Pragmatic and policy directional Budget to bring Achhe Din and ease of doing business: ICAI
The Institute of Chartered Accountants of India (ICAI) welcomes the ‘Pragmatic and policy directional’proposals outlined by the Hon’ble Finance Minister in the Union Budget 2015.
CA. Manoj Fadnis, President ICAI said “Proposal outlined by the Union Finance Minister such as Abolishment of Wealth Tax, Rationalization of Corporate Tax Structure, Removing uncertainty over DTC, with clear roadmap for financial discipline and consolidation are the need of the hour. We are also happy that the Government reaffirmed its commitment to introduce GST from April 2016. This will truly revolutionize the indirect tax structure in the Country.”
He acclaimed the proposal to change the definition of Chartered Accountant under Section 288 of the Income-tax Act, 1961 thereby ensuring independence of the auditors in the overall interest.
Manoj Fadnis said “This is in line with the directions of ICAI Council which is hereby given recognition under income-tax Act too”. The Budget 2015-16 has been presented when Indian Economy has embarked upon a high growth trajectory and global economy is facing a downturn. With Growth Rate expected to be 7.4%, Inflation touching negative level (in terms of Whole-Sale-Price Index i.e. WPI), Current Account Deficit (CAD) moving towards less than 1.3% of GDP and maintaining fiscal deficit of 4.1 % of GDP in 2014-15, the Indian Economy is expected to achieve dream double digit growth in near future.
The Finance Minister stressed upon the need of continuing fiscal prudence and fiscal consolidation for the desired macroeconomic outcome. Game changing reforms like GST, Jan Dhan, Aadhar and Mobile (JAM) for direct transfer benefit will help in fiscal consolidation and reduction of leakages. Government reaffirmed its commitment to achieve its target of Fiscal Deficit reaching 3% of GDP over a period of 3 years.
ICAI Vice President CA. M. Devaraja Reddy commended the excellent steps taken by the Finance Minister towards social security, Make in India and financial inclusion.
The Institute of Chartered Accountants of India specifically welcomes the following proposals of the Union Budget 2015-16:
1. Curbing Black Money
Curbing Unaccounted Money is the first and foremost pillar of Mr. Arun Jaitley’s tax proposals in Union Budget 2015-16. Ever since the NDA Government came into power nine months back, tracking down and bringing back the wealth parked in offshore territories has been high on its agenda. In this Union Budget, it has come out with a series of tax proposals to effectively and forcefully deal with the problem of black money.
In this direction, CA Manoj Fadnis hailed the proposal to introduce a Bill in the current session of the Parliament to specifically deal with black money stashed away abroad.
CA Manoj Fadnis said “Stringent penal and prosecution provision are in the right direction to deal with the black money and its concealment with effectively and forcefully. Chartered Accountants can play an effective role in curbing the black money in tandem with the spirit of the budget.”
As regards curbing domestic black money, the Finance Minister proposed to introduce a Benami Transactions (Prohibition) Bill in the current session of the Parliament.
Stringent penal and prosecution provisions have been laid down under the Income-tax law for evasion of tax in relation to concealment of income and foreign assets, which include rigorous imprisonment upto ten years. Such offence will be “predicate offence” under the Prevention of Money Laundering Act, 2002. The same would be non-compoundable and the offenders will not be permitted to approach the Settlement Commission. Non-filing of return or filing of return with inadequate disclosures would be punishable with rigorous imprisonment of up to seven years.
Real Estate had been a significant contributor to generation and holding of black money in the form of benami property. The proposed tax measures include barring acceptance of cash advance of Rs.20,000 or more in case of immovable property transactions. It is hoped that the new bill which is proposed to be introduced will effectively plug the loopholes.
For effective enforcement of the tax measures to curb black money, CBDT and CBEC will leverage technology and have access to information in each other’s database.
Through these strong measures, the Finance Minister has aimed to keep a tight check on black money. This would go a long-way to prevent tax leakage.
2. Minimum Government and Maximum Governance
The Union Budget 2015-16 has used tax as an instrument to achieve “Minimum Government and Maximum Governance” and introduced a series of measures, including simplification of tax procedures.
On the Direct Taxes front, increase in monetary limit by Rs.10 lakh for a case to be heard by a single member bench of ITAT will declog cases pending before the Tribunal. Abolition of wealth-tax is a welcome measure. Increase in domestic transfer pricing threshold limit would reduce compliance burden would considerably reduce the administrative hassles of the small taxpayers.The ambiguities in the provisions relating to indirect transfers have been suitably addressed in this Union Budget to eliminate scope for discretionary exercise of power. The clarification that the presence of fund manager in India would not constitute PE would encourage offshore fund managers to relocate to India, without fear of any adverse tax consequences. Also, the steep reduction in the rate of income-tax on royalty and fees for technical services from 25% to 10% would have the positive effect of promoting inflow of technology to small businesses at low costs. The Finance Minister’s reassurance that the Government would avoid resorting to such provisions would surely boost investor confidence.
