Tag: Budget Analysis

Budget 2020: FM ticks all the right boxes for infrastructure push, but implementation is key

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The infrastructure sector has special attention in Budget 2020. Economically, it makes more sense to create capital assets to boost economic growth – it generates employment, facilitates better standard of living and the return from capital asset helps service debt. This option is likely to have the most immediate and stimulating effect; as per the Reserve Bank of India, the economic impact of capex in infrastructure could be 1.81.

The government had already announced the National Infrastructure Pipeline (NIP); an ambitious Rs 1 trillion plan covering all the sectors of infrastructure. Amidst the sluggish economic growth, the government’s continued focus on building physical as well as social infrastructure reiterates the eminence of infrastructure sector in India’s growth story.

The government’s intention of paving the path for private sector inclusion for faster development is evident from this budget viz. PPP model for agriculture warehousing, hospitals, smart cities and station redevelopment.

The announcement of development of 100 more airports, which is in line with the NIP’s vision of India entering the top two aviation markets by 2025, is likely to give a boost to the aviation sector and go a long way in fulfilling the UDAAN scheme of the government. Though announced in Budget 2019 and recognised by NIP, reforms for maintenance, repair and overhaul (MRO) industry found no place in the budget. We hope that MRO finds its own space in the next year’s budget allocation.

Single-window e-logistics market

The proposal to introduce a National Logistics Policy which would create a single-window e-logistics market is likely to bring efficiencies and reduce the bureaucratic hurdles.

For augmenting the solar power sector, the government has proposed the inclusion of farmers by providing solar pumps and solar power generation capacity on barren land. In order to make railways cost effective and green, it is proposed to consider generation of solar power on land owned by railways alongside railway tracks.

The government has proposed replacement of conventional meters by smart meters in the coming three years which would help reduce power distribution losses. The government also seems to have acknowledged the industry’s needs and indicated that measures to bring relief to power distribution companies (DISCOMs) would be proposed.

On the tax front, an extension of a beneficial corporate tax rate of 15 percent (earlier provided for new ‘manufacturing’ companies only) to new companies engaged in the generation of electricity is a welcome move. Further, abolition of DDT is also likely to mitigate inefficiencies in case of multiple SPV structures, which are peculiar to the infrastructure sector.

Infrastructure creation has had its own share of hurdles. A key issue affecting the sector is the liquidity crunch. The government has indicated that infrastructure finance companies such as IIFCL and NIIF would leverage the equity support granted to them in order to create financing pipeline for the infrastructure sector. Further, the proposed tax exemption on investment income earned by a foreign sovereign wealth fund from new investment (whether debt or equity) in infrastructure companies viz roads, ports and airports is likely to open their coffers and thus is a clear boost to foreign investment and greater fund generation.

Inclusive mindset

The proposed setting up of project preparation facility to boost infrastructure projects by harnessing the talent pool — young engineers, management graduates and economists — is also an indication of the inclusive mindset of the human capital in the government’s infrastructure agenda.

One of the themes of Budget 2020 was caring society. The government has proposed phasing out of the thermal power plants having carbon emission higher than prescribed norms. This bold step appears to be an effort to contribute to the global goal of reducing carbon footprint and encouraging green economy. However, the government would have to walk a tightrope to balance the power requirement and attaining carbon efficiency.

Budget 2020 seeks to tick the right boxes by continuing to recognise infrastructure spend as a tool to revive the investment cycle and foster growth by increasing public spending in capital formation. Having said that, the success of infrastructure would depend on the implementation and monitoring the projects put to use.

Samir Kanabar is Tax Partner at EY India. Ankit Kochar and Kajal Mukhi, senior tax professionals, have contributed to the article.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Budget 2020: New income tax regime may put taxpayers in a dilemma

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Finance Minister Nirmala Sitharaman mentioned in her budget speech that It is almost impossible for a taxpayer to comply with the Income tax law without taking help from professionals and in order to simplify the law, she proposes a new personal income tax regime which is optional in addition to the existing one. On the contrary, a taxpayer will need more professional help for selecting the suitable option given two choices. Her new optional Income Tax regime which basically forgoes exemptions for lower tax rates has put the taxpayers in dilemma whether to opt for the new one or stay in the older one.

The new tax structure has introduced new slabs between the Rs 5 lakh and Rs 15 lakhs where the rates applicable to each slab are lower as it may be seen in the table below:

An analysis of the tax slabs paints a totally different picture and instead of a tax benefit, there is a clear additional tax burden. If we consider a person earning Rs 15 lakh a year and not availing any deductions he would have a tax liability of Rs 1.95 lakh as per the new regime (wherein he forgoes all deductions)  indicated by the FM as compared to Rs 2.73 lakh earlier which is a clear saving of Rs 78,000.

