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New Delhi
Thursday 23 January 2020

Congress-like Budget by BJP Govt

Reading out a mammoth document in the name of Budget 2014-2015, Union Finance Minister Arun Jaitley presented to Parliament on 10 July proposals that touch upon perhaps all aspects of governance, but it will take economists to get a sense of direction from the speech, as it had too much of minutiae as if prepared by a typical bureaucrat rather than a visionary politician.

This report covers the entire speech of the finance minister, but instead of placing things in his order of financial classification, सिर्फ़ News is placing it in the order of sectors of the economy. Money going into infrastructure development is the only thing that finds mention in different parts of this report, as almost every sector involves infrastructure. Our observations appear in bold fonts; appreciations are but more frequent, as we have not challenged many of the claims made by the minister.

The finance minister began his speech by acknowledging that that “the people of India have decisively voted for a change. The verdict represents the exasperation of the people with the status-quo.” Yet, no UPA scheme has been discontinued; on the contrary, they have been funded further. Some promises of novelty in the BJP manifesto and Narendra Modi’s election speeches before he became prime minister have got allocations of a few thousand crore. In the rest, the Budget proposals indeed look like a “laundry list of Rs 100 crores” as has been critiqued by Indian National Congress vice president Rahul Gandhi.

In a post-speech interview, Jaitley said he had no option but to first correct his predecessor’s wrongs. This means the people will have to wait for the subsequent, full-year budgets to see a clearer translation of Modi’s vision.

Like his predecessors, the new finance minister began by offering the ‘influence of global economy’ alibi. “As per IMF, the world economy is projected to grow at 3.6% in 2014 vis-à-vis 3.0% in 2013, with the Euro area expected to register a positive growth after the contraction witnessed in 2012 and 2013. However, the performance of the US economy with attendant implication for the unconventional monetary policy stance and global financial conditions is pivotal to the fate of global recovery in the coming years. These are the head winds against which the Indian economy will have to manoeuvre its way to attain high growth trajectory,” the minister said.

“The steps that I will announce in this Budget are only the beginning of a journey towards a sustained growth of 7-8% or above within the next 3-4 years along with macro-economic stabilisation that includes lower levels of inflation, lesser fiscal deficit and a manageable current account deficit. Therefore, it will not be wise to expect everything that can be done or must be done to be in the first Budget presented within forty five days of the formation of this Government,” said the minister, mixing optimism and realism.

the finance minister observed that “the decline in fiscal deficit from 5.7% of GDP in 2011-12 to 4.8% in 2012-13 and 4.5% in 2013-14 was mainly achieved by reduction in expenditure rather than by way of realisation of higher revenue. Although, the external sector witnessed a turn-around with the year ending with a Current Account Deficit of 1.7% of the GDP against 4.7% in 2012-13, this was mainly achieved through restriction on non-essential imports and slowdown in overall aggregate demand. Going forward, we must continue to be watchful of the CAD”. It is to be seen whether the little measures he has announced for every sector, the little tax exemptions and industry sops he has offered decreases the fiscal deficit, and whether the talk on exports reduces the current account deficit.

Jaitley conceded, “My predecessor has set up a very difficult task of reducing fiscal deficit to 4.1% of the GDP in the current year,” and added, ““Difficult, as it may appear, I have decided to accept this target as a challenge. One fails only when one stops trying.” He has set a tougher target of fiscal deficit of 3.6% for 2015-16 and 3% for 2016-17.”

An Expenditure Management Commission will be set up to look into various aspects of expenditure reforms to be undertaken by the government. “The Commission will give its interim report within this financial year,” the finance minister said.

He has also proposed to overhaul the subsidy regime, including food and petroleum subsidies, and make it more targeted while providing full protection to the marginalised, poor and SC/STs. A new urea policy will also be formulated.

Taxes
tax-photoThe minister told the House that he had discussed GST with the States “both individually and collectively”. He hoped the government is able to find a solution in the course of this year and approve the legislative scheme that enables the introduction of GST. “This will streamline the tax administration, avoid harassment of the business and result in higher revenue collection both for the Centre and the States. I assure all States that government will be more than fair in dealing with them,” Jaitley said.

Dealing the biggest jolt to investor confidence, the finance minister asserted that “the sovereign right of the government to undertake retrospective legislation is unquestionable”. This comes as a surprise to all who saw the retrospective tax proposal of former finance minister Pranab Mukherjee (now the President) as a retrograde and regressive step exemplified by the Vodafone case. As a saving grace, Jaitley said that he will exercise this power “with extreme caution and judiciousness keeping in mind the impact of each such measure on the economy and the overall investment climate”.

“This Government will not ordinarily bring about any change retrospectively which creates a fresh liability,” the minister sought to assure potential investors with these words, adding, “We are committed to provide a stable and predictable taxation regime that will be investor friendly and spur growth. Keeping this in mind, we have decided that henceforth, all fresh cases arising out of the retrospective amendments of 2012 in respect of indirect transfers and coming to the notice of the Assessing Officers will be scrutinised by a High Level Committee to be constituted by the CBDT before any action is initiated in such cases. I hope the investor community both within India and abroad will repose confidence on our stated position and participate in the Indian growth story with renewed vigour.”

To ease off more than Rs 4 lakh crore worth disputes and litigation over direct taxes before various courts and appellate authorities, the minister proposed to make certain legislative and administrative changes. Currently, an advance ruling can be obtained about the tax liability of a non-resident from the authority for advance rulings. This facility is not available to resident taxpayers except Public Sector Undertakings. Jaitley proposed “to enable resident taxpayers to obtain an advance ruling in respect of their income tax liability above a defined threshold”.

the finance minister also proposed to strengthen the authority for advance rulings by constituting additional benches and enlarge the scope of the Income-tax Settlement Commission so that taxpayers may approach the commission for settlement of disputes.

A high-level committee will be set up to interact with trade and industry on a regular basis and ascertain areas where clarity in tax laws is required. Based on the recommendations of the committee, the Central Board of Direct Taxes and the Central Board of Excise and Customs shall issue appropriate clarifications, wherever considered necessary, on the tax issues within a period of two months. This approach of dealing with issues through “committees” is hardly a breakaway from the Congress legacy. And this is only for “clarifications”, not real change in tax slabs, provisions or exemptions.

Direct and indirect taxes
In the interim Budget 2014-15, P Chidambaram had, Jaitley said, set revenue collection targets for direct taxes as well as indirect taxes, which appear to be ambitious. The new finance minister has proposed to retain these targets. He said, “It shall be my endeavour to achieve the same.” The impact of the tax changes now proposed has been factored into the Budget estimates, 2014-15, he claimed.

While preparing the tax proposals, Jaitley claimed to have encountered the challenge of an extremely limited fiscal space. Nonetheless, the finance minister has proposed to introduce measures to revive the economy, promote investment in manufacturing sector and rationalise tax provisions so as to reduce litigation as well as to address the problem of inverted duty structure in certain areas. The finance minister also claimed to give relief to individual taxpayers and to certain sectors of the economy. That ‘relief’, as readers will notice in the subsequent paragraphs, amounts to pittance.

Not proposing to make any change in the tax rate, the finance minister increased personal income tax exemption limit by Rs 50,000 that is, from Rs 2 lakh to Rs 2.5 lakh in the case of individual taxpayers who are below the age of 60 years. The minister also proposed to raise the exemption limit from Rs 2.5 lakh to Rs 3 lakh in the case of senior citizens. Now divide the amount by 12. The middle or salaried class households obviously run on monthly — and not annual — budgets. This relief boils down to a measly Rs 4,166.66 per month. Those earning just this much more are now out of the tax bracket.

In his post-speech interview to a news agency, Jaitley said that while he wanted to raise the exemption to Rs 5 lakh, his pocket did not permit him to do so. He then tried to assure the people by saying the bar would be raised constantly for 7-8 more years. Is he not conscious of the fact that these gradual increases won’t be felt by the middle class as the small additional amounts will be more than absorbed by inflation?

No change in the rate of surcharge either for the corporates or the individuals, HUFs, firms etc has been brought about.

The education cess for all taxpayers shall continue at 3%. Remember, this cess was trenchantly criticised by the BJP when it was introduced by Chidambaram.

In the year 2012-13 the gross domestic savings were 30.1% of the GDP as compared to 33.7% in the year 2009-10. “Increase in savings and their productive use leads to higher economic growth. The households are the main contributors to savings,” Jaitley observed. Therefore, to encourage domestic investment in long-term savings, the finance minister has proposed to increase the investment limit under section 80C of the Income-tax Act from Rs 1 lakh to Rs 1.5 lakh.

FDI
Finance Minister Jaitley reiterated that the policy of the NDA Government was to promote Foreign Direct Investment (FDI) selectively in sectors where it helps the larger interest of the Indian economy. “FDI in several sectors is an additionality of resource, which helps in promoting domestic manufacture and job creation,” Jaitley said.

FDI in defence
rafale-aircraft-carrier200706
“India today is the largest buyer of defence equipment in the world. Our domestic manufacturing capacities are still at a nascent stage. We are buying substantial part of our defence requirements directly from foreign players. Companies controlled by foreign governments and foreign private sector are supplying our defence requirements to us at a considerable outflow of foreign exchange. Currently we permit 26% FDI in defence manufacturing. The composite cap of foreign exchange has been raised to 49% with full Indian management and control through the FIPB route,” the finance minister said.

Insurance
The Insurance sector is investment starved. Several segments of the Insurance sector need an expansion. The composite cap in the Insurance sector is proposed to be increased up to 49% from the current level of 26%, with full Indian management and control, through the FIPB route.

Besides, benefits of insurance in India have not reached a large section of the people and insurance penetration and density are very low. The Government will work towards addressing this situation in multi-pronged manner with the support of all stake holders concerned. This will include suitable incentives, using banking correspondents, strengthening micro-offices opened by public sector insurance. It is also proposed to take up the pending insurance laws (amendment) Bill for consideration of the Parliament.

