India Budget 2019: Sitharaman announced a slew of measures to lay the roadmap for India to become a $5 trillion economy by 2024.
- By: Tanvi Loond
Union Budget 2019: “Reform, Perform, Transform”, affirmed finance minister Nirmala Sitharaman as India listened to Budget 2019 with bated breath. Sitharaman announced a slew of measures to lay the roadmap for India to become a $5 trillion economy by 2024. “We have set the ball rolling for a new India”, she stated, giving credit to a rejuvenated Centre-State dynamic, cooperative federalism, Goods and Services Tax (GST) Council, and commitment to fiscal discipline.
This new India focuses on widening the tax net, ensuring smooth compliances, digitizing the country, promoting a cash-less, green (pollution free) and blue (water secure) economy. The vision laid out in the interim budget announced in February 2019 had a key focus on Make In India, the flagship program of the NDA government, with particular emphasis on MSMEs and startups to drive investment and push for growth. Key highlights of the impact of Budget 2019 on the MSME sector are noted below.
Ease of Access to credit
Provision of loans up to Rs 1 crore for MSMEs within 59 minutes through a dedicated online portal. Under the Interest Subvention Scheme for MSMEs, Rs 350 crore has been allocated for FY 2019-20 for 2% interest subvention for all GST registered MSMEs, on fresh or incremental loans.
Smooth payment processing
Creation of a payment platform for MSMEs to enable filing of bills due from the Government and payment thereof. This measure will reduce the delays in processing Government payments to suppliers and contractors, improving cash flow of the MSMEs, thereby making them more attractive to investors.
Reduction of red tape
Launch of a scheme of faceless tax assessment by the Income-tax Department in electronic mode. The existing system of scrutiny assessments in the Income-tax Department involves a high level of personal interaction between the taxpayer and the Department, which leads to certain undesirable practices on the part of tax officials. This scheme, involving no human interface, aims to eliminate such instances and is a welcome measure.
Income Tax Calculator: Check your post-Budget 2019 Income Tax outgo here
Promotion of cashless business
Proposal to provide for tax deduction at source at the rate of 2% on cash withdrawal by a person in excess of Rs. 1 crore in a year from his bank account. Some business models, where large cash withdrawal is a necessity, are proposed to be exempted. It is also proposed that the Central Government may notify the persons to whom these
provisions shall not be applicable in consultation with the Reserve Bank of India. The goal of the proposal is to discourage large amount of cash withdrawal from bank accounts and support digitalization.
Pension benefit to certain sectors
Extension of the pension benefit to about three crore retail traders & small shopkeepers whose annual turnover is less than Rs 1.5 crore under a new Scheme namely 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.
Benefits to women entrepreneurs
- Continuation and expansion of programs such as MUDRA, Stand UP India and the Self Help Group (SHG) movement to encourage women led enterprises.
- Allowance of an overdraft of Rs 5,000 to every verified women SHG member having a Jan Dhan Bank Account.
- Allotment of a loan up to Rs 1 lakh under the MUDRA Scheme to one woman in
Access to capital markets for social enterprises
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 organizations working for the realization of a social welfare objective so that they can raise capital as equity, debt or as units like a mutual fund. This move will take capital markets closer to the masses and meet various social welfare
objectives related to inclusive growth and financial inclusion.
Promotion of Electronic Vehicles
- Envision India as a global hub of manufacturing of Electric Vehicles and inclusion of Solar storage batteries and charging infrastructure to boost demand.
- Suggestion to GST council to reduce GST rate on electric vehicles from 12% to 5%.
- Provision of additional income tax deduction of ` 1.5 lakh on the interest paid on loans taken to purchase electric vehicles to make electric vehicle affordable to consumers.
- Exemption of custom duty on import of certain electric vehicle parts
- Resolution of the “angel-tax” issue by introducing electronic verification for establishing investor identity and source of funds. The start-ups and their investors who file requisite declarations and provide information in their returns will not be subjected to any kind of scrutiny in respect of valuations of share premiums. With
this, funds raised by start-ups will not require any kind of scrutiny from the Income Tax Department.
- Arrangements to be made by Central Board of Direct Taxes (CBDT) for pending assessments of start-ups and redressal of their grievances.
- Proposal to relax some of the conditions for carry forward and set off of losses in the case of start-ups.
- Extension of the period of exemption of capital gains arising from sale of residential house for investment in start-ups up to 31.3.2021
- Exemption from provisions of income tax law to Investment by Category II Alternative Investment Funds (AIF)
- Launch of an exclusive TV channel to promote start-ups, and discuss issues affecting their growth, matchmaking with venture capitalist, funding and tax planning.
Exports and imports
- Rationalization of export duty on raw and semi-finished leather to provide relief to this sector
- Increase in custom duty on gold and other precious metals from 10% to 12.5%
- Increase in basic customs duty on various items such as automotive parts, optical fibres, optical fibre bundle and cables in order to promote Make in India
- Exemption from basic Customs duty will be provided to military equipment and parts not being manufactured in India, on import by Ministry of Defence (MoD) or armed forces of specified military.
To conclude, Sitharaman’s budget is a welcome attempt to promote digital, inclusive and prudent growth. Our hearts are indeed filled with “hope, trust and aspirations” as we set out to hit the $5 trillion mark.
- Tanvi Loond is Founder and CEO, Insta C.A. Views are the author’s own.