs have been provided with the participation of private sector. The government will set up 22nd AIIMS in the state of Haryana. Entertainment Single window clearance for ease of shooting films, available only to foreigners, would be made available to Indian filmmakers as well. Farmer's progress and Increase in Income A historic programme namely Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) in the form of income support scheme will be launched for vulnerable landholding farmer families, having cultivable land upto 2 hectares to provide direct income support of INR. 6,000/- per year which will be transferred directly into the bank accounts of beneficiary farmers, in three equal installments of INR 2,000/- each. The programme would be made effective from 1st December 2018 and the first installment for the period upto 31st March 2019 would be paid during this year itself. It would also meet their emergent needs especially before the harvest season. The Government has committed INR 75,000 crores in this budget for this flagship programme. Separate Department of Fisheries will be created to provide sustained and focused attention towards development of this sector. The Government has provided the benefit of 2% interest subvention to the farmers pursuing the activities of animal husbandry and fisheries, who avail loan through Kisan Credit Card. Further, in case of timely repayment of loan, they will also get an additional 3% interest subvention. Labour and Workers Dignity High growth and formalization of the economy has led to the expansion of employment opportunities as shown in EPFO membership, which has increased by nearly 2 crore in two years reflecting formalization of the economy and job creations. Mega Pension Yojana namely 'Pradhan Mantri Shram-Yogi Maandhan' to be launched with a sum of INR 500 crore which has been allocated for the Scheme. The key features include: v For the un-organized sector workers with monthly income upto INR 15,000/- v Assured monthly pension of INR 3,000/- from the age of 60 years v Worker joining at the age of 18 years & 29 years will have to contribute only INR 55 & INR 100 per month respectively till the age of 60 years. v Government will deposit equal matching share. The Government will also set up a Welfare Development Board under the Ministry of Social Justice and Empowerment specifically for the purpose of implementing welfare and development programmes for De-notified, Nomadic and Semi-Nomadic communities. Empowering Youth to fulfill their potential With job seekers becoming job creators, India has become the world s second largest start-up hub. In order to take the benefits of Artificial Intelligence and related technologies to the people, a National Programme on 'Artificial Intelligence' has been envisaged by the Government. This would be catalysed by the establishment of the National Centre on Artificial Intelligence as a hub along with Centres of Excellence. A National Artificial Intelligence portal will also be developed soon. Page 6 of 9
Digital India Revolution The Government will make 1 lakh villages into Digital Villages over next five years. Empowering MSMEs and Traders A Scheme for MSME & Traders has been launched v Sanctioning loans upto INR 1 crore in 59 minutes; v 2% interest rebate for GST Registered SME units on incremental loan of INR 1 Crore. The Government e-marketplace (GeM), created by the Government two years ago is now being extended to all Central Public Sector Enterprises (CPSE). Infrastructure development Pradhan Mantri Gram SadakYojana (PMGSY) is being allocated INR 19,000 crores. Reforms of Single Stamp Duty for sale of Financial Securities through Stock Exchanges The Budget 2019 has proposed for the single stamp duty rate for Financial Securities Transactions. The amendment has authorized the stock exchanges and/ or clearing corporation to collect the stamp duty on sale of Financial Securities and share the stamp duty collected to the respective State Government based on the domicile of the buyer. In case, where the buyer is domiciled outside India, stamp duty collected would be shared with the State Government having the office of the trading member or broker of such buyer. With this change, the Government has brought the much needed change to meet the long asked demand of brokering industry. Projects stuck for decades like the Eastern Peripheral Highway around Delhi or the Bogibeel rail-cum-road bridge in Assam and Arunachal Pradesh have been completed. The flagship programme of Sagarmala along the coastal areas of the country will develop ports for faster handling of import and export cargo. For the first time, container freight movement has started on inland waterways from Kolkata to Varanasi. The Government will introduce container cargo movement to the North East as well, by improving the navigation capacity of the Brahmaputra river. Introduction of the first indigenously developed and manufactured semi highspeed "Vande Bharat Express" will give the Indian passengers world class experience with speed, service and safety. The capital support for railways is proposed at INR 64,587 crore in 2019-20. Page 7 of 9
OUR EXPERT S OPINION ON THE BUDGET Mayur Batra, Founder & President "Vision for the next 10 years is a balancing act between farm distress, middle-class aspiration, salaried employees & growth with a decent outcome on fiscal deficit. Changes in assessment and get in procedures will lead to cut in inefficiency as well as red tape. More money in hands of consumers should lead to spur in demand, superb for the industries! Initiatives on artificial intelligence and clean energy is the future. Impressive and positive for India. Seems like a win-win!" Amit Sachdev, COO "Interim Budget 2019 was the last budget of the current government on completion of their elected term of 5 years. It is being termed as a medium of the country s development journey and highlights various achievements, efforts and measures taken by the government. Our nation is being recognized as bright spot and positioned as 6 th largest global economy. It seems to be in the best phase of macro -economic stability and attracted massive amount of $ 239 billion of foreign direct investment in last 5 years. Several policy initiatives have been announced for farmers, poor and backward classes and youth. The efforts to strengthen the position of medium and small business enterprises, provide boost to the infrastructure development and digital revolution reflected in this year s budget again. It also mentions several steps taken to simplify direct tax system of the country through several technology driven initiatives. There is no change in the existing rates of income tax but few other changes have been proposed for providing relief to middle class tax payers. The proposal to introduce full and comprehensive digitalization of export and import transactions is also promising. The budget also sets out road map for next decade with focus on several areas with the aim to enable our country to achieve its full potential as a society and an economy." Deepak Arora, Executive Director "The Budget in overall is a good, balanced budget aimed at creating the real infrastructure and increasing discretionary spending for spurring the overall growth of the economy. The Budget has provided a much needed impetus to middle class, small trader and farmers and has primarily focused on areas of Agriculture, Social Sector, Railways, Education, Real Estate, Health and Defence. As such, there are no such changes being proposed in the Indirect Taxes i.e. for Custom & Excise except few policy reforms to be introduced in Customs for ease in compliance, improving digitization of export/ import transaction and leveraging new technologies to improve export logistics. Badri Vishal Mahajan, Director A give-away budget in election year prognosticates a sub-8% GDP growth rate expectation (7.5% after GDP deflator of 4%) for 2019-20 combined with an increase in fiscal deficit by 10 basis points to 3.4% and reflects an apathetic attitude towards fiscal consolidation and a credit negative position to world at large. Disclaimer: The information contained herein are intended to provide information of general nature and is not an exhaustive treatment on the topics mentioned herein. This document is prepared only as guiding tool reflecting synopsis of Interim Budget 2019. Whilst every care has been taken in the preparation of this document, it may contain inadvertent errors for which we shall not be held responsible. No one should act on such information without appropriate professional advice. We accept no responsibility for loss arising from any action taken or not taken by anyone using this information. Page 8 of 9
MAYUR BATRA GROUP A Square Building, Plot No. 278, 4th Floor, Udyog Vihar Phase II, Gurugram, Haryana - 122015, India Phone: +91-124-4670800 Email: info@mayurbatra.com www.mayurbatragroup.com India Singapore Middle East P.R. China Japan Germany