New cities
To encourage development of “smart” cities, which will also provide habitation for the neo-middle class, now the built-up area neeed not be 50,000 sq m at least; it is a minimum of 20,000 sq m. The capital conditions for FDI has been reduced from $10 million to $5 million. For both, the lock-in period is 3 years post-completion.

Projects that commit at least 30% of the total project cost for low cost affordable housing will be exempted from minimum built up area and capitalisation requirements, with the condition of a 3-year lock-in.

Further, to translate Prime Minister Modi’s vision of developing 100 “smart” cities, Rs 7,060 crore has been allocated in the current fiscal for satellite towns of larger cities and modernisation of the existing mid-sized cities. This is another damp squib, as the announcement is not of altogether new cities in the swathes of barren land between any two large human settlements waiting to be tapped. This is an incremental change where the extended areas are likely to carry some baggage of mismanagement of the existing cities since they will be attached/adjacent.

FDI in manufacturing
The manufacturing units will be allowed to sell its products through retail including e-commerce platforms without any additional approval.

Banking
To be in line with Basel-III norms Rs 2,40,000 crore as equity must be infused into the system by 2018. “While preserving the public ownership, the capital of these banks will be raised by increasing the shareholding of the people in a phased manner through the sale of shares largely through retail to common citizens of this country. Thus, while the government will continue to have majority shareholding, the citizens of India will also get direct shareholding in these banks, which currently they hold indirectly. We will also examine the proposal to give greater autonomy to the banks while making them accountable,” the minister said.

cr mega 561 BANK7There have been some suggestions for consolidation of public sector banks. Government, in principle, agrees to consider these suggestions. To provide all households in the country with banking services, a time bound programme will be launched as Financial Inclusion Mission on 15 August this year. It will particularly focus to empower the weaker sections of the society, including women, small and marginal farmers and labourers. Two bank accounts in each household are proposed to be opened which will also be eligible for credit.

Long term financing for infrastructure has been a major constraint in encouraging larger private sector participation in this sector. On the asset side, banks will be encouraged to extend long term loans to infrastructure sector with flexible structuring to absorb potential adverse contingencies, sometimes known as the 5/25 structure. On the liability side, banks will be permitted to raise long term funds for lending to infrastructure sector with minimum regulatory pre-emption such as CRR, SLR and Priority Sector Lending (PSL).

After making suitable changes to current framework, a structure will be put in place for continuous authorisation of universal banks in the private sector in the current financial year. RBI will create a framework for licensing small banks and other differentiated banks. Differentiated banks serving niche interests, local area banks, payment banks etc. are contemplated to meet credit and remittance needs of small businesses, unorganised sector, low income households, farmers and migrant work force.

Rising non-performing assets of public sector banks is a matter of concern for the government. So, 6 new Debt Recovery Tribunals will be set up at Chandigarh, Bengaluru, Ernakulum, Dehradun, Siliguri and Hyderabad. The government will work out effective means for revival of other stressed assets.

Tackling cheats
As part of the legislative initiatives under financial sector reforms, it is proposed to bridge the regulatory gap under the Prize Chits and Money Circulation Scheme (Banning) Act, 1978. This step is expected to facilitate effective regulation of companies and entities which have duped a large number of poor and vulnerable people in this country.

Small Savings
To address the concerns of decline in savings rate and improving returns for small savers, the finance minister has proposed to revitalise small savings.

A special small savings instrument to cater to the requirements of educating and marriage of the girl child will be introduced. A National Savings Certificate with insurance cover will also be launched to provide additional benefits for the small saver.

In the PPF Scheme, annual ceiling will be enhanced to Rs1.5 lakh per annum from Rs 1 lakh at present.

PSUs
Public sector units will invest through capital investment a total sum of Rs 2,47,941 crore in the current financial year.

Tourism
A facility of Electronic Travel Authorization (e-visa) will be introduced in a phased manner at 9 airports in India where necessary infrastructure will be put in place within the next 6 months. The countries to which the Electronic Travel authorisation facility will be extended will be identified in a phased manner. This is likely to facilitate the visa-on-arrival facility.

Real estate
Real Estate Investment Trusts (REITS) will be provided incentives. A modified REITS-type structure for infrastructure projects has been announced as Infrastructure Investment Trusts (InvITs), which will have a similar tax efficient pass through status, for PPP and other infrastructure projects. These structures will, Jaitley reckons, reduce the pressure on the banking system while also making available fresh equity. “I am confident these two instruments will attract long term finance from foreign and domestic sources including the NRIs,” he said.

Old, popular investment renewed
Kissan Vikas Patra (KVP), a popular instrument among small savers, will be reintroduced for those who may have banked and unbanked savings to invest in this instrument.

Skill development
A national multi-skill programme called Skill India will be launched. It will skill the youth with an emphasis on employability and entrepreneur skills. It is expected to provide training and support for traditional professions like welders, carpenters, cobblers, masons, blacksmiths, weavers etc. Convergence of various schemes to attain this objective has also been proposed. No amount allocation for this initiative was announced.

Cleanliness
The government intends to cover every household by total sanitation by the year 2019, the 150th year of the birth anniversary of MK Gandhi through what it has named the Swatchh Bharat Abhiyan (Clean India Campaign).

Rural-Urban mix
Indian-village-houseTo implement Prime Minister Modi’s idea of villages with rural soul and urban facilities, the Shyama Prasad Mookerjee Rurban Mission will be launched to deliver integrated project based infrastructure in the rural areas, which will also include development of economic activities and skill development. The preferred mode of delivery will be through PPPs while using various scheme funds for financing.

Further, to supply 24×7 uninterrupted power supply to all homes, the Deen Dayal Upadhyaya Gram Jyoti Yojana will be launched for feeder separation to augment power supply to the rural areas and for strengthening sub-transmission and distribution systems. The finance minister has set aside a sum of Rs 500 crore for this purpose. This means the government will attempt to facilitate some villages as pilot projects because Rs 500 crore cannot electrify even 500 villages.

Supply of power continues to be a major area of concern for the country. Therefore, instead of annual extensions, the finance minister has proposed to extend the 10 year tax holiday to the undertakings which begin generation, distribution and transmission of power by 31 March 2017. This stability in our policy will help the investors to plan their investments better.

Rural development
The Pradhan Mantri Gram Sadak Yojana initiated during the NDA-I under the stewardship of then Prime Minister Atal Behari Vajpayee will be revitalised under Prime Minister Narendra Modi. A sum of Rs 14,389 crore has been allocated for the purpose.

Wage employment will be provided under Sonia Gandhi’s pet law MGNREGA through works that, the minister claimed, will be “more productive, asset creating and substantially linked to agriculture and allied activities”.

Ajeevika, the National Rural Livelihood Mission (NRLM) that aims to eliminate rural poverty through sustainable livelihood options, has women self-help groups (SHGs) provided with bank loans at 4% on prompt repayment in 150 districts and at 7% in all other districts. Jaitley proposed to extend the provision of bank loan for women SHGs at 4% in another 100 districts. A “Start-Up Village Entrepreneurship Programme” will be set up to encourage rural youth to take up local entrepreneurship programmes. An initial sum of Rs 100 crore has been provided for this.

The finance minister has increased the allocations for the year 2014-15 to Rs 8,000 crore for National Housing Bank (NHB) with a view to expand and continue to support Rural Housing in the country.

Panchayati Raj
Backward Region Grant Fund (BRGF) has been implemented in 272 backward districts in 27 States to fill up the critical gaps in development of basic infrastructure facilities and for capacity building of panchayats and gram sabhas in backward areas. The BRGF will be restructured to address intra-district inequalities to ensure that backward sub-districts units within States receive adequate support.

Sardar’s statue
The Government of Gujarat has embarked upon the mission to build the largest statue of Sardar Vallabh Bhai PatelTo support the State Government in this initiative to erect the Statue of Unity, Jaitley has proposed to set aside a sum of Rs 200 crore.

Allocations
Reiterating the government’s “firm commitment to strengthen the federal structure of the country”, Jaitley resolved to work closely with State governments.

For the traditionally underprivileged
An amount of Rs 50,548 crore is proposed under the SC Plan and Rs 32,387 crore under TSP.

To provide credit enhancement facility for young start up entrepreneurs from Scheduled Castes, who aspire to be part of the neo-middle class, the finance minister has proposed to set aside a sum of Rs 200 crore which will be “operationalised” through a scheme by IFCI, the minister said.

For the welfare of tribal people “Van Bandhu Kalyan Yojana” has been launched with an initial allocation of Rs 100 crore.

Other beginners
Considering the need to incentivise smaller entrepreneurs, the finance minister has proposed to provide investment allowance at the rate of 15% to a manufacturing company that invests more than Rs 25 crore in any year in new plant and machinery. This benefit will be available for three years: For investments up to 31 March 2017. The scheme announced last year will continue to operate in parallel till 31 March 2015.

Promotion of entrepreneurship and start-up companies remains a challenge. A principal limitation here has been availability of start-up capital by way of equity to be brought in by the promoters. In order to create a conducive eco-system for the venture capital in the MSME sector, it is proposed to establish a Rs 10,000 crore fund to act as a catalyst to attract private capital by way of providing equity, quasi equity, soft loans and other risk capital for start-up companies.

However, ease of setting up businesses and sustaining them depends on factors beyond money. The budget is silent on regulations that, in effect, have created a corrupt, extortionist Inspector Raj in the country.

Welfare of senior citizens
NDA Government during its last term in office had introduced the Varishtha Pension Bima Yojana (VPBY) as a pension scheme for senior citizens. Under the scheme a total of 3.16 lakh annuitants are being benefitted and the corpus amounts to Rs 6,095 crore. The new finance minister wants to revive the scheme for a limited period from 15 August this year to 14 August of the next for the benefit of citizens aged 60 years and above.

