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The minister of finance Shrimati Nirmala Sitharaman presented the budget 2020-2021 on February 1, 2020. The budget 2020-2021 concentrated mainly on three important themes.These include aspirational India, economic development and aiming for a society that is humane and caring.
This article covers Budget 2020 highlights in respect of various amendments and provisions proposed by the government.
For improving compliance a new Chapter VAA (a new section 28DA) is being incorporated in the Customs Act to provide enabling provision for administering the preferential tariff treatment regime under Trade Agreements.
The proposed new section seeks to specifically provide for certain obligations on importer and prescribe for time bound verification from exporting country in case of doubt.
Pending verification preferential tariff treatment shall be suspended and goods shall be cleared only on furnishing security equal to differential duty.
In certain cases, the preferential tariff treatment may be denied without further verification.
Major Amendments in CGST Act
a. For Facilitating Trade or Consumer
- The date of issuance of debit note has been delinked from the date of issuance of the underlying invoice. This has been done to simplify the claiming of input tax credit.
- A provision has been inserted for cancellation of voluntary GST registration for distinct persons.
- Provision has been inserted to empower the jurisdictional tax authorities to extend the date for application of revocation of GST Registration cancellation. This power can be used in deserving cases.
- TDS Deductor would now no longer be required to issue TDS Certificate as per the new amendment as such a requirement has been removed. Accordingly, the corresponding rule with regards to late fees for delay in issuance of TDS certificate has also been omitted.
- A provision has been inserted to allow jurisdictional commissioner to exercise powers in respect of:
- determining fees of chartered accountant or cost accountant to carry out special audit in cases where he considers such an audit necessary and
- Notifying goods that can be supplied by the Principal from the place of a Job Worker without declaring such a place as his additional place of business
b. For Improving Compliance
- Certain categories of taxable persons are excluded from the purview of the Composition Scheme. These include persons who:
- Provide services not chargeable to tax under CGST Act
- Inter-State outward supply of services
- Outward supply of services via an e-commerce operator
- A provision has been inserted to charge penalty even from the beneficiary who claims ITC fraudulently. Furthermore, the penalty in such a case is similar to the one that is charged on the person who commits such an offence.
- A provision has been introduced with regards to a person claiming fraudulent ITC without invoice or bill and the person causing such an offence. This provision states that such an offence would now lead to a punishment and would be non-bailable and cognizable.
c. Other Changes
- An amendment has been made to bring the provision of Appellate Tribunal under CGST Act, 2017 in the Union Territory of Jammu and Kashmir and Ladakh.
- Provisions in respect of transitional ITC are amended to lay out the time period and manner for availing such a transitional credit.
- As per the CGST Act, the government could pass orders to remove any difficulties arising in the implementation of the GST Act. Such orders could not be passed after the expiry of three years from the date of implementation of the GST Act as per the initial provisions. This period has now been extended from 3 to 5 years.
- Goods or services being supplied by the way of transfer of business assets without any consideration would now be omitted from Schedule II of CGST Act, 2017.
d. Retrospective Amendments
- Any central tax, union territory tax and integrated tax paid on fishmeal for the period July 1, 2017 to September 30, 2019 would now be exempted. But GST paid on supply of fishmeal during such period would not be refunded.
- A reduced rate of 12% IGST, that is 6% CGST and 6% UTGST shall apply on pulley, wheels and other parts that are used as parts of agricultural machinery between July 1, 2017 and December 31, 2018. But GST paid at a rate higher than 12% shall not be refunded.
- Refund due to Inverted tax in respect of tobacco products is disallowed with a retrospective effect from 1st July 2017.
Corporate Tax Rate
Corporate tax rate for new companies in the manufacturing sector has been set at a low rate of 15%. Likewise, Corporate tax rate for the existing companies has been reduced to 22%, thus making Corporate Tax Rates in India lowest in the world.
Income Tax Slabs
In order to simplify the direct tax law and extend relief to the taxpayers, a new and simplified personal income tax regime has been proposed. Under this regime, the government proposes to reduce income tax rates significantly. Following table showcases the new income tax slabs as suggested by the government:
|Taxable Income Slab||Existing Tax Rates||New Tax Rates|
|Above 15 Lakh||30%||30%/td>|
The new income tax regime would be optional for the taxpayers. In other words, taxpayers availing higher amount of deductions and exemptions under the Income Tax Act can opt for continuing income tax payment as per the old regime.
Furthermore, the government has also introduced measures for prefilling the Income tax returns. This will help the taxpayers adopting the new regime to file returns and pay tax without any help from the tax professionals.
Reduction in rate of Tax Deduction at Source (TDS)
The government proposed to reduce the rate for TDS in case of fees for technical services (other than professional services). The rate has been reduced to 2% from the current 10% in order to bring at par with the TDS rate on works contract.