As regards Indirect Taxes, the facility of providing online central excise and service tax registration within two working days will promote ease of doing business. Further, allowing Central excise and service tax assessees to issue digitally signed invoices and maintain electronic records will significantly reduce paper work and red tape.
3. Benefits to middle class taxpayers
On the personal taxation front, the objectives emerging from the tax proposals are encouraging savings and promoting health care. These proposals usher in the concept of social security in the Indian tax regime. Further, there are added incentives especially for senior citizens and very senior citizens, which indicate the Government’s concern for the elderly.
The increased limits for deduction for contribution to pension fund and new pension scheme are positive measures to promote social security. Further, the enhancement in the limit for contribution of medical insurance premium both for senior citizens and others would certainly promote health care. The deduction for very senior citizens towards expenditure incurred on their medical treatment, in lieu of medical insurance premium, reflects the Government’s empathy towards the aged.
Further, the Government’s concern for the differently-abled persons is reflected in its proposal to provide additional deduction for such persons. Exempting all payments to beneficiaries from investments in Sukanya Samriddhi Scheme, a significant step of the Government’s “Beti Bachao Beti Padhao” campaign, mirrors the Government’s special interest in promoting higher education of the girl child.
4. Job creation through revival of growth and investment and promotion of domestic manufacturing and ‘Make in India’
The Government proposes a series of steps to attract domestic and foreign capital for creating jobs by reviving growth and investment and promoting domestic manufacturing as part of its ‘Make in India’ campaign. The most significant step in this direction is the deferral of the applicability of General Anti-Avoidance Rules (GAAR) by two years. The Finance Minister goes on to clarify that even when implemented, the same would apply prospectively to investments made on or after 1.4.2017. This is a undoubtedly a sure step to boost investor confidence.
Accordance of tax “pass through” status in respect of both Category I and Category II Alternative Investment Funds (AIFs) would boost the ability of these Funds to mobilize resources and increase investment in SMEs and infrastructure and social projects. Since REITS and InviTs play a significant role in reviving construction activity, the capital gains regime for sponsors exiting at the time of listing has been rationalized by making them eligible for exemption/concessional rate of tax, depending on whether the same is long-term or short term. The pass-through facility has been extended to rental income from REITs. These measures would facilitate new real estate and infrastructure projects to take off.
5. Indirect Taxes
On the Indirect Taxes Front, the Finance Minister in his budget speech has reaffirmed the NDA Government’s stand of introducing GST by April 1, 2016. In fact, by increasing the rate of service tax from the present 12.36% to 14% he has taken a significant step in this direction since under GST regime the rate of tax on services will go up as both centre and States will levy CGST on the same.Continuing the trend of pruning exemptions, which is also a pre-requisite for effective GST mechanism, this year too certain services under the negative list are being proposed to be brought under service tax levy. Further, few exemptions are also being withdrawn.
Minor tinkering has been done in excise duty rates by subsuming education cess and secondary and higher education cess in the basic rate itself and rounding it off. In other words, the rate has been changed from 12.36% to 12.50%.
6. Other Highlights
The Budget has rightly taken measures for strengthening the financial markets. Setting up of Public Debt Management Agency, merging of Forward Market Commission with SEBI, amendment of Section 6 of FEMA, proposing establishment of Sector Neutral Financial Redressal Agency and introduction of Indian Financial Code are the steps in these directions.
The budget has taken welcome steps for Financial Inclusion. Creating a functional Social Security System for all Indians especially for poor and underprivileged, pension schemes like Pradhan Mantri Jeevan Jyoti Yojna, accidental insurance for poor, enhancing allocation to MGNREGA etc. all aim to uplift the poor and the downtrodden.
The budget stressed upon improving the infrastructure of the country. Increased outlays of roads and railways, establishing National Investment and Infrastructure Fund (NIIF), issuing tax free bonds and increased emphasis on the role of Public Private Partnership all directed towards strengthening the backbone of the economy i.e. Infrastructure.
Manufacturing sector has always been the priority of the present government. Its dream project Make in India and Skill India have been further bolstered in the present budget. Rationalisation of direct and indirect tax structure, introduction of Online Excise and Service Tax Registration, launching of National Skill Mission, further strengthening Deen Dayal Upadhyay Gramin Kaushal Yojna for the betterment of poor students are steps in the right direction.