A large amount of money is estimated to be lying as unclaimed amounts with PPF, post office, saving schemes etc. These are mostly out of investments belonging to senior citizens. On their demise, the sums remain unclaimed for want of relevant payment instructions. To tackle this situation, Jaitley announced setting up of a committee to examine and recommend how this amount could be used to protect and further financial interests of senior citizens. The committee will give its report not later than December this year.

The Government is notifying minimum pension of Rs 1,000 per month to all subscriber members of EP Scheme and has made an initial provision of Rs 250 crore in the current financial year to meet the expenditure. Further, increase in mandatory wage ceiling of subscription to EPS from Rs 6,500 to Rs 15,000 has been made and a provision of Rs 250 crore has been provided in the current budget. For the convenience of the subscribers, EPFO will launch the “Uniform Account Number” Service for contributing members to facilitate portability of Provident Fund accounts.

For the ‘dfferently abled’
the finance minister has extended the scheme for Assistance to Disabled Persons for purchase/fitting of Aids and Appliances (ADIP) to include contemporary aids and assistive devices. National level institutes for Universal Inclusive Design and Mental Health Rehabilitation and also a Centre for Disability Sports will be established soon.

The Braille presses in the government and private sector are not able to meet the demand of Braille textbooks for the visually impaired students. It is proposed to provide assistance to State governments to establish 15 new Braille presses and modernise 10 existing ones in the current financial year. The NDA Government will also print currency notes with Braille like signs to assist the visibly challenged persons.

Women and child
6006789474 b529a7f19a zAn outlay of Rs 50 crore will be spent by Ministry of Road Transport & Highways on pilot testing a scheme on “Safety for Women on Public Road Transport”. A sum of Rs 150 crore will also be spent by Ministry of Home Affairs on a scheme to increase the safety of women in large cities. “Crisis Management Centres” will be set up in all districts of the NCT of Delhi this year in all government and private hospitals. The funding will be provided from the Nirbhaya Fund.

Jaitley proposed to launch “Beti Bachao, Beti Padhao Yojana”, which will be a focussed scheme to help generate awareness and also improve efficiency of delivery of welfare services meant for women. A sum of Rs 100 crore has been set aside for this.

Government will focus on campaigns to sensitize people of this country towards the concerns of the girl child and women. School curriculum will have a separate chapter on gender mainstreaming.

The government has further made an allocation of Rs 98,030 crore for women and Rs 81,075 crore for child welfare.

Health and family welfare
To move towards “Health for All”, two key initiatives — the Free Drug Service and Free Diagnosis Service — will be taken up on priority.

In order to achieve universal access to early quality diagnosis and treatment to TB patients, 2 National Institutes of Ageing will be set up at AIIMS, New Delhi and Madras Medical College, Chennai. A national level research and referral Institute for higher dental studies will be set up in one of the existing dental institutions.

All the six new AIIMS at Jodhpur, Bhopal, Patna, Rishikesh, Bhubaneswar and Raipur, which are part of Pradhan Mantri Swasthya Suraksha Yojana, have become functional. A plan to set up 4 more AIIMS like institutions at Andhra Pradesh, West Bengal, Vidarbha in Maharashtra and Poorvanchal in UP is under consideration. Jaitley has set aside a sum of Rs 500 crore for this. Presently 58 government medical colleges have been approved; 12 more government medical colleges will be added. In addition, dental facilities will also be provided in all the hospitals.

For the first time, the Central Government will provide central assistance to strengthen the States’ Drug Regulatory and Food Regulatory Systems by creating new drug testing laboratories and strengthening the 31 existing State laboratories.

In keeping with the Government’s focus on improving affordable healthcare and to augment the transfer of technology for better health care facilities in rural India, 15 Model Rural Health Research shall be set up in the states, which shall take up research on local health issues concerning rural population.

Watersheds
To give an added impetus to watershed development in the country, a new programme called “Neeranchal” with an initial outlay of Rs 2,142 crore in the current financial year will be started.

Safe drinking water
Many of our drinking water sources have excess impurities like flouride, arsenic and manmade contaminations due to untreated sewage, industrial effluents and leaching of pesticides and fertilizers. It is proposed to earmark Rs 3,600 crore under National Rural Drinking Water Programme for providing safe drinking water in approximately 20,000 habitations affected with arsenic, fluoride, heavy/ toxic elements, pesticides/ fertilizers through community water purification plants in the next 3 years.

Education
educate-india
Claiming that “elementary education is one of the major priorities of the government”, Jaitley said that the government will strive to provide toilets and drinking water in all the girls school in the first phase. An amount of Rs 28,635 crore has been funded for Sarva Shiksha Abhiyan and Rs 4,966 crore for Rashtriya Madhyamik Shiksha Abhiyan. A School Assessment Programme has been initiated at a cost of Rs 30 crore. To infuse new training tools and motivate teachers, “Pandit Madan Mohan Malviya New Teachers Training Programme” has been launched. Jaitley has set aside an initial sum of Rs 500 crore for this. Enough for the thousands of villages in the country where formal education hasn’t yet reached?

A sum of Rs 100 crore has been allocated for setting up virtual classrooms as Communication Linked Interface for Cultivating Knowledge (CLICK) and online courses.

The Jayaprakash Narayan National Centre for Excellence in Humanities will be set up in Madhya Pradesh. Five more IITs will come up in Jammu, Chattisgarh, Goa, Andhra Pradesh and Kerala. Five IIMs will be set up in Himachal Pradesh, Punjab, Bihar, Odisha and Maharashtra. A meagre sum of Rs 500 crore has been set aside for this! Isn’t higher education a matter of choice and primary education a right? Couldn’t the higher education sector have received more private investment while the schools received more money from the state?

The government also proposes to ease and simplify norms to facilitate education loans for higher studies.

Digitisation
Recognising the imminent need to further bridge the divide between digital “haves” and “have-nots”, a pan India programme “Digital India” has been launched. This will ensure broadband connectivity at village level, improved access to services through IT enabled platforms, greater transparency in government processes and increased indigenous production of IT hardware and software for exports and improved domestic availability. Special focus will be on supporting software product start-ups. This bodes well for the semi-educated, poor, urban youth of the country, who have taken to computerised interactions between themselves and IT-support businesses like repair shops quite readily. They can now aim at establishing slightly bigger enterprises.

A National Rural Internet and Technology Mission for services in villages and schools, training in IT skills and E-Kranti for government service delivery and governance scheme has also been proposed. The finance minister has provided a sum of Rs 500 crore for this purpose.

A programme for promoting “good governance” will be launched for which Rs 100 crore has been set aside. Jaitley’s speech gave no idea as to what such a promotion will mean.

Information and broadcasting
So far permissions for setting up around 400 community radio stations have been issued. To encourage the growth in this sector, a new plan scheme has been taken up with an allocation of Rs 100 crore. This scheme will support about 600 new and existing community radio stations. This is a new vista of employment generation and mass communication. However, more than state allocation of funds, it needs easy regulations for vibrancy.

Film & Television Institute, Pune, and Satyajit Ray Film & Television Institute, Kolkata, have been proposed to be accorded status of institutes of national importance and a National Centre for Excellence in Animation, Gaming and Special Effects will be set up.

Urban development
To rejuvenate the existing cities, 4 fundamental activities will be stressed. These are provision of safe drinking water and sewerage management, use of recycled water for growing organic fruits and vegetable, solid waste management and digital connectivity. The government will support at least 500 such habitations, while harnessing private capital and expertise through PPPs, to renew their infrastructure and services in the next 10 years.

Municipal management
Pooled Municipal Debt Obligation Facility was set up in 2006 by the UPA Government with participation of several banks to promote and finance infrastructure projects in urban area on shared risk basis. Present corpus of this facility is Rs 5,000 Crore. This Government has a major focus of providing good infrastructure, including public transport, solid waste disposal, sewerage treatment and drinking water in the urban areas. In keeping with Prime Minister Modi’s vision for urban areas, the corpus will be enlarged to Rs 50,000 crore with extension of the facility by 5 years to 31 March 2019. This is a quantum jump.

Modern transport
Urban Metro Projects have proven to be very useful in decongesting large cities. For 2,000,000+ cities, planning of metro projects must begin now. Government will encourage development of metro rail systems, including light rail systems, in the PPP mode, which will be supported by the Union Government through VGF. In the current financial year, Jaitley has set aside a sum of Rs 100 crore for Metro projects in Lucknow and Ahemdabad.

Housing
There will be houses for all by 2022, the government promises! For this purpose, additional tax incentives on home loans have been extended to encourage people, especially the young, to own houses.

A Mission on Low Cost Affordable Housing will start, which will be anchored in the National Housing Bank. Schemes will be evolved to incentivise the development of low-cost affordable housing. A sum of Rs 4,000 crore has been allocated for NHB with a view to increase the flow of cheaper credit for affordable housing to the urban poor/EWS/LIG segment. The government, Jaitley said, was willing to examine other suggestions that will spur growth in this sector.

The finance minister also proposed to add inclusion of slum development in the list of Corporate Social Responsibility (CSR) activities to encourage the private sector to contribute more towards this activity. One wonders whether this will work. When industrialists are forced to spend on CSR, they tend to donate to NGOs run by members of their families and kin.

Housing continues to be an area of concern for middle and lower middle class as well. Therefore, to reduce this burden, the finance minister has proposed to increase the deduction limit on account of interest on loan in respect of self occupied house property from Rs 1.5 lakh to Rs 2 lakh. This increase won’t be felt either due to the high rate of inflation and declining value of the rupee.

Nutrition
“A comprehensive strategy, including detailed methodology, costing, time lines and monitorable targets, will be put in place within six months” to combat malnutrition, the finance minister promised.

Minorities
A programme for upgrading skills and training in ancestral arts for development for the minorities called “Upgradation (sic) of Traditional Skills in Arts, Resources and Goods” will be launched to preserve the traditional arts and crafts which are of rich heritage.

