BUDGET 2016 INDIA

UNION BUDGET 2016, INDIA

#BUDGET2016

Background :

> Indian Economy grew at an impressive 7.6% in 2015-16
> Foreign Exchange Reserves at highest ever : US $ 350 Billion

Challenges in 2016-17 :

> Risk of Global slowdown & turbulence

> Addl burden due to recommendation of 7th Pay commission & OROP :  Estimated Rs 1,10,000 crore 

Tax Proposals :


>Tax rebate increased from Rs 2000 to Rs 5000 for Tax payers  having income up to Rs 5 Lacs. It means effective increase in exemption limit by Rs 30000 for this category of Tax payers. 

>Maximum Limit for Deduction for House Rent for Tax payers  (not in receipt of HRA) increased to Rs 60000 from Rs 24000
 

>Additional Deduction for Int on Housing Loan up to Rs 50000 for First time House Buyers where Home Loan amount is NOT more than Rs 35 lacs & cost of House is NOT more than Rs 50 Lacs & Home is purchased between 01-04-16 to 31-03-17)

> 10% Tax on Dividend Income in the hands of Payee where Dividend amount exceeds Rs 10 Lacs

 (It means Mukesh Ambani will be paying Addl Tax of More than Rs 100 crore , Wipro chairman Premji Azim  will be paying more than Rs 150 crore additionally) 

 

 > Surcharge on Income above Rs 1 Crore increased to 15% (from 12%)

> Lump sum Withdrawal from NPS, EPF etc in excess of 40% to be taxed

(This proposal has faced a stiff opposition and may be withdrawn)

>  1% TCS on purchase of cars costing more than Rs 10 Lacs

>  1% TCS on purchase of ANY goods & Services above Rs 2 Lacs in CASH


> New Mfg Company incorporated after 1.3.16 given option to be taxed @ 25% (plus cess )provided No deductions are claimed under other sections of Income Tax act 

> Companies with annual turnover of up to Rs 5 crore to be taxed @ 29% (plus cess) 

 > For start up businesses set up between Apr 16 to Mar,19, full tax exemption for 3 out of first 5 years

> Holding period of shares in unlisted companies for claim of Long term capital gain reduced to 2 yrs from 3 yrs

> 0.5% Krishi Kalyan Cess on all Taxable Services wef 01-06-16

 > 1% Infra Cess on Small Cars (Petrol,LNG)

> 2.5% Infra Cess on small Diesel cars

> 4% Infra Cess on SUV / high capacity cars

> Clean Environment Cess on coal @ Rs 400 per tonne 

> Immunity Scheme to declare previously undisclosed income / Asset @ 45% all inclusive Tax. No questions asked. Limited Period scheme.

> Penalty provisions rationalised. 50% in case of Under reporting and 200% in case of Mis Reporting of Income

> Stay of demand mandatory where case is under appeal and assessee has paid 15% of disputed Tax

> E assesment scheme to be launched in 7 cities for assessment of scrutiny cases on e-platform without direct face to face inter action with Assessing Officer  

> TDS provisions rationalised

    TDS on Brokerage /Commission : Limit raised to 15000 , (from 5000 ) Rate reduced to 5%  (from 10%)

    TDS on Contracts : Limit raised to Rs 100000 (from Rs 75000

> Presumptive Scheme of taxation extended to businesses having annual TO of up to Rs 2 crores.(subject to conditions)

> Excise duty of 1% (Without Input claim ) / 12.5% (with Input Claim)  levied on Jewellery

> Excise duty of 2% (Without Input Claim) / 12.5% (With Input Claim)  on Readymade Garments  

> Excise duty on Tobacco raised by  10- 15%

> Commitment to provided Stable & predictable Tax regime

> GAAR (General Anti Avoidance Rules) to be implemented with effect from 01-04-2017

> GST to be implemented with effect from 01-04-2017 

Agriculture :

> To reduce dependency on Monsoon, Irrigation to be given a big boost by :

1) Addl 28.5 Lacs hectare of Farmland to be brought under irrigation
2) Irrigation fund set up with initial corpus of Rs 20000 crore
3) Ground Water resource Management to focus on recharging of fast depleting Ground water - Funds allocated Rs 6000 Crore
4) Target to dig 5 Lacs addl ponds / wells under MGNREGA

> Action plan to tackle droughts 

> Emphasis on Organic Farming : 5 Lacs Acres to be brought under Organic Farming

> E-market platform for Agricultural produce to reduce dependency of farmers on middlemen

> Crop Insurance Scheme to protect farmers in distress
    Allocation Rs 5500 Crores

> Rs 15000 crores for Interest subvention on Loans by farmers

Rural Sector :

> 100% Village electrification target by 01.05.2018

> Budget allocation for MGNREGS Rs 38500 Crores

> Rs 19000 crore to connect villages by Road

> Digital Literacy Mission to cover 6 crore addl rural households in next 3 years

Health :

> Health Insurance cover of Rs 1 Lac for each family

> 3000 Medical Stores to be opened to provide generic drugs at affordable  prices

> National Dialysis Programme to provide Dialysis services at affordable cost

> Rs 9000 Crore for Swachh Bharat Programme

Education :

> Target to set up 10 Public & 10 Private Educational Institutions to be made World class in quality of Education & Research

> Higher Education Funding Agency to provide loans for higher education : initial Fund Rs 1000 Crore

> Digital Depository for School & College certificates, mark sheets etc

Skill development :

> 1500 Multi skill development centres to impart multiple skills to enable youth to make a living

> A no of online courses to be started for training in multiple disciplines to encourage entrepreneurship

Infrastructure :

> 10000 Kms of New National Highways to be approved & commenced 

> Ambitious plan to generate Nuclear Power over next 15-20 years. Rs 3000 crore for 16-17.

