Union Budget 2019: The government has set the aspirational target of taking it to $5 trillion by FY25 with considerate focus on three main growth pillars: investments in infrastructure, digital economy and job creation.
Budget 2019 India: Finance minister Nirmala Sitharaman presented her maiden Budget with encouraging remarks that the Indian economy had reached from $1.85 trillion in FY14 to $2.7 trillion by FY19. The government has set the aspirational target of taking it to $5 trillion by FY25 with considerate focus on three main growth pillars: investments in infrastructure, digital economy and job creation.
From an indirect tax standpoint, the FM indicated that indirect tax landscape has significantly changed with the implementation of GST, which subsumed 17 taxes and 13 cesses into one single tax. The teething problems with regard to GST implementation have more or less settled and there is a considerable reduction in tax rates on majority of goods and services in the last two years. Now there has been buoyancy in revenue collections. The GST Council is further aiming towards simplifying GST processes.
In this regard, the proposal for a single monthly return has been rolled out. Furthermore, taxpayers with annual turnover of less than Rs 5 crore are required to file GST returns on a quarterly basis. The FM also highlighted its recent proposal to move towards electronic invoicing from January 2020, which is expected to reduce the compliance burden and will eventually phase out the e-way bill system. Other GST proposals such as facility to transfer the cash balances available in the electronic cash register from one head to another head for discharge of tax liability, payment of interest on net cash tax liability, constitution and other administrative aspects relating to setting up and functioning of National Appellate Authority Ruling, etc, are welcome provisions to boost the confidence of India Inc in the new tax regime.
Other indirect tax proposals are largely focused on promoting ‘Make in India’, reducing import dependence, protection to MSMEs and promoting clean energy. Defence being the priority sector, the government has proposed to exempt the import of defence equipment that are not manufactured in India, from the levy of the Basic Customs Duty (BCD). This exemption has a sunset clause of June 30, 2024.
In order to provide the domestic industry a level-playing field, BCD is being increased on certain items such as cashew kernels, PVC, auto parts, CCTV camera, IP camera, digital and network video recorder, etc. Also, BCD exemptions on certain electronic items such as microphones, receivers, SIM sockets and connectors for use in cellular mobile phones, etc, which are now being manufactured in India, are being withdrawn.
To further promote domestic manufacturing, customs duty reduction is being proposed on certain categories of raw materials and capital goods such as inputs for manufacture of artificial kidneys and disposable sterilised dialyser and fuels for nuclear power plants. At the same time, special additional excise duty and road and infrastructure cess has been proposed to be increased on petrol and diesel by Rs 1 a litre. Customs duty on gold and other precious metals has been increased from 10% to 12.5%.
The Budget proposals has specific mention towards the use of cleaner energy and providing affordable and environment-friendly public transportation options for the common man. The government has sent a proposal to the GST Council for reduction in GST rate on EVs from the current 12% to 5%. Also, an income tax rebate scheme has been proposed providing a rebate of Rs 1.5 lakh on interest on loan to the buyer to boost the sector.
In order to curb bogus transactions and unfair trade practices relating to misuse of duty free scrips and drawback of value more than Rs 50 lakh, prosecution provisions have been made more stringent by making such unfair practices cognisable and non-bailable. The government is mindful of the fact that the GST regime is two-year old. Despite this, India Inc is grappling with large pending litigations pertaining to the erstwhile tax regime. Realising the need for minimisation of tax-related disputes and focus on restructuring of tax administration, the FM has proposed to roll-out a Legacy Dispute Resolution Scheme to facilitate trade and industry in quick closure of pending disputes.
The government has laid the foundation for India’s growth and development for the times to come. With a special impetus on digital economy and start-ups, the government is likely to transform the current assessment model to faceless e-assessments involving no human intervention. To begin with, such faceless assessment shall be carried out in the sphere of direct taxation and will eventually be rolled out under indirect taxes as well.
(Gautam Khattar is partner, Indirect Tax, PwC India and the article has inputs from Kishore Kumar, director, Indirect Tax.)