However, that is not the case because the salaried employee would under the old regime avail the flat standard deduction of Rs 50,000. In addition, he would have tax exemption on his HRA if rent is paid. In case the employee has taken a loan to purchase a house he gets dual benefits. Deduction of principal from his gross income as well as tax benefits on interest paid. It is very unlikely that an individual earning Rs 15 lakh per annum may not have bought insurance or not investing any tax saving scheme like PPF, Sukanya Samriddhi Yojana or ELSS. Also, currently interest income up to Rs 10,000 in a financial year from saving bank account can also be considered as tax free after claiming deduction u/s 80TTA. The taxpayers will lose the benefit if they opt for the new tax regime and it will be taxable at the tax rate applicable to them considering their overall income during the financial year.

For example, a salaried individual earning Rs 15 lakh per annum will pay an income tax of Rs 1.95 lakh in new regime compared to Rs 1,23,600 after considering the benefit of standard deduction if he opts for old tax regime assuming that he invests Rs 1.50 lakh in various tax schemes u/s 80 C of Income Tax act, additional Rs 50,000 in NPS u/s 80 CCD (1B) of income tax act, pays a premium of Rs 25,000 for a health insurance plan and pays Rs 2 lakh towards the interest against the home loan he has availed for the house he purchased for his personal use.

More administrative work

The optional tax regimes will put an additional burden on HR and will become an administrative nightmare. Employees earning more than Rs 5 lakh will have to decide on the tax regime they would want to choose. HR departments would require setting up counseling centres to explain to employees the pros and cons of choosing a particular path. Though you have the choice to consider the option in your interest at the time of filing your Income Tax Return, yet your employer may not allow you changing the option during the financial year once selected in the beginning.

Whatever process the HR department chooses it is very clear that this will add to the administrative work and the FM’s claims of simplifying tax apparently go up in smoke. Secondly, freshers and employees in lower tax brackets may feel that there is no incentive for tax saving and may opt for the new regime. The mandatory saving not only helps in tax saving but also develops saving habits in young taxpayers that helps in long term wealth creation.

From April 1, 2020 all dividends paid to shareholders will be taxed in the hands of investors at their applicable slab rates. Hence, FM has moved the liability of paying tax from the firms to the investors. Though it is in the interest of investors especially who are in lower tax bracket, yet the calculation will be little complicated, and it may require professional help. Moreover, the Finance Bill introduces TDS (Tax deduction at source) on both capital gains and dividend income from mutual funds. The TDS of 10 percent would be applicable for dividend income received from one fund house in a financial year exceeds Rs 5000.

Pankaj Mathpal is the managing director of Optima Money Managers Pvt Ltd.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Budget 2020: Impetus to domestic industry, cess on medical device import right steps

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Finance Minister Nirmala Sitharaman’s second budget carried with it a number of expectations and the central one from an indirect tax perspective was that she will promote Make in India. The theme of Budget 2020 centrally revolves around three aspects: Aspiration, economic development and compassion. The FM has emphasised in her speech that GST reforms continue to be a priority and has reinforced the government’s intention of implementing simplified returns from April 1, 2020. Also, the e-invoicing mechanism proposed by the GST Council will be implemented in a phased manner from this month (on optional basis) with the aim of facilitating compliance.

This year’s Union budget, as expected, continues to maintain its focus on the ‘Make in India’ policy. In order to boost India’s domestic labour-intensive sectors, this budget increases the customs duty on articles like furniture and footwear. It has been proposed to levy a nominal health cess on the import of medical equipment. This will give impetus to the domestic industry and also generate resources for health services in the country.

One of the pillars of Digital India initiative has been to build domestic capacity in electronics by bringing net electronic imports in India to zero by FY 2020. In order to synchronise the electronics industry with “Make in India” and “Digital India” a Phased Manufacturing Programme (PMP) was initiated since 2017 with an objective of imposing Basic customs duty on import of parts of mobile phones to create incentives to manufacture/ assemble in India. However, for some parts industry has been representing to defer PMP till the capacity building for that product happens in the country. Also, some components have not fully achieved the manufacturing ecosystem in the country and this budget intends to further increase the customs duty on such items to create the necessary disability for importing those components.

