By Rahul Kakkad
The government has themed this budget on four major pillars i.e. Poor, Women, Youth and Farmers with focus on employment, skilling, MSMEs and the middle class with a total central outlay of around Rs 2 lakh crores over a 5-year period.
In line with the strategy laid down in the interim budget, this budget lays down a roadmap in pursuit of ‘Viksit Bharat’ with 9 priorities including agriculture, employment and skilling, manufacturing, infrastructure and steps have been taken in that regard.
It is also proposed to simplify the rules for FDI. While changes with respect to the same would be announced separately, liberalization to the FDI regime on multi brand retail would be closely looked at.
From a personal tax front, changes made to the new tax regime for individuals is expected to benefit the salaried employee up to Rs 17,500 in income tax leading to more disposable income which is a welcome move.
On the corporate front, a slew of measures have been announced including abolishment of angel tax, withdrawal of equalization levy, reduction in tax rates for foreign company from 40% to 35%, simplification/ reduction of TDS rates and simplification of re-assessment proceedings which is in line with the government’s objective to simplify taxes, provide tax certainty and reduce litigation.
On the flip side, there has been increase in tax rates for STCG from 15% to 20% and on the LTCG from 10% to 12.5% with an increase in STT on options to 0.1% from 0.0625% and on futures from 0.0125% to 0.02%. Further, buyback of shares has now been treated akin to distribution of dividend and taxed accordingly.
While increase in STT rates was somewhat expected, substantial increase in capital gains tax would surely dent the investor sentiments in the short term. Further, treating buyback of shares as akin to dividend has now reduced the scope of structuring the payments to shareholders in a tax effective manner.
On the indirect tax front, reduction of BCD on mobile phone, PCBA and charger from 20% to 15% should certainly bring about a reduction in the cost of mobile phones making them more affordable to the customers. Further, BCD reduction from 10% to 5% for gold and silver bars, gold and silver dores, etc. would surely boost consumer spends owing to overall reduced costs. Additionally, providing a boost to the leather and textile industry, BCD rates have been rationalized.
While there are no big bang announcements from a tax perspective, the government has taken focussed steps on rural development, manufacturing, skilling which would definitely provide an upliftment to the sector and pave the way for sustainable growth in the years to come.
Rahul Kakkad, Tax Partner – Consumer Products and Retail, EY India.
Views are personal and do not represent the stand of this publication.
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