An additional amount of Rs 100 crore for modernization of madrassahs has been provided to the Department of School Education.

Agriculture
Indian Agricultural Research Institute, Pusa, has been at the forefront of research in this area. However, since independence only one such centre has been established. Government will establish two more such institutions of excellence on similar pattern in Assam and Jharkhand with an initial sum of Rs100 crore in the current financial year. In addition, an amount of Rs 100 crore has been set aside for setting up an “Agri-Tech Infrastructure Fund”.

The government also proposed to establish agriculture universities in Andhra Pradesh and Rajasthan and horticulture universities in Telangana and Haryana. An initial sum of Rs 200 crore has been allocated for this purpose.

Deteriorating soil health has been a cause of concern and leads to sub optimal utilization of farming resources. Government will initiate a scheme to provide to every farmer a soil health card in a Mission mode. A sum of Rs 100 crore has been marked for this purpose and an additional Rs 56 crore to set up 100 mobile soil testing laboratories across the country.

“There have also been growing concerns about the imbalance in the utilisation of different types of fertilisers, resulting in deterioration of the soil,” the minister said, but added nothing to address the concern.

To meet the challenge of agriculture being affected by vagaries of climate change, Jaitley wants to establish a “National Adaptation Fund” for climate change. An initial sum of Rs 100 crore will be transferred to the fund.

To sustain a growth of 4% in agriculture, the government will bring technology driven second green revolution with focus on higher productivity and include “protein revolution” as an area of major focus.

As a very large number of landless farmers are unable to provide land title as guarantee, institutional finance is denied to them and they become vulnerable to money lenders’ usurious lending. So Jaitley proposed to provide finance to 5 lakh joint farming groups of bhoomiheen kisan (landless farmer) through NABARD in the current financial year.

Price volatility in the agriculture produce creates uncertainties and hardship for the farmers. To mitigate this, the government is providing a sum of Rs 500 crore for establishing a Price Stabilisation Fund.

The Agricultural Produce Market Committee Ahmedabad“The farmers and consumers’ interest will be further served by increasing competition and integrating markets across the country,” said the finance minister. To accelerate setting up of a national market, the Union Government wants to work closely with the State Governments to re-orient their respective APMC Acts and provide for establishment of private market yards/private markets. The state governments will also be encouraged to develop farmers’ markets in town areas to enable the farmers to sell their produce directly. Since FDI in the retail trade is not coming — whether or not governments want it — producers and consumers will only wish this works so that the former get better sales price and the latter cheaper cost price. This is not possible at the moment because of several layers of brokers that operate between the two.

Jaitley has set aside a sum of Rs 50 crore for the development of indigenous cattle breeds and an equal amount for starting a blue revolution in inland fisheries.

Irrigation
Bulk of our farm lands
is rain-fed and dependent on monsoons. Therefore, there is a need to provide assured irrigation to mitigate risk. To improve access to irrigation, the government has proposed to initiate “Pradhan Mantri Krishi Sinchayee Yojana” (Prime Minister’s Farm Irrigation Scheme). Jaitley has allocated Rs 1,000 crore for this purpose.

Agriculture credit
A target of Rs 8 lakh crore has been set for agriculture credit during 2014-15 which, the government is confident, the banks will surpass.

Under the Interest Subvention Scheme for short term crop loans, the banks are extending loans to farmers at a concessional rate of 7%. The farmers get a further incentive of 3% for timely repayment. Jaitley will continue with the scheme in 2014-15.

Rural infra
NABARD operates the Rural Infrastructure Development Fund (RIDF), out of the priority sector lending shortfall of the banks, which helps in creation of infrastructure in agriculture and rural sectors across the country. Jaitley has proposed to raise the corpus of RIDF by an additional Rs 5,000 crore from the target given in the Interim Budget to Rs 25,000 crore in the current financial year.

Warehousing
Keeping in view the urgent need for availability of scientific warehousing infrastructure in the country, the finance minister has proposed an allocation of Rs 5,000 crore for the fund for the year 2014-15.

Further, under a plan for commodity marketsthe Warehouse Development and Regulatory Authority (WD&RA) has begun a transformation plan to invigorate the warehousing sector and significantly improve post-harvest lending to farmers against negotiable warehouse receipts. This plan will be implemented with vigour.

Rural credit
In order to give a boost to long term investment credit in agriculture, the finance minister has proposed to set up a “Long Term Rural Credit Fund” in NABARD for the purpose of providing refinance support to Cooperative Banks and Regional Rural Banks with an initial corpus of Rs 5,000 crore.

The Short Term Cooperative Rural Credit (STCRC) – Refinance Fund was announced in Union Budget 2008-09 with initial corpus of Rs 5,000 crore. In order to ensure increased and uninterrupted credit flow to farmers and to avoid high cost market borrowings by NABARD, the finance minister has proposed to allocate an amount of Rs 50,000 crore for STCRC Fund during 2014-15.

Profitability in farming
The finance minister has proposed to supplement NABARD’s producers’ organisation development fund for producer’s development and uplift called PRODUCE with a sum of Rs 200 crore, which will be utilised for building 2,000 producers organisations across the country over the next 2 years.

Food security
The government will take up restructuring FCI, reducing transportation and distribution losses and efficacy of PDS on priority.

Assuring the people that stocks in the Central pool are adequate to meet any exigency when inadequate rainfall causes decline in agriculture production, the finance minister said that the government will, when required, undertake open market sales to keep prices under control.

Another Krishi Darshan?
Kisan TV, dedicated to the interests of the agriculture and allied sector, will be launched in the current financial year. This will disseminate real-time information to the farmers information regarding new farming techniques, water conservation, organic farming etc. The finance minister has proposed to set aside a sum of Rs 100 crore for this purpose.

Industry
Noting that the manufacturing sector is of paramount importance for the growth of our economy, and that an incentive in the form of investment allowance to a manufacturing company that invests more than Rs 100 crore in plant and machinery during the period from 1 April 2013 to 31 March 2015 was announced last year, the finance minister proposed to extend the investment linked deduction to two new sectors, namely, slurry pipelines for the transportation of iron ore, and semi- conductor wafer fabrication manufacturing units.

Manufacturing sector is under stress due to a variety of reasons. To boost domestic manufacture as also to address the issue of inverted duties, the finance minister has proposed to reduce the basic customs duty (BCD) on:

  • Fatty acids, crude palm stearin, RBD and other palm stearin, specified industrial grade crude oils from 7.5% to 0% for manufacture of soaps and oleo-chemicals;
  • Crude glycerin from 12.5% to 7.5% and crude glycerin used in the manufacture of soaps from 12.5% to 0%;
  • Steel grade limestone and steel grade dolomite from 5% to 2.5%;
  • Battery waste and battery scrap from 10% to 5%;
  • Coal tar pitch from 10% to 5%;
  • Specified inputs for manufacture of spandex yarn from 5% to 0%.
  • Cathode ray TVs are used by weaker sections who cannot afford to buy more expensive flat panel TVs. The finance minister has proposed to exempt colour picture tubes from basic customs duty to make cathode ray TVs cheaper. The duty concession will help revive manufacturing of TVs in the SME sector and create employment opportunities. At the same time, to encourage production of LCD and LED TVs below 19 inches in India, the finance minister has proposed to reduce the basic customs duty on LCD and LED TV panels of below 19 inches from 10% to 0%. Further, to encourage manufacture of LCD and LED TV panels, the finance minister has proposed to exempt from basic customs duty specified inputs used in their manufacture.
  • The eBiz platform aims to create a business and investor friendly ecosystem in India by making all business and investment related clearances and compliances available on a 24×7 single portal, with an integrated payment gateway. All Central Government Departments and Ministries will integrate their services with the eBiz platform on priority by 31 December this year.
  • A National Industrial Corridor Authority, with its headquarters in Pune, has been set up to coordinate the development of industrial corridors, with ‘smart’ cities linked to transport connectivity, aimed at driving India’s growth in manufacturing and urbanisation. Jaitley has provided an initial corpus of Rs 100 crore for this purpose. This is one field where the allocation could be adequate for the time being because here the sum is not sought to be spread thin across the country; rather it is to set up an authority.
  • Imposing basic customs duty at 10% on specified telecommunication products that are outside the purview of the Information Technology Agreement;
  • Exempting all inputs/components used in the manufacture of personal computers from 4% special additional duty (SAD);
  • Imposing education cess on imported electronic products to provide parity between domestically produced goods and imported goods;
  • Exempting 4% SAD on PVC sheet and ribbon used for the manufacture of smart cards.
  • Specified inputs for use in the manufacture of EVA sheets and back sheets;
  • Flat copper wire for the manufacture of PV ribbons.
  • EVA sheets and solar back sheets and specified inputs used in their manufacture;
  • Solar-tempered glass used in the manufacture of solar photovoltaic cells and modules;
  • Flat copper wire for the manufacture of PV ribbons for use in solar cells and modules;
  • Machinery and equipment required for setting up of a project for solar energy production;
  • Forged steel rings used in the manufacture of bearings of wind operated generators;
  • Machinery and equipment required for setting up of compressed biogas plants (Bio-CNG).

The demand for electronics is growing very fast. To boost domestic production and reduce our dependence on imports, Jaitley announced the following steps:

The domestic stainless steel industry is presently suffering from severe under-utilisation of capacity. To give an impetus to the stainless steel industry, the finance minister has proposed to increase the basic customs duty on imported flat-rolled products of stainless steel from 5% to 7.5%.

EasternCorridorThe Amritsar-Kolkata Industrial Master Plan will be completed expeditiously for the establishment of industrial smart cities in 7 States of India. The master planning of 3 new cities in the Chennai-Bengaluru Industrial Corridor region, namely Ponneri in Tamil Nadu, Krishnapatnam in Andhra Pradesh and Tumkur in Karnataka will also be completed.

The perspective plan for the Bengaluru Mumbai Economic corridor (BMEC) and Vizag-Chennai corridor will be completed with the provision for 20 new industrial clusters.