Incentivising mobile phones manufacturing

Accordingly, the basic customs duty on PCBA has been increased from 10 percent to 20 percent and charger/power adaptor of cellular mobile phones has increased to 20 percent. Further, BCD on headphones and earphones will be increased to 15 percent. The withdrawal of exemption from BCD on fingerprint readers/ scanner for use in manufacture of cellular phones will lead to an effective rate of 15 percent. Exemption of social welfare surcharge on specified items as information technology software, microphones, PCBA, loudspeaker and set top boxes have been withdrawn. These measures would lead to incentivising manufacturing of mobile phones in India and promoting exports of the same. Also, the custom duty rate of electric vehicles has been increased with the same objective of reducing the focus on imports and the promotion of local manufacturing of eco-friendly technology. On the other hand, exemptions have been granted to inputs and raw materials used in the manufacture of certain parts of mobile phones which will aid the domestic manufacturers in reducing their cost of manufacturing.

From a common man’s perspective also, there is some relief in this budget such as concessional import duty rates have been prescribed for products such as milk, butter, cheese and ghee. Apart from some concessions, there has been an increase in import duty on household articles such as tableware, kitchenware as well as some domestic appliances, basically to promote domestic manufacturing by the MSME sector.

The budget also tends to strengthen anti-dumping duty measures and countervailing duty measures to avoid circumvention and also lays down stringent guidelines for administration of Rules of Origin to avoid misuse of FTA benefits. A concept of electronic duty credit ledger has been introduced and will be used to regulate the passing on of incentives to genuine taxpayers and avoid the misuse of benefits available in FTP.

From GST perspective, certain amendments have been incorporated in the central Goods and Services Tax, 2017 and the Union Territory Goods and Services Act, 2017 for improving compliance and putting in effect the decisions of GST Council. The government has taken further stringent measures in this budget in order to curb fraudulent practices such as issuance of fake invoices or availment/utilisation of credit on the same. Suitable amendments have been made in the Act to make the offence of fraudulent availment of input tax credit without invoice or bill cognisable and non-bailable.

Overall, the Budget is focussed on boosting the manufacturing sector in India and improve the ease of business as well. While the budget matched what the industry was expecting, there needs to be an alignment of incentives and production subsidy to create the necessary ecosystem to promote manufacturing in India. While the tariff barriers will create sufficient disability to serve the Indian market, the necessary ecosystem needs to be developed for the products manufactured in India to be competitive in global markets to promote export to harness the true potential of the labour-intensive industries. In this regard, acknowledging assemble in India as an end in itself is a step in the right direction at this juncture.

Bipin Sapra is Partner -Indirect Tax at EY India. With inputs from Pratiksha Dhawan, Manager.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Budget 2020: FM puts wealth creation and investments before fiscal restraint

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Budget 2020 was keenly awaited for the reforms to be announced by the finance minister to stimulate consumption and investments and revive growth. True enough, clearly recognising that the way to welfare and creating jobs is through wealth creation and investments, the Budget proposes several measures towards this end.

One of the most discussed aspects just ahead of the Budget was the pressure on government tax revenues in the wake of a nominal growth slowdown and the tax cuts announced for the corporate sector. In the interest of growth, the government accepted a fiscal deficit slippage for FY20 and FY21 by margins of 0.5 percent points each from their respective targets at 3.3 percent and 3 percent of GDP. The focus in the coming year will be on how the tax revenue numbers measure up help contain the deficit at the proposed levels.

The latest actual data of tax revenue for FY2020 brings out that for the first time since FY2010, there was a contraction in the Centre’s gross tax revenues in the first nine months of FY20 by 2.9 percent. In the case of corporate tax, the contraction was 13.6 percent. The personal tax revenues grew by 5.1 percent while indirect taxes grew by only 0.1 percent up to December 2019.  The revenue targets for the Centre’s gross tax revenues for FY20 RE envisage a growth of 19 percent.  The assumed buoyancy for FY21 (BE) for gross taxes is 1.2 while the buoyancy achieved for FY20(RE) is only 0.5. This seems ambitious considering the current economic slowdown and recent performance of tax revenue.

Notably, the personal tax buoyancy is assumed at 2.4 for FY20, which is much higher than that in the last two years. Perhaps the government expects some gains from the Vivad Se Vishwas scheme for reducing direct tax litigation. With about Rs 10 lakh crore disputed amount stuck in direct tax litigation, a positive response to the litigation settlement scheme can yield significant revenues. However, the timeframe provided for the scheme is short and the government should consider at extending the time beyond March 31 for taxpayers to comply.