Raising of Limit For Tax Audit
The government proposed to increase the limit for tax audit from existing Rs. 1 crore to Rs. 5 crore. Provided where cash receipt is not more than 5% of total receipt and cash payment is not more than 5% of total payment.
Furthermore, the government proposed that a tax audit report must be filed a month before the due date of filing income tax return.
As per these changes, the due date for filing of income-tax returns is proposed to be amended from 30th September to 31st October of the relevant assessment year.
At present, the government allows an additional deduction of up to Rs 1,50,000 for interest paid on loans sanctioned upto 31st March, 2020 in respect of purchase of an affordable house.
The government in budget 2020 proposed to extend the date of loan sanction to March 31, 2021. Therefore, as per this provision, this deduction can be availed on the loans sanctioned for purchase of an affordable house upto March 31, 2021.
In addition to this, to encourage supply of affordable houses, the government has provided a tax holiday on the the profits earned by the developers on affordable housing projects that are approved by March 31, 2020.
Furthermore, the government has proposed to extend the date of approval of affordable housing projects to claim the tax holiday to March 31, 2021. Therefore, developers can claim tax holiday on affordable housing projects approved by March 31, 2021.
Removal of Dividend Distribution Tax
Currently, companies distributing dividends are liable to pay Dividend Distribution Tax (DDT) at the rate of 15% plus Surcharge and Cess on the dividends given to the shareholders for the shares held by them.
This is in addition to the tax paid by the company on its profits. In the Budget 2020, the government has proposed to remove DDT and shift to a classical system of taxing dividends in the hands of shareholders.
Incentives to Start-Ups
Government has introduced various measures in order to boost start-ups in the country. Employee Stock Option Plan (ESOP) forms an important component for the compensation of employees.
Start-Ups usually offer ESOPs so as to attract and retain highly skilled employees. However, at present ESOPs are taxed as perquisites given to the employees.
This increases the tax burden for all those employees who opt not to sell the shares immediately but to hold them for a longer term.
To boost the start-ups in India, the government in the Budget 2020 proposed to defer the tax payment on these ESOPs by five years or till the employee leaves the company or when the said employee sells those shares, whichever is earliest.
(ii) Increase in Turnover Limit For Claiming Tax Exemption
Furthermore, in order to provide tax deduction of 100% of its profits to larger start-ups, the government proposed to increase the turnover limit for claiming tax exemption from existing Rs. 25 crore to Rs. 100 crores.
In addition to this, the government also proposed to extend the period of eligibility for claim of 100% deduction from the existing 7 years to 10 years.
TDS on E-commerce Transactions
Government proposed that e-commerce operators need to deduct TDS on all payments and credits made to ecommerce participants at the rate of 1% in cases where such participants have PAN/Aadhaar and 5% in cases where participants do not have PAN/Aadhaar.
This is undertaken to widen the tax net. Further, it is also proposed to exempt TDS to individuals and HUF receiving less than Rs 5 Lakhs from and furnishing PAN/Aadhaar to e-commerce operators.
Amendment of Residential Status
Changes are suggested in the criteria for residential status of the individuals residing in India. Accordingly, it is suggested to reduce the time of stay in India from 182 days to 120 days for an Indian citizen or person of Indian origin to become resident in India.
Consequently, it is proposed to relax the provision of “resident but not ordinarily resident”. Thus, a resident who has been non-resident in seven out of ten previous years would be resident but not ordinarily resident.
Furthermore, the government also proposed that an Indian citizen who is not liable to tax anywhere in the world would be deemed to be resident in India.
Changes in Factor Regulation Act 2011
The government proposed to make changes to the Factor Regulation Act 2011. Such changes will allow the NBFCs to extend invoice financing facility to the MSMEs via TReDS. This will enhance the economic and financial sustainability of the MSMEs.
Working Capital Credit
The government proposed to introduce a scheme that provides subordinate debt to the MSMEs. Such a subordinate debt would be extended by the banks, treated as quasi-equity and fully guaranteed via the Credit Guarantee Trust for Medium and Small Entrepreneurs (CGTMSE).
App Based Invoice Financing Product
Government has proposed to launch an app-based invoice financing loans product. This will remove the issue of delayed payments and the resulting cash flows mismatches for the MSMEs.
Audit of Books of Accounts
At present, business entities having turnover of more than Rs 1 Crore are liable to get their books of accounts audited by an accountant.
So, to ease the compliance burden on MSME stakeholders such as retailers, traders etc, the government proposed to raise the turnover limit for audit from Rs 1 Crore to Rs 5 Crore.
Furthermore, in order to encourage less cash economy, the government proposed that this turnover limit would be applicable only to business entities which have less than 5% of their business transactions in cash.
Public Sector Banks
- Robust mechanism is in place to monitor the health of all Scheduled Commercial Banks and that depositors’ money is safe.