Kakinada, its adjoining area and the port will be developed as the key drivers of economic growth in the region with a special focus on hardware manufacturing.

In order to engage with the States to take India’s exports to a higher growth trajectory, Jaitley wants to establish an Export Promotion Mission to bring all stakeholders under one umbrella.

SEZ
The Government will revive Special Economic Zones (SEZs) and make them effective instruments of industrial production, economic growth, export promotion and employment generation. It will put the Special Economic Zones on operation, revive investors’ interest to develop better infrastructure and encourage them to effectively and efficiently use the available unutilised land.

Apprenticeship
Apprenticeship Act will be suitably amended to make it more responsive to industry and youth. The government will also encourage MSMEs to avail of the benefits of this scheme.

SMEs form the backbone of our Economy. They account for a large portion of our industrial output and employment. The bulk of service sector enterprises are also SMEs. Most of these SMEs are Own Account Enterprises. Most importantly a majority of these enterprises are owned or run by SCs, STs and OBCs. Financing to this sector is of critical importance, particularly as it benefits the weakest sections. The finance minister has proposed to appoint a committee with representatives from the Finance Ministry, Ministry of MSME, RBI to give concrete suggestions in 3 months.

To establish technology centre network to promote innovation, entrepreneurship and agro-industry, the finance minister has proposed to set up a fund with a corpus of Rs 200 crore.

The definition of MSME will be reviewed to provide for a higher capital ceiling. A programme to facilitate forward and backward linkages with multiple value chain of manufacturing and service delivery will also be put in place.

Entrepreneur friendly legal bankruptcy framework will also be developed for SMEs to enable easy exit. A nationwide “District level Incubation and Accelerator Programme” will be taken up for incubation of new ideas and providing necessary support for accelerating entrepreneurship.

Textiles
The finance minister has proposed to set up a Trade Facilitation Centre and a Crafts Museum with an outlay of Rs 50 crore to develop and promote handloom products and carry forward the rich tradition of handlooms of Varanasi, where he also intends to support a textile mega-cluster.

Jaitley also proposed to set up 6 more textile mega-clusters in Bareilly, Lucknow, Surat, Kuttch, Bhagalpur, Mysore and one town in Tamil Nadu. The government is allocating a sum of Rs 200 crore for this purpose.

There is also a proposal to set up a Hastkala (handicraft) Academy for the preservation, revival, and documentation of the handloom/handicraft sector in PPP mode in Delhi. The minister has set aside a sum of Rs 30 crore for this purpose.

The finance minister has proposed to start a Pashmina Promotion Programme (P-3) and a programme for the development of other crafts of Jammu & Kashmir. The government is setting aside a sum of Rs 50 crore for this purpose.

Without naming any community, the government has thus sought to reach out to the Ansaris. Will the Pasmanda Muslims notice this?

Infrastructure
India has emerged as the largest PPP market in the world with over 900 projects in various stages of development. PPPs have delivered some of the iconic infrastructure like airports, ports and highways which are seen as models for development globally. But governments have also seen the weaknesses of the PPP framework, the rigidities in contractual arrangements, the need to develop more nuanced and sophisticated models of contracting and develop quick dispute redressal mechanism. An institution to provide support to mainstreaming PPPs called 3P India will be set up with a corpus of Rs 500 crore to address the issue.

Shipping
A policy for encouraging the growth of Indian controlled tonnage will be formulated to ensure increase in employment of the Indian seafarers. Development of ports is also critical for boosting trade. So, 16 new port projects will be awarded this year for port connectivity. Rs 11,635 crore will be allocated for the development of Outer Harbour Project in Tuticorin for the first phase. SEZs will be developed also in Kandla and JNPT. A comprehensive policy will be announced to promote Indian ship-building industry in the current financial year.

Inland navigation
Development of inland waterways can improve vastly the capacity for the transportation of goods. A project on the river Ganga called ‘Jal Marg Vikas’ (National Waterways-I) will be developed between Allahabad and Haldia to cover a distance of 1,620 kms, which will enable commercial navigation of at least 1,500 tonne vessels. The project will be completed over a period of 6 years at an estimated cost of Rs 4,200 crore.

Thus far, places in West Bengal have figured thrice. This may well placate people of the State who were feeling totally neglected by the Railway Budget proposals announced two days ago.

Air connectivity
Despite increase in air connectivity air travel is still out of reach of a large number of aspirational Indians. Scheme for development of new airports in Tier I and Tier II will be launched for implementation through Airport Authority of India or PPPs.

Roads
This sector constitutes a very import artery of communication in the country. The sector had taken shape from 1998-2004 under NDA-I. The sector again needs huge amount of investment along with debottlenecking from maze of clearances. The finance minister has proposed investment in National Highways Authority of India and State Roads of an amount of Rs 37,880 crore, which includes Rs 3,000 crore for the North East. During the current financial year, a target of NH construction of 8500 km will be achieved.

A modern nation needs multiple sources of transport. A country of the size of India must have a transport network which can ensure faster travel across cities which are geographically distant. This will also improve the supply chain in transporting goods across cities. The government will initiate work on select expressways in parallel to the development of the industrial corridors. For project preparation NHAI shall set aside a sum of Rs 500 crore. This again is an inadequate sum for the said purpose.

Power
To promote cleaner and more efficient thermal power, the finance minister has proposed to allocate an initial sum of Rs 100 crore for preparatory work for a new scheme “Ultra- Modern Super Critical Coal Based Thermal Power Technology”.

Coal
Copy of coalindia--621x414“Comprehensive measures for enhancing domestic coal production are being put in place along with stringent mechanism for quality control and environmental protection, which includes supply of crushed coal and setting up of washeries (sic),” Jaitley announced. The existing impasse in the coal sector will be resolved and adequate quantity of coal will be provided to power plants which are already commissioned or will be commissioned by March 2015 to unlock dead investments. An exercise to rationalise coal linkages which will optimise transport of coal and reduce cost of power is underway.

At present, coal attracts customs duties at different rates. The finance minister has proposed to rationalise the duty structure on all non-agglomerated coal at 2.5% basic customs duty and 2% CVD. Henceforth, anthracite coal, bituminous coal, coking coal, steam coal and other coal will attract the same duty. This will eliminate all assessment disputes and transaction costs associated with testing of various parameters of coal.

Metallurgical coke is manufactured out of coking coal. The basic customs duty on metallurgical coke has been increased from 0% to 2.5% in line with the duty on coking coal.

New and renewable energy
New and renewable energy deserves a very high priority. It is proposed to take up Ultra Mega Solar Power Projects in Rajasthan, Gujarat, Tamil Nadu, and Ladakh in Jammu & Kashmir. The finance minister has set aside a sum of Rs 500 crore for this. The government is launching a scheme for solar power driven agricultural pump sets and water pumping stations for energising 100,000 pumps. The finance minister has proposed to allocate a sum of Rs 400 crore for this purpose. An additional Rs 100 crore is set aside for the development of 1 MW solar parks on the banks of canals. Implementation of the Green Energy Corridor Project will be accelerated in this financial year to facilitate evacuation of renewable energy across the country.

The government needs to maximise utilisation of solar power. The existing duty structure incentivises imports rather than domestic manufacture of solar photovoltaic cells and modules. Therefore, the finance minister has proposed to exempt from basic customs duty:

A concessional basic customs duty of 5% is also being extended to machinery and equipment required for setting up of a project for solar energy production.

To promote wind energy, the finance minister has proposed to reduce the basic customs duty from 10% to 5% on forged steel rings used in the manufacture of bearings of wind operated electricity generators. Also, the minister exempted the SAD of 4% on parts and raw materials required for the manufacture of wind operated generators. Further, he prescribed a concessional basic customs duty of 5% on machinery and equipment required for setting up of compressed biogas plants (Bio-CNG).

To develop renewable sources of energy, the finance minister has proposed to exempt from excise duty:

Clean Energy Cess is presently levied on coal, peat and lignite for the purposes of financing and promoting clean energy initiatives and funding research in the area of clean energy. The finance minister has proposed to expand the scope of purposes of levying the said cess to include financing and promoting clean environment initiatives and funding research in the area of clean environment. To finance these additional initiatives, the finance minister has proposed to increase the Clean Energy Cess from Rs 50 per tonne to Rs 100 per tonne.

Petroleum & natural gas
The government intends to accelerate production and exploitation of coal-bed methane reserves. The possibility of using modern technology to revive old or closed wells will also be explored to maximise production from such fields.

The usage of PNG will be rapidly scaled up in a mission mode as it is “clean” and efficient to deliver.

The government has at present about 15,000 km of gas pipeline systems in the country. In order to complete the gas grid across the country, an additional 15,000 km of pipelines are required. It is proposed to develop these pipelines using appropriate PPP models. This will help increase the usage of gas, domestic as well as imported, which, in the long term, will reduce dependence on any one energy source.

Mining
To encourage investment in the mining sector and promote sustainable mining practices and adequately meet the requirements of industry without sacrificing environmental concerns, the current impasse in mining sector, including, iron ore mining, will be resolved expeditiously. Changes, if necessary, in the MMDR Act, 1957 will be introduced to facilitate this.

Revision of royalty rate
There have been requests from several State Governments to revise rate of royalty on minerals. The rate of royalty can be revised after a period of three years. Last revision took place in August, 2009. Therefore, another revision, which is due, will be undertaken to ensure greater revenue to the State Governments.

Capital market
Financial sector is at the heart of the growth engine. Globalisation helps channelise external savings to India to bridge the resource gap but also renders the financial sector vulnerable to the vagaries of the global economy. The government has seen this in the recent past in ample measure. It is essential to strengthen and modernise the legislative regulatory framework. There are some important recommendations of the Financial Sector Legislative Reforms Commission like the enactment of the Indian Financial Code which is considered necessary for better governance and accountability. It will be my endeavor to complete the ongoing process of consultations with all the stakeholders expeditiously on this. It is also essential to have a modern monetary policy framework to meet the challenge of an increasingly complex economy. The government will, in close consultation with the RBI, put in place such a framework.