Abolition of dividend distribution tax

Foregoing Rs 25,000 crore, the FM accepted the industry’s ask to remove the tax on distributed dividends and to tax them in the hands of recipients at their applicable rate. To remove the cascading effect, a deduction will be allowed for the dividend received by holding company from its subsidiary. Reverting to the classical system of taxing dividends will be particularly advantageous to foreign investors as they can claim treaty benefit of lower rate of tax, usually at 10 percent to 15 percent, instead of 20 percent. Also, they can now claim a foreign tax credit in their home country for tax paid on dividend in India. Shareholders in high tax brackets may have to bear a higher tax burden on the dividend income received. However, this is justified in the interest of equitous and progressive taxation. The government is confident of its advanced tracking systems to ensure that there no tax avoidance.

However, there is a need to review the dividends provisions in terms of their impact on REITs / Infratructure Investment Trusts, more so when the government is looking at monetising its assets through REITs. Till now, dividend received by REIT/InvIT from 100 percent SPV was not liable to DDT and not taxable either in the hands of REIT/InvIT or investors. This was based on rationale that SPV paid tax on rental and other incomes earned and hence there is a single point of taxation. But as per the Budget proposal, the unitholders will need to pay tax on dividend income from SPV, received and distributed by REIT/InvIT, leading to double taxation in the hands of SPV and unitholders. This will adversely impact return in the hands of unitholders.

The Budget focuses on many measures to attract foreign investment in India by sovereign funds and foreign portfolio investors. In a relief to non-residents receiving only royalty and FTS income from India on which tax is deducted at 10 percent plus surcharge and cess, the exemption is provided from filing the return of income, thus saving the non-residents from prosecution risk of non-filing of returns.

The government recognises that wealth creation is essential for welfare. Tax reforms too are focused on stimulating investments, simplification and ease of paying taxes – the right direction for facilitating economic growth.

Shalini Mathur is Director, Tax and Economic Policy Group at EY India.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Here’s why deductions shouldn’t be done away with in the new income tax regime

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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In a country where social security is next to zero, pensions are nearly nonexistent, healthcare is unaffordable and post-retirement life is still based on children’s duty to care for the parents, the budget has shown tremendous moral bankruptcy to kick-start consumption in the economy.

Arguments like ‘if you don’t take deductions then new income tax regime is beneficial for you’ are farcical, to put it charitably. In a country where financial planning is a laborious chore before the income tax filing season, what the government should have done was allow more deductions instead of embarking on a path of reductive binary.

The FM has told Network 18 in an interview that the taxpayer is smart enough to decide. If that is true, we would not have so many chartered accountants. In fact, CAs would be salivating at the prospects of more business due to the complex tax system.

This isn’t a debate about letting people choose between the old income tax regime and the new one, as the finance minister would like to believe. This is a debate between do you want to nudge people to save more or not?

According to The Economic Times, over the years, the gross financial savings of Indian households have been range bound — around 9-10 percent of GDP. But net financial savings available for growth is falling. It fell from 7.2 percent of GDP in 2011-12 to 6.5 percent in 2017-18.

Clearly, households are borrowing more and lifestyle changes are afoot. There isn’t anything wrong with people making these choices. But in a country where children are seen as ‘retirement plans’ it becomes the duty of the government to force people to save. This budget takes a dangerous turn from that.

If anything, four major components; the house-rent allowance (HRA), tax deductions on certain investments, life and health insurance and rebate on interest for a house loan must not be taken away from income tax deductions.

These four, in the absence of any social security provided by the government, become the responsibility of the taxpayer themselves. According to this LiveMint report, more than half of Indians don’t have a health cover. And a majority of the rest have inadequate health insurance covers. In other words, most citizens opt for health insurance to take benefit of the income tax deductions rather than their actual needs. It is the same in case of investments. The fact that most of the salaried class rush to ‘invest’ in mutual funds, provident funds, et al between January and March 31, is a testament that the idea is to save on income tax rather than plan for the future.

In such a situation, the FM giving people the option to opt out of these deductions completely will wreak havoc on already feeble financial literacy in India. By the way of these deductions, at least people were forced to make some decisions around their future financial wellbeing.

With the option done away with, coupled with the absence of financial literacy programmes starting from school and the overall apathy of social security and post-retirement money needs, the new income tax regime is set to be a disaster for India’s future generations.

