The Finance Minister rose to present his third budget by stating that the global economy is weak but India has done well. With a fiscal deficit target of not exceeding 3.5% as budgeted, the Finance Minister surely seems to have done his bit to make it happen.
Considerable emphasis has been laid on boosting agriculture and social sector reforms, and at the same time the Finance Minister has given his best shot on aspects of managing fiscal discipline through simplification and rationalization of taxes, steps towards ease of doing business and making a sincere effort to reduce prolonged tax litigations.
The Finance Minister’s speech on few occasions did mention about startups and how the Indian government is determined to make India the next startup capital of the world. In addition various policy announcements on financial sector reforms is a welcome step.
On direct taxes, Mr. Finance Minister has shown his clear intention towards giving priority to the fiscal discipline by reducing exemptions, tax holidays, incentives and moving towards a low corporate tax rate.
The Finance Minister very clearly seems to have focused on empowering the ‘Make In India’ initiative by removing customs and excise duty exemptions on a variety of goods. The thrust seems to be more on electronics, hardware and the infrastructure industry where duty exemption has been provided to imported parts and components used in manufacturing of various electronic and hardware goods. These exemptions are available only when the companies import such items for their actual use.
Prolonged litigation seems to have taken a toll on Government’s administration machinery and this seems to be corrected by proposing a one-time Dispute Resolution Scheme allowing the tax payer to settle the tax dispute pending with the first appellate authority.
The Budget also seems to encourage ‘export of goods’ by not only announcing a widening of the duty drawback schemes but also providing a retrospective amendment to allow refund of credit on services used beyond the factory gate for manufacture of goods subsequently exported out of India.
On the aspects of ease of doing business that has been one of the mantras of Mr. Narendra Modi to the investors, few measures seem to be visible on a first look of the Finance Bill. Increase in monetary limits for prosecution, restricting the situations for arrest of defaulting taxpayers and introducing the provisions for deferred payment of customs duties for certain classes of importers and exporters seem to be a welcome measure.
Overall, the Budget seems to be quite populist with a larger focus on creating value addition in India, remove cascading effect by streamlining credit mechanism and create a conducive environment for doing business with ease.
About the Author- International Business Advisors (www.ibadvisors.co) is a boutique audit, tax and consulting firm run by ex-BIG4 professionals and working extensively with multinational companies operating in varied sectors including e-commerce, mobile, manufacturing, real-estate and hospitality. IBA operate out of its offices in Delhi, Mumbai and Bangalore.