“While the impact of the above measures will be felt in the medium term, towards the same objective,” the finance minister has proposed to:

  1. Advise financial sector regulators to take early steps for a vibrant, deep and liquid corporate bond market and deepen the currency derivatives market by eliminating unnecessary restrictions.
  2. Extend a liberalised facility of 5% withholding tax to all bonds issued by Indian corporate abroad for all sectors and extend the validity of the scheme to 30.06.2017.
  3. Liberalise the ADR/GDR regime to allow issuance of depository receipts on all permissible securities.
  4. Allow international settlement of Indian debt securities.
  5. Completely revamp the Indian Depository Receipt (IDR) and introduce a much more liberal and ambitious Bharat Depository Receipt (BhDR).
  6. Clarify the tax treatment on income of foreign fund whose fund managers are located in India to resolve a long-standing problem. Details will be presented in Part B.
  7. Introduction of uniform KYC norms and inter-usability of the KYC records across the entire financial sector.
  8. Introduce one single operating demat account so that Indian financial sector consumers can access and transact all financial assets through this one account.
  9. An Advance Pricing Agreement (APA) scheme was introduced in the year 2012. It has received a good response, the finance minister noted and proposed to strengthen the administrative set up of APA to expedite disposal of applications. Further, the minister proposed to introduce a rollback provision in the APA scheme so that an APA entered into for future transactions might also be applied to international transactions undertaken in previous four years in specified circumstances.
  10. In order to align transfer pricing regulations in India with the best available practices, the finance minister has proposed to introduce range concept for determination of arm’s length price. However, the arithmetic mean concept will continue to apply where number of comparable is inadequate. The relevant data is under analysis and appropriate rules will be prescribed.
  11. As per existing provisions of Transfer Pricing Regulations, only one year data is allowed to be used for comparable analysis with some exception. The finance minister has proposed to amend the regulations to allow use of multiple year data.

The Indian capital markets have been a source of risk capital for a growing India. The finance minister has proposed to take a number of measures to further energise these markets including:

There is an urgent need to converge the current Indian accounting standards with the International Financial Reporting Standards (IFRS). The finance minister has proposed adoption of the new Indian Accounting Standards (Ind AS) by the Indian companies from the financial year 2015-16 voluntarily and from the financial year 2016-17 on a mandatory basis. Based on the international consensus, the regulators will separately notify the date of implementation of AS Ind for the Banks, Insurance companies etc. Standards for the computation of tax will be notified separately.

Defence and internal security
An amount of Rs 229,000 crore has been allocated for the current financial year for defence.

The government has reaffirmed its commitment to our soldiers. A policy of “One Rank One Pension” has been adopted by the Government to address the pension disparities. The government proposes to set aside a further sum of Rs 1,000 crore to meet this year’s requirement.

Modernisation of the armed forces is critical to enable them to play their role effectively in the Defence of India’s strategic interests. The capital outlay for defence stands increased by Rs 5,000 crore over the amount provided for in the interim Budget. This includes a sum of Rs 1,000 crore for accelerating the development of the Railway system in the border areas. Urgent steps will also be taken to streamline the procurement process to make it speedy and more efficient.

Honouring Modi’s election promise to the jawans, the government announced that a war memorial will be constructed in Prince’s Park. It will be supplemented by a war museum. The government is allocating a sum of Rs 100 crore for this purpose.

In the year 2011 a separate fund was announced to provide necessary resources to public and private sector companies, including SMEs, as well as academic and scientific institutions to support research and development of defence systems that enhance cutting-edge technology capability in the country. However, beyond the announcement, no action was taken. Therefore, the finance minister has proposed to set aside an initial sum of Rs 100 crore to set up a Technology Development Fund to support this objective.

982816-india-maoist-attackThe scheme for modernisation of state police forces will be reviewed. The finance minister has proposed to enhance the allocation from a sum of Rs 1,847 crore in the BE of 2013-14 to Rs 3,000 crore in the current financial year. The government is also allocating adequate funds for carrying out small but much needed developmental activities as additional central assistance for left wing extremist affected districts. This does show the government’s commitment to fighting Maoism tooth and nail.

In order to strengthen and modernise border infrastructure, a sum of Rs 2,250 crore has been set aside. In addition, a sum of Rs 990 crore has been allocated for the socio-economic development of the villages along the borders. A sum of Rs 150 crore has also been ear-marked for the construction of Marine Police Station, Jetties, for the purchase of boats etc. This is a welcome departure from governance by the UPA that feared that a well-developed northern border region would be an invitation to Chinese incursion and occupation of Indian territory. While China never went to war with India after 1962, the apprehension only made life difficult for Indian civilians and soldiers posted in the region alike.

Jaitley also announced the construction of a befitting National Police Memorial. The finance minister has proposed to set aside a sum of Rs 50 crore for this purpose in the current financial year.

Culture and tourism
India’s rich cultural, historical, religious and natural heritage provides a huge potential for the development of tourism and job creation as an Industry. The finance minister has proposed to create 5 tourist circuits around specific themes and set aside a sum of Rs 500 crore for this purpose. This sum may be adequate too, as the scheme is a mere facilitator.

The National Mission on Pilgrimage Rejuvenation and Spiritual Augmentation Drive (PRASAD) shall be launched in this financial year. A sum of Rs 100 crore has been set aside for this purpose.

The National Heritage City Development and Augmentation Yojana (HRIDAY) will also be launched for conserving and preserving the heritage characters of these cities. To begin with the finance minister has proposed to launch this programme in the cities such as Mathura, Amritsar, Gaya, Kanchipuram, Vellankani and Ajmer. The minister has proposed to set aside a sum of Rs 200 crore for this purpose. The project will work through a partnership of government, academic institutions and local community, bringing together affordable technologies.

Archaeological sites’ preservation requires urgent attention lest our ancient heritage is lost to all future generations. For this purpose, the finance minister has set aside a sum of Rs 100 crore.

Sarnath-Gaya-Varanasi Buddhist circuit will be developed with world class tourist amenities to attract tourists from all over the world.

Goa has emerged as a major international convention centre. It has also been declared as the permanent venue for International Film Festival of India. There is an urgent need to develop world class convention facilities. This can best be done in close collaboration with the private sector. The Government of India will fully support this initiative to develop the facilities in PPP mode through the VGF scheme.

Water resources and Ganga
Rivers form the lifeline of our country. They provide water not only for producing food for the multitudes but also drinking water. Unfortunately the country is not uniformly blessed with perennial rivers. Therefore, an effort to link the rivers can give rich dividends to the country. It is time that the government made a serious effort to move in this direction. To expedite the preparation of the Detailed Project Reports, the finance minister has proposed to set aside a sum of Rs 100 crore.

big thumb 207ac9c8a023287dbb15abb03a3d58e6Substantial amount of money has been spent in the conservation and improvement of the Ganga, which has a very special sacred place in the collective consciousness of this country. However, the efforts have not yielded desired results because of the lack of concerted effort by all the stakeholders. The finance minister has proposed to set up Integrated Ganga Conservation Mission called “Namami Gange” and set aside a sum of Rs 2,037 crore for this purpose.

Our riverfronts and ghats are not only places of rich historical heritage but many of these are also sacred. To start this process in the country, the finance minister has proposed to set aside a sum of Rs 100 crore for ghat development and beautification of river front at Kedarnath, Haridwar, Kanpur, Varanasi, Allahabad, Patna and Delhi in the current financial year.

NRIs have been a very important contributor to the development process in India, in areas such as education, health and preservation of culture. In this context, to harness their enthusiasm to contribute towards the conservation of the river Ganga, NRI Fund for Ganga will be set up which will finance special projects.

Science and Technology
The Department of Science & Technology has some of country’s leading research centres in the areas such as nanotechnology, materials science and bio- medical device technology. The government will strengthen at least 5 such institutions as Technical Research Centres to make them more effective in the innovation space through Public Private Partnerships.

The development of biotech clusters in Faridabad and Bengaluru will be scaled up and taken to the highest international quality. This effort will include global partnerships in accessing model- organism resources for disease biology, stem cell biology and for high-end electron microscopy.

The nascent agri-biotech cluster in Mohali will be scaled up to include plant-genetic and phenotype platforms. Secondary agriculture will be a major thrust in Mohali through collaborations in the public and private sector. In addition, 2 new clusters in Pune and Kolkata will be established.

Global partnerships will be developed under India’s leadership to transform the Delhi component of the International Centre for Genetic Engineering and Biotechnology (ICGEB) into a world-leader in life sciences and biotechnology.

Several major space missions are planned for 2014-15 which include the experimental flight of India’s future heavy capacity launcher GSLV Mk-III, a commercial launch of PSLV and 2 more navigational satellites. Our Mars Orbiter spacecraft is in its 300 days long voyage to Planet Mars along the designated helio-centric trajectory. Mars Orbiter Spacecraft is expected to be orbiting around Mars on 24 September 2014. This, of course, is no NDA contribution. सिर्फ़ News published a timetable recently that talked of ISRO programmes several years into the future.

Sports
This government will set up national level sports academies for major games in different parts of the country to mainstream sports. Academies with international level facilities for training of accomplished athletes and for nurturing best talent in the country at junior and sub-junior level will also be set up for shooting, archery, boxing, wrestling, weightlifting and various track and field events. The efficacy of this well intentioned programme is doubtful. Like the best sporting nations, the private sector, especially brands, must come up to fund potential sportspersons. This will, it goes without saying, promote their businesses, too.

The finance minister has proposed to provide a sum of Rs200 crore to upgrade the indoor and outdoor sports stadiums to international standards in Jammu and in Kashmir Valley.

The finance minister also proposedto set up a sports university in Manipur. For this the government is providing a sum of Rs 100 crore in the current financial year.