The Reserve Bank of India (RBI)’s committee on household finance in 2017 found only 23 percent people saving or planning to save for retirement in 2016. Less than 30 percent insurance policies make it to their sixth year. The report further stated, as late as 2031, the number of Indians over the age of 65 likely to be dependent on their children for their financial needs post retirement stood at over 50 percent. Simply put, even 11 years from now, more than half of India’s senior citizenry will have zero financial plans to sustain their retired life.

This is more pronounced when one looks at data at the lower economic strata. Nearly half of the workers from the unorganised sector failed to contribute the required Rs 1,000 over a year in National Pension Scheme (NPS).

Indians are saving lesser

The debate between saving and consumption gains more importance due to a biting economic slowdown. Indians are anyway saving lesser by the day. The country’s gross saving rate for 2019 was 30.1 percent – a multi-decade low. This means an average Indian household saved Rs 30.1 for every Rs 100 earned. In 2018, this saving rate stood at 32.4 percent. Clearly, Indians are consuming more and saving less. Buying a house is an unaffordable mountain of debt for most.

According to an RBI Residential Asset Price Monitoring Survey in 2019, housing affordability worsened over the past years with Mumbai retaining the top slot. Given this, the HRA deduction is paramount as people spend anywhere between 30 and 60 percent of their monthly incomes on house rents.

The debate isn’t whether you will save more tax in the new or the old income tax regime. The debate is whether, in a country with no financial plan for the future, prohibitive medical expenses, inadequate insurance covers and houses that may need you to pay EMIs way past your retirement, the government is justified to not incentivise citizens to invest money in financial assets?

Therefore, even if the new tax regime effectively lowers your income tax outgo, there is still a case for those deductions to continue.

In a country where investments are largely a last-minute process just to save income tax, it then becomes the moral duty of the government to force its taxpayers to save money for later life and other goals. Nirmala Sitharaman, by beginning on the journey to take away benefits of these deductions, has only set course for moral bankruptcy that a democratic government should refrain from at all costs.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

The Budget has taken another brick out of the walls protecting Indians from anarchy

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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When it was all over, the crowd turned on Ruby Batham, kicking and hitting her before someone finally did her the mercy of smashing her skull in with a rock. Police watched. Batham’s husband, Subhash, had held 23 local children hostage, threatening to execute them as an act of vengeance against those, he claimed, had framed him for murder. For the mass-circulation, Amar Ujala, the murder of his wife was her own fault: “How can we let them go”, it reported Ruby Batham as saying, with troubling itself with citing a source, “these kids are worth Rs 1 crore each”.

The murder of Ruby Batham isn’t the only savagery we haven’t chosen to dwell on this week gone by: There were the terrorist attacks by Hindu nationalists on New Delhi’s Shaheen Bagh protests; the brutal beatings administered to a woman schoolteacher by Trinamool Congress workers; the acid attack on a Hapur teenager unwise enough to complain to police that she had been raped.

India’s biggest national security threat isn’t in Kashmir or Chhattisgarh: It is the complete vanishing of the rule of law in giant swathes of the Republic’s territory. This year’s budget commitments for policing have taken one more brick out of the walls protecting us from anarchy.

In 2020-2021, Rs 784.53 crore has been budgeted for the modernisation of state police and India’s national criminal database, down from Rs 939.79 crore spent in 2019-2020. Though cash might be short, depressing reading isn’t: The Intelligence Bureau will spend just Rs 83.50 crore of its  Rs 2575.25 on capital acquisitions, this at a time new challenges across the region are mounting. capital expenditure on police training is just Rs 21.69 crore, and forensic science Rs 15.41 crore.

Compare that with the Rs 145.20 crore budgeted for capital expenditure on the Special Protection Group, which guards the prime minister, or the Rs 222.63 the Delhi Police has got—and you get a good sense of what VIPs actually care for.

Law enforcement system is at breaking point

These funding cuts are coming at a time it’s clear the law enforcement system is at breaking point.  The implosion of the Haryana Police along caste lines in 2016, searingly documented in Prakash Singh’s official investigation; the failure of intelligence services and police to contain violence after the arrest of Ram Rahim Singh; the near-collapse of the state across southern Kashmir in 2018: Together, these provide graphic illustration of what India’s future might be looking like.

The key to understanding why police forces are overstretched is the stark fact that there just aren’t enough personnel. The United Nations recommends that nation states maintain 250 police officers per 100,000 population. India has vowed, repeatedly, to move towards that target but has miserably failed.

