Dr. Sanjiv Agarwal, FCA, FCS

Sanjiv Agarwal

The Union Budget for the year 2019-20, as laid in the Parliament on 5th July, 2019 is the first Budget of the new Union Government and so for the Union Finance Minister, a woman. While the Budget promises a host of plans, welfare schemes and developmental activities, here is a snap shot of the of the major offerings in terms of direct and indirect taxation in the backdrop of economic slowdown.

1. Direct Taxes Highlights and Select Proposals

  • Direct tax revenue increased by over 78% in past 5 years to Rs. 11.37 lakh crore
  • Tax rate reduced to 25% for companies with annual turnover up to Rs. 400 crores (earlier Rs. 250 crores).
  • Surchage increased for individuals having income from Rs. 2 crores to Rs. 5 crores
  • TDS of 2% on aggregate cash withdrawals exceeding Rs. 1 crore in a year from a bank account
  • Business establishments with annual turnover more than Rs. 50 crore shall have to offer low cost digital modes of payment to their customers and no charges or Merchant Discount Rate shall be imposed on customers as well as merchants.
  • Tax Simplification and Ease of living

> Interchangeability of PAN and Aadhaar: Return can be file using Adhaar instead of PAN and also Aadhaar can be used wherever PAN is required.

> Pre-filling of Income-tax Returns for faster, more accurate tax returns

> Faceless e-assessment with no human interface to be launched

  • Additional deduction up to Rs. 1.5 lakhs for interest paid on loans borrowed up to 31st March, 2020 for purchase of house valued up to Rs. 45 lakh.
  • E-Vehicles

> Additional income tax deduction of Rs. 1.5 lakh on interest paid on electric vehicle loans.

> Customs duty exempted on certain parts of electric vehicles.

> GST rate proposed to be reduced from 12% to 5%

  • Start-ups

> Capital gains exemptions from sale of residential house for investment in start-ups extended till FY21.

> Funds raised by start-ups to not require scrutiny from Income Tax Department

  • STT restricted only to the difference between settlement and strike price in case of exercise of options

B. Indirect Taxes Highlights and Select Proposals

a) Customs , Service Tax and Central Excise

  • Import duty on gold & precious metals increased to 12.5% from 10%.
  • Import of Defence equipment not manufactured in India exempt from Customs Duty
  • 5% Basic Custom Duty imposed on imported books.
  • Customs duty reduced on certain raw materials, like Inputs for artificial kidney, Capital goods required for manufacture of specified electronic goods, etc
  • Increase in Special Additional Excise Duty and Road and Infrastructure Cess each by Rs. 1 per litre on petrol and diesel
  • Legacy Dispute Resolution Scheme, 2019 for quick closure of pending litigations in Central Excise and Service tax from pre-GST regime
  • Service Tax (provisions shall apply retrospectively):

> No service tax shall be levied or collected in respect of taxable service provided or agreed to be provided by the State Government by way of grant of liquor licence, against consideration in the form of licence fee or application fee, by whatever name called, during the period commencing from the 01.04.2016 to 30.06.2017.

> Refund of tax already collected but which would not have been so collected shall be given and application for the claim of such refund shall be made within a period of 6 months from the date on which the Finance (No.2) Bill, 2019 receives the assent of the President.

> Special provision for retrospective exemption from service tax in certain cases relating to services provided by Indian Institutes of Management to students for period 1st July, 2003 to 31st March, 2016.

> Special provision for retrospective exemption from service tax in certain cases relating to long term lease of plots for development of infrastructure for financial business for 1st October, 2013 to 30th June, 2017

C. Goods and Service Tax (GST)

  • Acknowledges GST as a monumental tax reform in country
  • Praises cooperative federalism and efforts of GST Council
  • Admits teething problems in GST implementation, but considers it to be natural, looking to the scale of reform.
  • Stress on further simplification of GST processes, including simplified single return and e-invoice system.

GST revised collection for financial year 2018-2019 – Rs.  643900 crores

Budget estimate for GST collection for financial year 2019-2020 – Rs. 663343 crores

  • Changes in GST law

Changes proposed in CGST / IGST / UGST tax laws:

> ICGST

Insertion of new Section Relating to
31A Facility of digital payment  to recipient
53A Transfer of certain amounts
101A Constitution of National Appellate Authority for advance ruling and AAAR
101B Appeal to National Appellate Authority
101C Order of National Appellate Authority

> IGST

Insertion of new Section Relating to
17A Transfer of certain amounts by Government to State / Union Territory
103A Retrospective Exemption in relation to Uranium Ore Concentrate

> IUGST

Insertion of new Section Relating to
103A Retrospective Exemption in relation to Uranium Ore Concentrate

 Amendment in  CGST Law

Section Amendment
2 Adjudicating Authority to exclude National Appellate Authority
10 Alternative composition scheme for supplier of services or mixed suppliers
22 Higher threshold exemption for supplier of goods upto Rs. 40lakhs
25 Mandatory use of Aadhaar for taking GST registration
39 Quarterly payment / furnishing of annual return by composition suppliers
44 Commissioner empowered to extend date of furnishing annual return
49 Facility to transfer amount from one head to another in e-cash ledger
50 Providing for charging interaction net cash tax liability
52 Commissioner empowered to extend the date of furnishing TCS return
54 Central Government empowered to refund State tax to taxpayers
95 Seeking advance ruling from National Appellate Authority for Advance Ruling
102 National Appellate Authority empowered to rectify Advance Ruling
103 Ruling of National Appellate Authority to be binding to all persons having same PAN
104 National Appellate Authority Ruling to be void if obtained through fraud, suppression etc
105 National Appellate Authority to have powers of civil court under CCP, 1908
106 National Appellate Authority to regulate its own procedures
168 Commissioner to exercise power u/s 44 & 52 with approval of CBIC
171 National Anti-Profiteering Authority empowered to impose penalty @10% of profiteered amount

These  proposals shall come into force on enactment of Finance Bill, 2019 and / or on issuance of Notification, wherever prescribed.

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