Chapter-2: Review of Fiscal Developments

On GST

• In a historic tax reform, the goods and services tax was rolled out on 1st July, 2017, subsuming almost all major indirect taxes like Central Excise Duty, Service Tax, VAT, CST, entertainment tax, Octroi, luxury tax, a large number of cesses/surcharges and various other state and central levies on goods and services
• GST has significantly raised turnover thresholds of Rs 20 lakh for an entity to be taxable in GST. Threshold for composition was increased in general to Rs. 1 crore (Rs 75 lakh for special category states except Jammu & Kashmir and Uttarakhand).

What were the salient measures taken on direct taxes in the Budget 2017-18 and afterwards?

• Lowering of tax rate on domestic companies with turnover or gross receipts less than or equal to Rs. 50 Crore in FY 2015-16 to 25 per cent from 30 per cent.
• Lowering of tax rate on individuals between income of Rs. 2.5 lakhs and Rs. 5 lakhs to 5 per cent from 10 per cent.
• Levying of surcharge at 10 per cent on individuals with income between Rs. 50 lakhs and Rs. 1 crore.
• In moving towards a less cash economy and to incentivise small traders/businesses to proactively accept payments by digital means, the existing rate of deemed profit of 8% under section 44AD of the Act was reduced to 6% for amount of total turnover or gross receipts received through banking channel/digital means for the financial year 2016-17 and subsequent years
• Period of holding for computation of long term capital gains in the case of immovable property reduced from 36 months to 24 months to give fillip to the housing sector.
• 100 per cent deduction of profit has been made available to an assessee developing and building affordable housing projects if the housing project is approved by the competent authority before the 31st March, 2019 subject to certain conditions.
• Capital gains exemption provided to an individual or Hindu Undivided Family under the land pooling scheme notified under the provisions of Andhra Pradesh Capital Region Development Authority Act, 2014.
• Base year for fair market value and cost inflation index has been shifted from 1981 to 2001.
• Period of Tax credit available in respect of Minimum Alternate Tax (MAT) and Alternate Minimum Tax (AMT) has been increased from the existing 10 years to 15 years.
• Limit of cash donations under Section 80G of the Act reduced to Rs. 2000 from Rs. 10,000.
• Self-employed individual shall be eligible for deduction up to 20 per cent of his gross total income in respect of contribution made to National Pension System Trust. Exemption from taxation has been provided to partial withdrawal made by subscriber of New Pension Scheme.
• Further, to bring transparency in the source of funding to political parties, the provisions of section 13A of the Act have been amended to provide for the following additional conditions for availing the benefit of the exemption from income-tax: (a) No donations of Rs. 2000/- or more are received otherwise than by an account payee cheque drawn on a bank or an account payee bank draft or use of electronic clearing system through a bank account or through electoral bonds; and (b) Political party furnishes a return of income for the previous year in accordance with the provisions of sub-section (4B) of section 139 of the Act on or before the due date under section 139 of the Act
• Income-tax return (ITR) Forms have been rationalised to make it more objective and taxpayer friendly. viz. a one page ITR-1 (Sahaj) Form has been notified for the assessment year 2017-18 for taxpayers having income uptoRs. 50 Lakh from salary and one house property.

What policy initiatives were taken on investment management in CPSES?

• The thrust of the Government is presently directed towards efficient management of its investment in CPSEs, with the overall focus on higher economic growth through consistent long-term policies as well as efficient and effective allocation of resources.
• Based on this philosophy, Budget 2016-17 focused on the need to migrate from the’ disinvestment based approach’ to ‘investment based approach’ for CPSEs. Accordingly, renaming the Department as ‘DIPAM’ with expanded mandate denotes a paradigm shift in the thinking process of the Government on its strategy to manage its investment in CPSEs.
• Keeping in view its inherent benefits, beginning January, 2017 the Government started using index based ETF to offer an investment opportunity in CPSEs to pension funds and retail investors in India.
• And pursuant to the announcement made in the Budget in this regard, a new ETF, namely BHARAT 22 was announced in August, 2017. The New Fund Offer of Bharat 22 launched in the month of November, 2017 received an overwhelming response across all class of investors and the Government retained a portion of the oversubscription by increasing the issue size of the offer.

What was done for ease of doing business for small traders?

• GST has significantly raised turnover thresholds of Rs 20 lakh for an entity to be taxable in GST. Threshold for composition was increased in general to Rs. 1 crore (Rs 75 lakh for special category states except Jammu & Kashmir and Uttarakhand). Other measures for MSME sector include:
• Service providers whose annual aggregate turnover is less than Rs. 20 lacs (Rs. 10 lacs in special category states except J & K) were exempted from obtaining registration even if they are making inter-State taxable supplies of services. This measure will significantly reduce the compliance cost of small service providers. • Small and medium businesses with annual aggregate turnover up to Rs. 1.5 crores would be required to file quarterly return (monthly for other taxpayers).