Unique sports traditions have developed in the Himalayan region in the countries and the states that are a part of it. To promote these, India will start an annual event to promote these games and will invite countries such as Nepal and Bhutan also to participate in addition to the Indian states such as J&K, Uttarakhand, Himachal Pradesh, Sikkim and the North Eastern States.

The finance minister also proposed to set aside a sum of Rs 100 crore for the training of our sports women and men for the forthcoming Asian and Commonwealth games.

To encourage sports, the finance minister has proposed to prescribe a concessional excise duty of 2% without Cenvat benefit and 6% with Cenvat benefit on sports gloves.

Youth
Employment exchanges will be transformed into career centres and in addition for providing information about job availability. These centres will also extend counselling facilities to the youth for selecting the jobs best suited to their ability and aptitude. The finance minister has set aside a sum of Rs 100 crore for this purpose.

In order to promote leadership skills, the finance minister has proposed to set up a “Young Leaders Programme” with an initial allocation of Rs 100 crore.

Kashmiri Pandits
Displaced Kashmiri migrants require state support for rehabilitation. For this, Jaitley has provided a sum of Rs 500 crore in the current financial year. The Congress pooh-poohed the move, claiming that they had allocated a higher amount for the purpose. The allegation apart, Pandits cannot be rehabilitated in their native homes and hearths by money alone. It calls for strong political, military and police measures.

The Himalayas
The finance minister has proposed to set up a National Centre for Himalayan Studies in Uttarakhand with an initial outlay of Rs 100 crore.

Mithai for both AP and Telangana
During his election speeches, slamming the UPA Government for cynically dividing Andhra Pradesh, Modi used to say that when the NDA Government had divided some States, both the divisions of each State would celebrate the decision. Apparently to see people distributing sweets in the latest two States, rewards for them were announced in the Railways Budget. The overall Budget is no exception.

The National Academy for Customs & Excise will be established in Hindupur, Andhra Pradesh.

Claiming that “my government is committed to addressing the issues relating to development of Andhra Pradesh and Telangana in the AP Re-organisation Act, 2014,” Jaitley announced that provisions have been made by various ministries/departments to fulfil the obligation of Union Government for both the States.

Northeast
The North-eastern region of India has tremendous potential for development of organic farming, the prime minister had said in his address to MPs on their day of swearing-in. With a growing global demand for organic food, people living in the NE states can reap rich harvest from development of commercial organic farming. To facilitate this, the finance minister has proposed to provide a sum of Rs 100 crore for this purpose in the current financial year.

Yangsum-farm 940 529 80 s c1The region has suffered from underdevelopment and a sense of isolation due to lack of proper connectivity. Development of rail system is urgently required to bridge this gap. Jaitley promised to expedite the development of rail connectivity in the region and for this purpose the finance minister has proposed to set aside an additional sum of Rs 1,000 crore over and above the amount provided for in the interim Budget.

To provide a strong platform to rich cultural and linguistic identity of the Northeast, a new 24×7 channel called Arun Prabha will be launched. The sun does rise in the east, but the name seems to bear a signature of the finance minister.

The previous NDA Government had made compulsory 10% allocation of plan funds for the Northeast and had made them non-lapsable in nature. From the current Budget, the government has introduced a statement which will separately show plan allocation made for the region. In 2014-15, an allocation of Rs 53,706 crore has been made for the region.

National Capital Territory of Delhi
The city-State faces large immigration every year, the finance minister noted. Delhi is plagued by frequent transmission related problems and issues of water distribution and supply. In order to overcome this and make Delhi a world class city, the finance minister has proposed to provide Rs 200 crore for power reforms and Rs 500 crore for water reforms. This has the potential to blunt the anti-BJP campaign of the Aam Aadmi Party in the inevitable re-election for the Delhi Assembly that is most likely to be held in October if the Delhi unit of the ruling party at the Centre gets its act together.

In addition, to solve the long term water supply issues to the capital region, construction of long pending Renuka Dam will be taken up on priority. the finance minister hasprovided an initial sum of Rs 50 crore for this.

Andaman & Nicobar Islands and Puducherry
In order to tide over communication related problems of the islands, the finance minister has proposed to allot a sum of Rs 150 crore.

Similarly, the finance minister has proposed to provide Rs 188 crore to Puducherry for meeting commitments for Disaster preparedness.

Estimates
Some of the estimates have figured under the respective sectors concerned. The rest follows. Non-Plan expenditure estimates for the financial year are to the tune of Rs 12,19,892 crore. The finance minister said that, while preparing non-plan estimates, due care had been taken to fully provide for all the essential activities. Additional amounts have been provided for fertiliser subsidy and capital expenditure of armed forces, he said.

“While preparing estimates of plan expenditure, attention was paid to the absorptive capacity of the department and on achieving greater outcome with the same financial outlay,” Jaitley said. In 2013-14, plan funds to the tune of Rs 4,53,085 crore could be utilised. Plan allocation of Rs 5,75,000 crore in the main Budget 2014-15 mark an increase of 26.9% over ‘actuals’ for 2013-14 and have been targeted towards agriculture, capacity creation in health and education, rural roads and national highways infrastructure, railways network expansion, clean energy initiatives, development of water resources and river conservation plans. Further thorough convergence of programmes greater impact from the money spent will be achieved, Jaitley assured.

The total expenditure estimates thus stands at Rs 17,94,892 crore. To finance this expenditure, it is estimated that Gross Tax Receipts will be Rs 13,64,524 crore. After devolving the share of states, share of centre will be Rs 9,77,258 crore. Non-tax revenues for the current financial year will be Rs 2,12,505 crore and capital receipts other than borrowings will be Rs 73,952 crore.

With the above estimates, fiscal deficit will be 4.1% of GDP and revenue deficit will be 2.9% of GDP. This certainly means Jaitley has accepted the target set by his predecessor Chidambaram, but neither in the speech in Parliament nor in his post-speech interview did he sound confident of achieving the goal.

Infrastructure and construction sectors have a significant role in the economy. Growth in these sectors is necessary to revive the economy and generate jobs for millions of our young boys and girls. With a view to attract large scale investment in these sectors, the finance minister claimed to have provided a conducive tax regime for Infrastructure Investment Trusts and Real Estate Investment Trusts to be set up in accordance with regulations of the Securities and Exchange Board of India.

Foreign Portfolio Investors (FPIs) have invested more than Rs 8 lakh crore (about $130 billion) in India. One of their concerns is uncertainty in taxation on account of characterisation of their income. Moreover, the fund managers of these foreign investors remain outside India under the apprehension that their presence in India may have adverse tax consequences. With a view to put an end to this uncertainty and to encourage these fund managers to shift to India, the finance minister has proposed to provide that income arising to foreign portfolio investors from transaction in securities will be treated as capital gains.

The concessional rate of tax at 15% on dividends received by Indian companies from their foreign subsidiaries has resulted in enhanced repatriation of funds from abroad, the finance minister noted, proposing to continue with this concessional rate on foreign dividends without any sunset date. “This will ensure stability of taxation policy,” he said.

In order to augment low cost long term foreign borrowings for Indian companies, the finance minister has proposed to extend the eligible date of borrowing in foreign currency from 30 June 2016 to 30 June 2017 for a concessional tax rate of 5% on interest payments. The minister also proposed to extend this tax incentive to all types of bonds instead of only infrastructure bonds. “I hope this measure will enable the companies to step up their investments in India,” Jaitley said.

In order to reduce litigation on transfer pricing issues, the finance minister has proposed to make certain changes in transfer pricing regulations.

Necessary legislative amendments to give effect to the above proposals including those relating to the Authority for Advance Rulings and Income-tax Settlement Commission will be moved in the current session of the Parliament, the minister said.

In the case of mutual funds, other than equity oriented funds, the capital gains arising on transfer of units held for more than a year is taxed at a concessional rate of 10% whereas direct investments in banks and other debt instruments attract a higher rate of tax. This allows tax arbitrage opportunity. “This arbitrage has hardly benefitted retail investors as their percentage is very small among such mutual fund investors,” the minister said. With a view to remove this tax arbitrage, he proposed to increase the rate of tax on long term capital gains from 10% to 20% on transfer of units of such funds. The finance minister also proposed to increase the period of holding in respect of such units from 12 months to 36 months for this purpose.

In the year 2003, the tax liability on income by way of dividends was shifted from the shareholder to the company. The shareholder was required to pay tax on the gross dividends, but now the company pays tax on the dividend amount net of taxes. Similarly, in cases of mutual fund, income distribution tax is paid on the income distributed net of taxes. The finance minister has proposed to remove this anomaly both in the case of the company and the Mutual Fund.

Currently, where an assessee fails to deduct and pay tax on specified payments to residents, 100% of such payments are not allowed as deduction while computing his income. “This has caused undue hardship to taxpayers, particularly where the rate of tax is only 1 to 10%,” Jaitley noted, providing that instead of 100%, only 30% of such payments will be disallowed.

The Direct Taxes Code Bill, 2010 lapsed with the dissolution of the 15th Lok Sabha. Having considered the report of the Standing Committee on Finance and the views expressed by the stakeholders, Chidambaram had placed a revised code in the public domain in March 2014. The government shall consider the comments received from the stakeholders on the revised code, Jaitley said. The government will also review the DTC in its present shape and take a view in the whole matter.

The Income Tax Department is expected to function not only as an enforcement agency but also as a facilitator. A number of Aykar Seva Kendras (ASK) have been opened in different parts of the country. The finance minister has proposed to extend this facility by opening 60 more such seva kendras (help centres) during the current financial year to promote excellence in service delivery.

The focus of any tax administration is to broaden the tax base. “Our policy thrust is to adopt non intrusive methods to achieve this objective,” Jaitley said. In this direction, the finance minister has proposed to make greater use of information technology techniques.

