The Budget was more focused on investment-led growth and reforms, boosting the country's entrepreneurial system with the poor and farmers being the centre of most of the programmes/ reforms
Finance minister Nirmala Sitharaman presented her maiden Budget laying down a roadmap for a New India taking forward the vision for the decade with a goal to turn India into a $5 trillion economy in the next few years. The Budget was more focused on investment-led growth and reforms, boosting the country's entrepreneurial system with the poor and farmers being the centre of most of the programmes/ reforms.
Like a big bang reform, there is a proposal to relax the local sourcing norms for FDI in Single Brand Retail Trade (SBRT). Currently, the regulation provides for a 30% local sourcing, preferably from MSMEs, village and cottage industries, artisans and craftsmen where the FDI exceeds 51%. This move to ease the sourcing conditions should positively impact the sector owing to higher FDI inflows since existing foreign players reluctant to increase FDI beyond 51% as well as new foreign players reluctant to enter the sector in India will surely revisit their investment plans.
The Budget also proposes to introduce a new scheme namely Pradhan Mantri Karam Yogi Maandhan Scheme (PMKYMS) to extend the pension benefits to approximately 3 crore retail traders and small shop keepers assuring them a minimum monthly pension of Rs 3,000 per month after attaining the age of 60 years. All small shopkeepers and self-employed persons as well as the retail traders with GST turnover below Rs 1.5 crore and age between 18-40 years, can enrol for this scheme based on self-declaration and no documents are required except Aadhaar and bank account. Further, the government will make a matching contribution to the subscriber's account. This proposal seeks to address one of the long pending demands of the Confederation of All India Traders (CAIT) boosting the retail traders and shopkeeper's sentiment while assuring financial security. Further, Rs 350 crore has been allocated for 2019-20 for 2% interest subvention for all GST registered MSMEs, on fresh or incremental loans up to Rs 1 crore through a dedicated online portal.
The government also proposes to replicate the Zero Budget farming model nation-wide so as to help double the farmer's income by 2022, which would also facilitate the ease of doing business for farmers. To promote digital payments and to move towards a cashless economy, a 2% TDS is proposed on cash withdrawals exceeding Rs 1 crore in a year. Further, business enterprises with an annual turnover exceeding Rs 50 crore would be required to offer low-cost electronic modes of payment without any charges or merchant discount rate imposed on customers as well as merchants.
There are further reforms/ relaxations for eligible start-ups around carry forward and set-off of losses, conditions for claiming capital gain exemptions on transfer for residential property for investment in start-ups, etc. On the corporate front, the reduced tax rate of 25% is proposed to be applicable to all companies having a turnover of up to Rs 400 crore as against Rs 250 crore currently.
While there were expectations around relaxing the stringent conditions in the multi-brand retail sector, reduction in corporate tax rate for all assessees which the Budget doesn't address, this is a balanced Budget which strikes the right balance between maintaining the fiscal deficit expectations while catering to the needs of the farmers, consumers and the middle class.
Paresh Parekh, tax partner, EY
(Views expressed are personal)
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