> Under served  Airports to be developed

Governance :

> Committee set up for Rationalisation of Human resources in all ministries

> Targeted Delivery of Financial Subsidies & benefits direct to beneficialry through Aadhar framework

> Price stabilisation Fund of Rs 900 Crore to maintain prices of Pulse

> Rs 25000 crore for recapitalisation of Banks 

> New Company Formation in 1 day

> एक भारत -श्रेष्ठ भारत : Annual event to connect States & Districts to for exchange of Trade, culture, Travel & Tourism

> Commitment to Fiscal Discipline 

Impact on Market Place :

Things Costlier :


> Cars
> Cigarettes , Cigar, Gutkha
> Readymade garments
> Gold, Jewellery
> Mineral Water, Soft Drinks
> Air Travel
> Eating Out,watching movies
> Beauty Parlour

Things Cheaper :


> Leather Footwear
> Refrigerated Containers
> Microwave Oven
> Agarbatti
> Ambulance , Ambulance Services
> Pacemaker
> Set Top Boxes, Router
> Make in India Mobile Phones
> LED lights

And finally a look at Where the Rupee comes from and where the Rupee goes to :

  Conclusion :

The Budget is clearly focused on Agriculture & Rural Sectors.
Due emphasis is given to "Make in India" project of PM Modi by tweaking Excise & Custom duties here and there to encourage domestic Industries like I T Hardware , Capital Goods  & Defence.

The Government has tried to take from Super Rich & Rich and given to the poor. Sincere steps are taken to prevent leakage of revenue and to ensure that benefit reaches directly to the targeted beneficiary.

Infrastructure, Education , Skill development, Environment are also given due importance.

Overall its a balanced budget in right direction.

  

Impression by Sand Artist Sudarshan Patnaik,Puri

  



 

Understanding GST

An integrated Tax on Goods & Services replacing a plethora of indirect taxes currently in vogue.

Features :

1. Dual Rate : It will be a Two rate Levy . Central GST (CGST) & State GST (SGST) 
2. Destination based :  Tax will finally accrue at the time of consumption by the ultimate consumer


Taxes to be replaced by GST :

a) Central Excise b) Service Tax c) CST d)  VAT e) Entertainment Tax f) Luxury Tax g) Octroi

Taxes NOT replaced by GST :

a) Income Tax b) Stamp duty

Products out of Purview of GST :

a) Petrolium Products b) Liquor c) Tobacco

Scheme of Taxation :

CGST & SGST will be charged on all Intra State Transactions (Transactions within a state)
IGST will be charged on all Inter state Transactions (Transactions between one state & another)
IGST will be total of CGST & SGST.

CGST & IGST will go to centre. SGST will go to State.  

Input Credit :

Input credit will be allowed for IGST, CGST & SGST subject to the restriction that CGST & SGST will not be set off mutually i.e. CGST credit will not be allowed to be set off against SGST liability & vice versa.

 

 Payment : 

Seperate payments have to be made for IGST, CGST & SGST. An electronic Ledger will be maintained for every assessee to maintain records of all input, output & Taxes paid.
IGST will be split up into its components i.e. CGST & SGST.

Monthly Returns :

1.Invoice wise (and may be, item wise) Return of outward supplies to be submitted by 10th of succeeding month
   Details have to be sent to respective Receivers (Customers) for their information & verification.

2. Invoice wise (and may be, item wise) Return of Inward supplies to be submitted by 15th of succeeding month
3. Combined  Return of Inward supplies, outward supplies, Input, Output & Tax paid etc to be submitted by 20th of succeeding month

 Penalty of Rs 100 per day (subject to maximum Rs 5000/=) for delay in filing of return.

Matching of Input & Output :

Each Input claimed by a Purchasing dealer will be matched against output declared by the corresponding selling dealer . In case of discrepancy, input will be disallowed.

Annual Return :

One Annual Return to be filed by 31st Dec for each FY ended 31st march. Dealers having TO exceeding a specified limit have to get an Audit Report by a CA along with statement of reconciliation of Book TO with TO reported.

Records : Records to be maintained for 60 months from date of filing of Annual return.


Annual Information Return :

Certain categories like Banks, Registrars, electricity dept, Company Registrar, Income Tax reqd to file Annual Information Return in respect of specified transactions of all persons.

Misc.:

> Regn will be PAN based. 13/15 digit GSTIN to be allotted to each assessee
> Persons having annual TO up to 50 Lacs to be exempted from GST. Instead 1% flat rate of tax to apply to them. They will not be eligible for input credit nor the tax charged by them will be eligible for input credit.


> Stock as at cut off date will be eligible for Input credit under GST.

Rate :

Combined Rate is expected to be between 18 - 23% split up between CGST & SGST.

States are demanding a rate of 27% but FM considers it too high.

Globally, average rate is 18%  

 
Road Map :

* Rajya Sabha to pass bill with 2/3rd majority
* Minimum 15 states to ratify it in legislative assebly
* Then President Gives assent to bill
* GST council to give finishing touches to bill
* GST network , Information Technology bone of GST, to be set up to facilitate online regn, payment of taxes and submission of returns

Challenges for business :

> GST means transparency in all business transactions
> There will be close monitoring of all business transactions from multiple platforms with cross matching of         all  returns & claims
> Greater responsibility & liability on Transporters of goods
> Strong powers to officers including power to arrest
> Setting up of a Information Technology system for reporting of all transactions in details, in time and accurately.


Unanswered question :

With petrolium products out of purview of GST, what will be the status of companies like ONGC & Reliance Industries ?