In 2007, Indian police forces were sanctioned 1,334,344 personnel, 411,871 of those committed to everyday duties, and 1,746,215 as armed reserves to be used in emergencies. For a projected population of 1.140 billion, that meant 153 police officers for every 100,000 people. Today, Bureau of Police Research and Development statistics show, there are 192 officers sanctioned for every 100,000 of India’s 1.287 billion residents — but because of budget constraints, India actually has only 150.80 police officers per 100,000 population, below the sanctioned level even for 2007.

Uttar Pradesh should have 185 police officers per 100,000 citizens; it has 127. Telengana should have 218; it has 131. Bihar doesn’t even pretend to aspire to United Nations norms, yet its sanctioned strength of 121 per 100,000 population is far higher than its actual numbers, a pathetic 73 per 100,000.

Even worse, the police we have aren’t trained or equipped. In 2016-2017, the last year for which figures are available, just 44,083 police personnel across the country received any form of in-service training: 0.03 percent of the national police force. Little spending, the BPR&D records, actually went into improvising the capability of police forces: Combined state and central government spending on modernisation of facilities, the BPR&D records, stood at just Rs 7,356.18 crore, or less than 7 percent.

For all the talk of smart policing and modernisation, most state governments have been reluctant spend cash to fix these problems. In 2017-2018, according to BPR&D statistics, India’s states and union territories together spent

Rs 108,174.88 crore on police forces: up just 1.39 percent in nominal terms. In no states barring Tamil Nadu, Telengana and Delhi did spending on police constitute more than 2 percent of the state budget.

Even in relatively well-administered Maharashtra, scholars Renuka Sane and Neha Sinha have found that “budgets, as they stand, barely allocate funds for operational expenses of running police stations, or maintenance costs for computer systems, arms and ammunition”. The cuts in central funding for state police forces will, obviously, accentuate the crisis.

Poor investigation, corruption and incompetence thus characterise the criminal justice landscape: Eroding the legitimacy of law-enforcement, and the law itself. Instead of building a modern criminal justice system, we’ve been reduced to lynching people on the streets. Like the crowds who gathered at football stadiums in Kabul to witness Taliban executions-by-stoning, we gawp at ball-by-ball commentary on the hangings of rapists; this simulacrum of justice is all that remains when hope has been lost for the real thing.

Lack of law and order 

The United States, with a far smaller population than India, spends over $100 billion a year on policing, New York alone will spend $5.6 billion this year, with $107 million dedicated to training, and another $187 million to intelligence and counter-terrorism. China is estimated to have spent more on internal security than on defence this last decade. No genius needed to understand why: A society that can’t ensure law and order is one that is headed into the abyss.

Indians can’t complain they weren’t warned. In 1953, the first issue of the national Crime in India survey warned that “the old fear which the police used to inspire among criminals has dissipated”. The reasons were clear, even then: “India has the lowest number of policemen per 100,000 of the population”; in rural areas, the police “had ceased to exist as an effective force”. Lack of funding had meant “there had been no improvement in methods of investigation, or the application of science”.

“All these handicaps continue to exist,” the survey recorded the next year, in 1954. “We make the same suggestions we made the last year.”

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Budget 2020: Indirect tax tweaks to incentivise domestic manufacturing, curb revenue leakage

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Against the backdrop of global pessimism on growth, increased fiscal deficit and continuing credit issues the finance minister presented her second budget for year 2020-21. The budget proposals revolved around three broad contours namely Aspirational India, Economic development for all and Building a Caring Society.

From an indirect tax standpoint, the finance minister indicated that the landscape has significantly changed with the implementation of the Goods and Services Tax (GST) which has successfully moved from infancy to toddler stage. While no major changes have been proposed under the GST framework, the finance minister has reinforced the timelines for introduction of new return formats and implementation of e-invoicing in a staggered manner. The shift in compliance framework is expected to curb revenue leakages due to bogus invoicing and reinstate credit matching concept. The other indirect tax proposals are largely focused to promote the flagship project of the government, namely, ‘Make in India’, digital economy or quantum technology and reducing import dependence.

From the standpoint of customs laws, there have been some major fiscal and non-fiscal announcements. On the fiscal front, the government has introduced Health Cess at the rate of 5 percent ad valorem on import of medical equipment to promote domestic manufacturing. The medical devices which are otherwise exempt from the levy of Basic Customs Duty (BCD) or inputs/parts used in manufacture of medical devices will be exempt from levy of Health Cess. Likewise, an increase in import duty has been proposed on import of various products both by way of increase in BCD rate and withdrawal of earlier exemption from BCD / Social Welfare Surcharge. The select imported products which are likely to get impacted due to increase in customs duty rate include specified parts/components for power transmission projects, compressors of refrigerators/air-conditioners, optical disk drives, MP3 or MP4 or MPEG4 players etc. Withdrawal of exemption may have an inflationary impact on such items.