Goal of Doubling Farmers’ Incomes
Government is dedicated towards the goal of doubling farmers’ incomes by 2022. It intends to achieve this through schemes like:
- Paramparagat Krishi Vikas Yojana
- PM Fasal Bima Yojana
- Krishi Sinchai Yojana
Expansion of PM-KUSUM
The government proposed to expand the PM-KUSUM Scheme in order to provide 20 lakh farmers the facility to set up stand-alone solar pumps. In addition to this, it also intends to help 15 lakh farmers to solarise their grid-connected pump sets.
Kisan Rail Scheme
Indian Railways would set up Kisan Rail via PPP arrangements. This will allow for building a seamless national cold supply chain for perishable items including milk, meat and fish. Accordingly, there would be refrigerated coaches in Express and Freight trains as well.
Krishi Udaan Scheme
The Ministry of Civil Aviation proposes to launch Krishi Udaan on international and national routes. This will help in improving value realisation in North-East and tribal districts.
Increase of Artificial Insemination
The government proposes to eliminate certain diseases in cattle, sheep and goats by 2025. Accordingly, it plans to increase the coverage of artificial insemination from the present 30% to 70%.
Goal to Increase Fish Production
Youth residing in coastal areas derive benefits through fish processing and marketing. Therefore, the government intends to increase fish production to 200 lakh tonnes by 2022-23.
Further, the government intends to involve youth in expansion of fishery through 3477 Sagar Mitras and 500 Fish Farmer Producer Organisations. Thus, the government hopes to increase fishery exports to Rs 1 lakh crore by 2024-25.
Apprenticeship Embedded Degree/Diploma Courses
Government feels that the students in general streams including services or technology have the need to improve their employability. To meet their need, close to 150 higher educational institutions would start apprenticeship embedded degree/diploma courses by March 2021.
Designing Bridge Courses
There is a huge demand for teachers, nurses, paramedical staff and care-givers abroad. But, there exists a gap in skill set required as per the employer’s standard and the one possessed by the individuals.
To help bridge the gap, the government proposed that special bridge courses must be designed by the Ministries of Health, Skill Development along with professional bodies.
Introduction of Ind-SAT Exam
The government intends to make India a preferred destination for higher education. Therefore, in Budget 2020, it proposed to conduct an Ind-SAT exam in Asian and African countries under the “Study in India” programme.
Increase in the Education Budget
The government in Budget 2020 proposed to allocate close to Rs. 99,300 crores for the education sector in 2020-2021. Furthermore, it also proposed to allocate close to Rs. 3,000 crores for skill development.
The government informed that it has put in place a robust mechanism in order to keep a check on the health of all Scheduled Commercial Banks, thus giving confidence that the depositors’ money is safe.
Furthermore, the Deposit Insurance and Credit Guarantee Corporation (DICGC) has been allowed to increase Deposit Insurance Coverage for a depositor from the current 1 lakh to 5 lakh per depositor.
Reduction in Limit For NBFC Under SARFAESI Act
The government proposed to reduce the limit for NBFCs that are eligible for debt recovery under the SARFAESI Act 2002. Accordingly, the limit is reduced from Rs 500 Crores to Rs 100 crore or loan size from existing Rs 1 crore to Rs 50 lakhs.
Separation of NPS From PFRDAI
The government intends to introduce Universal Pension Coverage along with auto enrolment to enable easy mobility in jobs. Furthermore, it intends to put into place mechanisms that will allow for interoperability.
Therefore, the government introduced requisite amendments in the Pension Fund Regulatory Development Authority of India (PFRDA) Act that will allow for separation of NPS trust for government employees from PFRDAI.
Government Holding of IDBI Sold
The government has taken sound steps to boost the banking system. In order to introduce greater private capital, the government has proposed to sell its balance holding inIDBI Bank to private, retail and institutional investors through the stock exchange.
Wellness, Water and Sanitation
More Hospitals Under PMJAY
Currently, there are more than 20,000 empanelled hospitals under PM Jan Arogya Yojana (PMJAY). Thus, in Budget 2020, the government declared that it feels the need to have more such hospitals in Tier-2 and Tier-3 cities for poorer people under this scheme.
“TB Harega Desh Jeetega” Campaign
To end Tuberculosis by 2025, “TB Harega Desh Jeetega” campaign has been introduced.
Extension of Jan Aushadhi Kendra Scheme
The government proposed to expand Jan Aushadhi Kendra Scheme to all districts offering 2000 medicines and 300 surgicals by 2024. Furthermore, it provided about Rs 69,000 crores for the health sector. This includes Rs 6400 crores for Prime Minister Jan Arogya Yojana (PMJAY).
Liquid and Grey Water Management
The government of India is committed towards Open Defecation(ODF). Accordingly, it feels the need to do more with regards to liquid and grey water management. It intends to focus on Solid waste collection, source segregation and processing.
Therefore, a total allocation of Rs 12,300 crore has been made for Swachh Bharat Mission in 2020-21.