The net effect of the direct tax proposals is a revenue loss of Rs 22,200 crore. This makes the Budget a political as well as economic letdown. For, reactions to the revenue measures have so far been mostly one of dissatisfaction; yet the finance minister has to live with this much of loss in revenue.

Among indirect taxes other than those mentioned under the section on industry, the finance minister has proposed to reduce the basic customs duty on reformate from 10% to 2.5%; on ethane, propane, ethylene, propylene, butadiene and ortho-xylene from 5% to 2.5%; on methyl alcohol and denatured ethyl alcohol from 7.5% to 5%; and on crude naphthalene from 10% to 5% in order to encourage new investment and capacity addition in the chemicals and petrochemicals sector.

The finance minister said he only highlighted some of the proposals in the Budget 2014-15. “The government is sure these measures will incentivise value addition, generate income and create more jobs in India,” Jaitley said with an air of optimism.

The finance minister has also undertaken several tax rationalisation measures. Ships imported for breaking up attract basic customs duty at 5%. As against this, melting scrap of iron or steel attracts basic customs duty at 2.5%. The finance minister has proposed to rationalise the duty on ship breaking scrap and melting scrap of iron or steel by reducing the basic customs duty on ships imported for breaking up from 5% to 2.5%.

Semi-processed, half cut or broken diamonds are presently exempt from basic customs duty. As against this, cut and polished diamonds and coloured gemstones attract basic customs duty of 2%. To prevent misuse and avoid assessment disputes, the basic customs duty on semi-processed, half cut or broken diamonds, cut and polished diamonds and coloured gemstones has been rationalised at 2.5%. To encourage exports, pre-forms of precious and semi-precious stones are being fully exempted from basic customs duty.

To encourage exports of readymade garments the finance minister has proposed to increase the duty free entitlement for import of trimmings, embellishments and other specified items from 3% to 5% of the value of their exports.

Considering the need to conserve our natural resources, the finance minister has proposed to increase the export duty on bauxite from 10% to 20%.

The free baggage allowance under the baggage rules was last revised in 2012. As a measure of passenger facilitation, the finance minister has proposed to increase the free baggage allowance from Rs 35,000 to Rs 45,000.

Excise
A part of it appears under the sections of new and renewable energy and sports. As for the rest, to provide a fillip to the capital goods, consumer durables and automobile sectors, and given our commitment to revive economic growth, the finance minister had already extended the excise duty concessions beyond 30 June 2014 for a period of 6 months up to 31 December 2014. The government expects the industry to show positive results in the coming months.

In continuation, the finance minister has a few more proposals to boost domestic production. Minimisation of harvest and post harvest losses of agricultural produce is an important measure for tackling food inflation and ensuring food security. The losses in fruits and vegetables are mainly due to lack of adequate processing capacity. To incentivise expansion of processing capacity, the finance minister has proposed to reduce the excise duty on specified food processing and packaging machinery from 10% to 6%.

As a measure of relief to the footwear industry, most of which are in SME sector, the finance minister has proposed to reduce the excise duty from 12% to 6% on footwear of retail price exceeding Rs 500 per pair but not exceeding Rs 1,000 per pair. Footwear of retail price up to Rs 500 per pair will continue to remain exempted.

The finance minister has proposed to withdraw the concessional excise duty (2% without Cenvat benefit and 6% with Cenvat benefit) on smart cards and levy a uniform excise duty at 12%. Consequently, imports will attract higher CVD. This will help domestic industry.

To set at rest an on-going dispute, the finance minister has proposed to exempt PSF and PFY manufactured from plastic waste and scrap including PET bottles from excise duty with effect from 29 June 2010 to 7 May 2012. The finance minister also proposed to levy prospectively a nominal duty of 2% without Cenvat benefit and 6% with Cenvat benefit on such PSF and PFY.

“While undertaking all these measures, I also need to mobilise resources,” Jaitley said. Accordingly, the finance minister has proposed to increase the specific excise duty on cigarettes in the range of 11% to 72%. Similar increases are proposed on cigars, cheroots and cigarillos. Likewise, the excise duty has been increased from 12% to 16% on pan masala, from 50% to 55% on unmanufactured tobacco and from 60% to 70% on gutkha and chewing tobacco. The finance minister also proposed to levy an additional duty of excise at 5% on aerated waters containing added sugar. “These are healthy measures and I hope everyone will welcome them from the point of view of human and fiscal health,” Jaitley said.

24f48374-4987-4664-8e8d-06a680b7c1caHiResThat is questionable. Will increased prices of cigarettes make smokers quit? No. Many will switch to bidi. Thousands of poor smokers switch after Budget every year, and harm themselves even more because bidis don’t have filters. The affluent can afford Rs 1 or Rs 2 hike per stick of their premium brands. The poor can’t afford even a 20p hike in the entry-level brands they buy. Hence bidi!

Hiking price of cigarettes, with the alibi that the measure is pro-health, is one of the most inane and yet one of the most popular measures among finance ministers. They need additional revenue, and know that smokers are not a political community that will revolt against the establishment. If these successive ministers had indeed been concerned about smokers’ health, why did they never have the guts to ban tobacco?

Readers must keep in mind that the bidi manufacturers are a strong political lobby. Did they influence this steep hike?

Service tax
In recent times, among indirect taxes, service tax has shown the highest rate of growth. “Since my overall objective is to prepare the indirect tax regime for a smooth transition to Goods and Services Tax, changes have been kept minimal at this stage,” Jaitley explained. His twin objectives in this sector of indirect taxes are to widen the tax base and enhance compliance. The finance minister’s proposals in relation to service tax are in line with these objectives, he claimed.

To broaden the tax base in service tax, it is necessary to prune the negative list and exemptions to the extent possible. Accordingly, the negative list has been reviewed and service tax leviable currently, on sale of space or time for advertisements in broadcast media, has been extended to cover such sales on other segments like online and mobile advertising. Sale of space for advertisements in print media, however, will remain excluded from service tax. Similarly, tax has been proposed on the service provided by radio-taxis to place them on par with rent-a-cab service. These new levies will come into effect from a date to be notified after the passing of the Finance Bill.

In furtherance of the effort to broaden the tax base, certain exemptions are being withdrawn, including those extended to services by air-conditioned contract carriages and technical testing of newly developed drugs on human participants.

To spur growth in certain sectors, the finance minister has tried to correct the bottlenecks which have been brought to my knowledge. Indian shipping industry had been representing that they are losing business in a tough global scenario, due to a provision in the Place of Provision of Services Rules, which is now being addressed through an amendment. Similarly, to encourage growth in the transport of goods through coastal vessels, the tax incidence has been reduced. In response to the request of the tourism sector, services provided by Indian tour operators to foreign tourists in relation to a tour wholly conducted outside India has been taken out of the tax net. A long standing demand of this sector has been to allow Cenvat credit for services of rent-a-cab and tour operators. The finance minister proposed to allow credit in the same line of business.

He had to accept a few requests for exemptions from the social sector, since exemption-induced distortion will be comparatively less in such sectors, Jaitley explained. “At the request of the Ministry of Agriculture, service tax on loading, unloading, storage, warehousing and transportation of cotton, whether ginned or baled, has been exempted to bring it on par with certain other agricultural produce,” he said. Services provided by the Employees’ State Insurance Corporation for the period prior to 1 July 2012 has been exempted.

For the benefit of the common man, the exemption presently available for specified micro insurance schemes has been expanded to cover all life micro-insurance schemes where the sum assured does not exceed Rs 50,000 per life insured. Since taxes should not come in the way of safe disposal of medical and clinical wastes, services provided by common bio-medical waste treatment facilities are being exempted.

Certain changes are also proposed for bringing about greater clarity and for reducing litigation regarding the scope of exemptions. These include functions ordinarily entrusted to a municipality and services in relation to education.

There are a few more decisions which entail small gains or losses of revenue. Certain amendments have also been proposed in the Customs and Central Excise Acts and in the Finance Act, 1994, relating to service tax. These changes are reflected in the Budget documents.

Jaitley’s tax proposals on the indirect taxes side are estimated to yield Rs 7,525 crore. This does not totally compensate for the revenue loss under direct taxes.

The finance minister announced some more proposals in the nature of facilitating trade and resolving disputes. He highlighted only a few.

Faster clearance of import and export cargo reduces transaction costs and improves business competitiveness. To help achieve these objectives, measures are being initiated to extend the existing 24×7 customs clearance facility to 13 more airports in respect of all export goods and to 14 more sea ports in respect of specified import and export goods.

It is also proposed to implement an ‘Indian Customs Single Window Project’ to facilitate trade. Under this, importers and exporters will lodge their clearance documents at a single point only. Required permissions, if any, from other regulatory agencies will be obtained online without the trader having to approach these agencies. This will reduce interface with Governmental agencies, dwell time and the cost of doing business.

The scheme of advance ruling in indirect taxes has been expanded to cover resident private limited companies. This will allow these companies to seek advance ruling in respect of new activities being proposed to be undertaken by them. The scope of Settlement Commission has been enlarged to facilitate quick dispute resolution.

To expedite the process of disposal of appeals, amendments have been proposed in the Customs and Central Excise Acts with a view to freeing appellate authorities from hearing stay applications and to take up regular appeals for final disposal.

The finance minister concluded his speech after this.

Surajit Dasgupta
Surajit Dasgupta
The founder of सिर्फ़ News has been a science correspondent in The Statesman, senior editor in The Pioneer, special correspondent in Money Life and columnist in various newspapers and magazines, writing in English as well as Hindi. He was the national affairs editor of Swarajya, 2014-16. He worked with Hindusthan Samachar in 2017. He was the first chief editor of Sirf News and is now back at the helm after a stint as the desk head of MyNation of the Asianet group. He is a mathematician by training with interests in academic pursuits of science, linguistics and history. He advocates individual liberty and a free market in a manner that is politically feasible. His hobbies include Hindi film music and classical poetry in Bengali, English, French, Hindi and Urdu.

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