In order to incentivise domestic electronic industry, the government has proposed to increase BCD on Printed Circuit Boards Assembly (PCBs) of cellular mobile phones from existing rate of 10 percent to 20 percent with effect from April 1, 2020. Further, exemption from BCD on Ringer, Display Assembly and Touch Panel used in manufacture of mobile phones is proposed to be withdrawn and a levy of 10 percent is proposed to be introduced as per Phased Manufacturing Programme (PMP), in a phased manner by October 1, 2020. However, parts used for manufacturer of Ringer, Display Assembly and Touch Panel have been exempted from BCD to encourage value addition / set up of downstream manufacturing of components / parts of mobile phones in India.  The finance minister also announced that a new scheme will be launched for encouraging manufacture of mobile phones, electronic equipment and semiconductor. The details of the scheme will be known in due course. Likewise in the auto sector, the BCD on electric motor vehicles under PMP has been proposed to increase by 5 percent to 15 percent depending upon the manner of import (like CBUs/SKD/CKD) to encourage domestic manufacturing.

Impetus to digital economy

On the non-fiscal front, more stringent compliance requirements have been introduced for administration of Rules of Origin under Free Trade Agreements (FTA). Certain obligation has been cast on the importer to possess sufficient information to prove country of origin criteria. In case of a failure to submit these information in a timely manner, the customs authorities can deny benefit of reduced BCD under FTAs. Further, the powers conferred upon the Central government to prohibit uncontrolled importation of any goods which cause injury to the economy of the country are likely to raise a new line of disputes between importers and the customs authorities.

With the overwhelming response from Sabka Vishwas Scheme which was introduced last year to settle pending disputes under Excise and Service Tax, the government has introduced similar scheme for pending disputes under the Income Tax Act under the name of ‘Vivad se Vishwas’ Scheme (no dispute but trust), however, there has been no announcement for coverage of disputes under Customs Law.

With a special impetus to the digital economy and startups, a new faceless assessment scheme has already been introduced in the last year’s budget. In order to impart greater efficiency, transparency and accountability, the finance minister has proposed faceless appeal on the lines of faceless assessment. Freeing taxpayers from tax harassment has been a stated objective.

The overall theme of the budget proposals on indirect taxes are expected to bring ease of doing business and foster domestic manufacturing, although the announcements fall short of India Inc. expectations of bold policy measures for revival of derailed economic growth and consumption.

Gautam Khattar is Partner – Indirect Tax with PwC India. Kishore Kumar, Director – Indirect Tax also contributed to this article.

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Budget 2020: Telecom sector left high and dry, cash flow problem may intensify

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Budget 2020 depicts the finance minister’s desperate attempt to balance and contain fiscal deficit while attempting to generate adequate revenue amidst the dwindling business scenario. While rural upliftment, infrastructure development and digitalisation at large has been the focus in the policy initiatives of the government, the telecom industry, which plays a pivotal role in paving the way to facilitate economic development and growth, has once again been left in the lurch.

Burdened with enormous AGR demands, which are threatening the very survival of the industry players, the sector had pinned high hopes on the Budget for a roadmap for revival of the industry and provision of requisite respite and relief to the cash-starved industry. The budget, however, has not addressed the concerns of the industry.

Though the renewed focus of the government on promoting the manufacture of mobile phones locally in India, as enshrined in the policy announcements, would provide impetus to a particular segment of the telecom industry ecosystem, this move alone may not be sufficient. While one may also see incidental positives in some of the direct tax proposals such as introduction of taxpayer’s charter in the legislation to remove hardship and harassment, faceless appellate proceedings, introduction of a dispute settlement scheme in the form of ‘Vivad Se Vishwas Scheme’, reduction of withholding tax rate on fee for technical services to 2 percent (as against existing rate of 10 percent), critical demands of the industry remain unanswered. From an indirect tax perspective, the positive is reassurance on digital issuance of refunds to exporters without any human interface, which is already implemented.

Ever-increasing losses

Neither the policy announcements nor the tax proposals provide any succour to the telecom companies, which is reeling under the financial burden of AGR demands, protracted tax litigation, blockage of tax refunds resulting in unfavourable cash flow position and ever-increasing losses. In fact, the proposal requiring payment of 20 percent of the tax demand for a stay on demand by the tax tribunals, would result in further cash being blocked in litigation.

