Union Budget 2019: The Budget has shown resilience of a test batsman where the positives lie in nuances, and has kept away from a flurry of boundaries that become interim talking points
By Vivek Sharma
Budget 2019In cricket terminology, Budget 2019 appears to have geared towards sound batting as against explosive hitting. The emphasis has not been towards any particular sector. Neither on reduction in rate of tax to spur demand. The nuances in tax laws appear to have continued with fitments of fundamentals. The Aadhaar Act stood the scrutiny before Constitution Benches of the Supreme Court. In K Puttaswamy vs UOI, it was held that the Aadhaar Act is not in violation of rights enshrined in the Constitution. In another challenge, in Binoy Viswam vs UOI, quoting of Aadhaar number in PAN application in the income tax return was upheld. The Budget has now proposed usage of Aadhaar and PAN interchangeably for income tax purposes, and authentication by submission of proof of Aadhaar number across customs and GST laws.
The direct tax proposal aimed at the super-rich by way of surcharge has taken FPIs, operating as AOPs, by surprise. The recent downward spiral in markets is attributed to this. The debate on whether FPIs were intended to be covered by this provision continues. It is settled jurisprudence that tax laws are strictly construed. If certain FPIs find themselves within the contours of the law, tax would follow, unless clarified otherwise. The stand of the Revenue appears it is not targeting FPIs, and FPIs have an option to convert into corporate entities to avail lower rate of tax. The buyback tax introduced in the Budget on listed companies may result in revisit of such arrangements. The Budget proposed a concessional rate of tax of 25% on corporates with a turnover of less than Rs 400 crore in FY18. Start-ups were in the news on share premium issues and tax implications thereon. The Budget has kept start-ups, who file requisite declarations, away from detailed scrutiny on share premium transactions.
There was clamour on divergent views taken by the Advance Ruling Authorities sitting in different states on identical questions. The Budget proposed a National Advance Ruling Authority to set such divergent views to rest. The Budget has also green-lighted transfer of any amount of tax, interest, penalty, fee available in the electronic cash ledger of CGST Act to that of IGST/SGST/UTGST Act. It has sought to rationalise the computation of interest on delayed furnishing of return to be effectively levied on the cash payment of tax. The Budget proposed a class of registered persons mandated to provide electronic payment modes to the recipient of supply of goods or services made by him. The insertion in the law appears to be geared towards digital payments and availability of transparency to the Revenue authorities to track payments. There is also an amnesty scheme to get rid of legacy indirect tax litigation.
Industries such as automobiles were seeking rate relaxation. One argument was that high-end cars are not required to be treated along with sin goods and applied GST at the highest slab of 28%. Other sectors also demanded rate rationalisation. There was expectation that reduction in rates may stimulate demand and drive the economy. But GST revenue collection in the recent past has looked promising only in spurts. With this, the Revenue and the GST Council appear not to have gone for any significant rate rationalisation.
The course adopted towards working the fundamentals may have jettisoned any big takeaway from the Budget. Headline news of rate reduction, particular sectoral benefits that become talking point for industry, eludes this Budget. However, the Budget has sought to ease many practical difficulties that were being faced by the industry. From the perspective of everyday working, the Budget may have a positive effect on trade.
The Budget appears to have shown the resilience of a test batsman where the positives lie in minute nuances. The Budget has kept away from a flurry of boundaries that become interim talking points. It could have been apt if certain relaxation in tax rates were provided to get behind the trade for generating the necessary stimulus. The Budget may have missed a run or two there. Barring the FPI conundrum and buyback arrangements, the Budget appears to have worked at addressing fundamental issues around tax laws.
The author is partner, Sarvada Legal. Views are personal