Business Today

Reform, Perform, Transform

The Budget is promising and instils hope for a holistic economic order in coming years
Mukesh Butani | Print Edition: July 28, 2019
Reform, Perform, Transform
Representative Image

In what can be claimed as an incremental Budget, the larger message of Finance Minister Nirmala Sitharaman is clear on redistribution of wealth and reinforcing the transparency agenda. With a host of administrative tax reforms, including faceless assessments, the bedrock of Budget 2019/20 appears to rest on stimulating growth, simplifying tax administration, digitisation of the economy, improving the ease of doing business and boosting the 'Make in India' initiative. It aspires to make India a $3 trillion economy by the end of the financial year, and lays guidance for the $5 trillion-mark by 2025.

There are no major policy shifts such as the introduction of wealth tax or inheritance tax. But, the FM has tinkered with several provisions for revenue mobilisation, digitalisation of cash transactions for establishing trail, surge in exports, harsher measures on tax evasion and obliterating unethical practices. The entire reform package is in line with Prime Minister Narendra Modi's vision of 'Minimum Government, Maximum Governance'.

On revenue mobilisation side, the introduction of two levels of surcharge on individual income over Rs 2 crore will upset the oppulent upper class. The Budget, however, had no room for the lower or middle-class tax sops. The increase in turnover threshold for 25 per cent corporate tax is a relief for most companies, though large conglomerates have little to cheer. The FM did emerge as an 'angel' for start-ups. To resolve the Angel Tax controversy that revolved around valuation of share premiums, the 'no scrutiny' policy is a much-needed breather. Its effectiveness will be tested. This would undoubtedly lift spirits of start-ups. However, India is far from awakening animal spirits to unleash the Startup India Vision 2024 of the Department for Promotion of Industry and Internal Trade for 50,000 start-ups with employment capability of two million. The budget has several measures to boost the construction sector such as the interest rate deduction for low-cost housing.

Faceless income tax e-assessment with no human interface is going to be a game changer. The efficacy of its phased implementation will be tested. This, coupled with TDS on large cash withdrawals and mandate prescribed on digital payment options (to businesses with turnover exceeding Rs 50 crore) is an impetus to the government's long-standing objective of creating a cashless digital economy.

The technology-driven tax administration proposal found a place on the GST side as well, though the simplified GST return form and proposal to introduce e-invoicing are mere reiterations of the GST Council proposals. The highlights were instead on the Customs part. The FM proposed several tweaks on import tariffs of intermediary and finished goods, probably to strike a balance between curbing import of finished goods and advancing the government's 'Make in India' initiative to promote domestic manufacturing.

The FM addressed the inverted duty structure issue that domestic manufacturers dealt with. Import of construction materials, precious metals, automobile parts, several electronic and electrical equipment would get costlier, thereby providing an inverse stimulus to manufacturing sector and boosting exports growth. The amnesty scheme for legacy dispute resolution under the erstwhile service tax and excise laws was aimed at unlocking over Rs 3.75 lakh crore involved in pending cases. Relief under the scheme varies from 40 per cent to 70 per cent of the tax dues for matters other than voluntary disclosure cases, depending on the quantum of tax dues. It provides for full relief from payment of interest and penalty. This could unclog the dispute resolution machinery.

Overall, the Budget is promising and instils hope for a holistic economic order in coming years. Now we await the new Direct Tax Code.

The author is Founder, BMR Legal. Advocates Joseph K. Antony, Bhagyashree and Riya Gupta assisted him.

  • Print
A    A   A