On an overall basis, it may not be incorrect to say that the budget has failed to deliver on the expectations of the industry and provide much required financial relief.

The budget announcements have yet again left the sector, which is one of the essential and critical sectors of the economy, high and dry.

Vishal Malhotra is Tax Leader – Telecom and Rohit Verma is Director – Tax and Regulatory Services at EY India.

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Budget 2020: Why the easing of ESOP taxation rules is a boon for startups

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Budget 2020 brought cheer to certain startups by way of relief from payment of taxes on employees’ stock options (ESOPs) at the point when the potential gains of ESOP are still unrealised.

Startups use ESOPs to attract and retain highly talented employees as well as compensate them adequately without taking a hit on their cash flows. From the point of view of the employees, the perquisite tax on ESOPs is triggered at the time of allotment of shares, pursuant to the exercise of stock options. However, at this point, since there is no liquidity for these shares, the employees have to make the tax payment out of their pocket, resulting in the employees not viewing the ESOPs favourably, especially those who have ESOPs as a significant component of their compensation.

The Budget 2020 proposes to defer the timing of payment of taxes on ESOPs to earlier of:

1. Five years from the end of the financial year in which allotment of shares is made.
2. Until the employee leaves the company.
3. Until the employee sells the shares.

The taxes on the ESOP should be paid within 14 days of the occurrence of the above event.

However, the above relaxation does not apply to all startups recognised by the Department for Promotion of Industry and Internal Trade (DPIIT), but only those companies set up between April 1, 2017 and March 31, 2020 and are approved by the inter-ministerial board of the government.

ESOPs are still taxable

The important point to note is that there is still no change in the taxation of ESOPs from the present tax law. ESOPs are still taxable at the time of exercise of stock options by the employee i.e. on the allotment of shares. The tax is determined as the fair market value of the shares allotted at the time of exercise, reduced by the option price paid by the employee. Subsequently, the shares once sold, are subject to capital gains tax.

While the above proposal is a good move towards handholding startups during their initial phase of liquidity crunch, the ask of the wider startup community may be that the relaxation be extended to all startups recognised by the DPIIT.

In addition to the above, the finance minister also proposed additional relief measures to the startup community by offering 100 percent deduction in profits for three consecutive tax years in a 10-year window (increased from earlier seven-year window), for eligible startups having turnover of up to Rs 100 crore (increased from earlier Rs 25 crore). The government has also committed to provide early seed funding for ideation and development in early-stage startups.

Shalini Jain is Partner, People Advisory Services at EY India.

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Budget 2020: A sneak peek at CNBC-TV18’s star studded coverage

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Union finance minister Nirmala Sitharaman will present the union budget for the fiscal year 2020-21 on Saturday (February 1).

Sitharaman’s second Budget, to be presented on February 1, is expected to announce measures to restore economic growth and to set out a clear road map for achieving the ambitious target of $5 trillion economy by 2025.

Where can the budget be seen?

All national channels will telecast the budget live from the Parliament. You can watch the budget speech live on DD News’ Youtube channel, Lok Sabha TV.

To watch the budget speech live with live analysis go to  CNCB-TV18.com click here.

For all major LIVE updates on the Budget speech, click the Budget 2020 tab on CNCB-TV18.com homepage and get instant updates on the live blog.

You can also download the CNBC-TV18 Online app from Google play store, and the iPhone store to get all important alerts, notifications on Union Budget 2020.

Commencement of union budget speech

The union finance minister will begin her budget speech at 11: 00 am in Parliament.

Readers can also download the budget document from the Government of India official website after the budget will be tabled in the Parliament.

Pre-Budget

CNCB-TV18.com will be covering the pre-budget session with well-known names like legendary investor Mark Mobius; Sajjid Chinoy, chief India economist, JPMorgan; Jahangir Aziz, head, emerging market economist, JPMorgan; Arundhati Bhattacharya, former State Bank of India (SBI) chairman among others will provide rolling coverage of the Budget 2020.

LIVE Budget Analysis

During the budget, HDFC chairman Deepak Parekh; C. Rangarajan, economist & former RBI Governor; Nirmal Jain, chairman of IIFL Finance, will give a minute-by-minute analysis of Nirmala Sitharaman’s announcements.

Post Budget

A galaxy of corporate bigwigs, market veterans and policymakers will scan each and every announcement of Nirmala Sitharaman during the budget and provide specific sector-wise analysis. For this, we have Amitabh Kant, NITI Aayog CEO; Sanjiv Goenka, RP-SG Group chairman will be present.

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