On August 23, 2019, A presentation was made by Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman on measures to boost Indian Economy during a press conference. Following are the highlights:
Facilitating wealth creators
Corporate Social Responsibility (CSR) Violations
- CSR violation will not be treated as a criminal offence. It will be treated as a civil liability.
- Ministry of Corporate Affairs will review the sections under Companies Act 1956.
Issue of IT orders, notices, summons, letters etc through a centralized system
In order to address complaints of harassment on account of issue of notices, summons, orders etc. by certain income-tax authorities:
- On or after 1st October, 2019 all notices, summons, orders etc. by the income-tax authorities shall be issued through a centralized computer system and will contain a computer generated unique Document Identification Number.
- Any communication issued without computer-generated unique Document Identification Number shall be non est in law.
- All old notices to be decided by 1st October 2019 or uploaded again through the system .
- From 1st October, 2019 all notices to be disposed off within three months from the date of the reply.
Taxation Measures
Relief from enhanced surcharge on Long-Term/Short-term Capital Gains
In order to encourage investment in the capital market, it has been decided to withdraw the enhanced surcharge levied by Finance (No. 2) Act, 2019 on long/ short term capital gains arising from transfer of equity shares/units referred in section 111A and 112 A respectively.
Withdrawal of Angel Tax provisions for Startups and their investors
- To mitigate genuine difficulties of startups and their investors, it has been decided that section 56(2)(viib) of the Income-tax Act shall not be applicable to a startup registered with DPIIT.
- It has also been decided to set up a dedicated cell under Member of Central Board of Direct Taxes (CBDT) for addressing the problems of startups. A startup having any income-tax issue can approach the cell for quick resolution of the same.
Cut in corporate tax for companiesÂ
Corporate tax rate for companies with over Rs 400 crore turnover will be gradually cut to 25% and the government will support wealth creators.
Banks/NBFCs/MSMEsÂ
Additional Credit expansion through PSBs
- Capital infusion of Rs 70,000 crore into public sector banks (PSBs). The move is aimed at boosting lending and improving liquidity situation.
- It is expected to generate an additional lending and liquidity in the financial system to the tune of Rs 5 lakh crore.
Banks to effect timely rate cuts
Banks have decided to pass on rate cuts through Marginal Cost of Funds based Lending Rate (MCLR) reduction to benefit all borrowers.
Banks to launch Repo rate /external benchmark linked loan products
- Banks to reduce Equated Monthly Installment (EMI) for housing loans, vehicle and other retail loans by directly linking Repo rate to interest rates.
- Working capital loans for industry will also become cheaper.
Customer Ease
- To reduce harassment and bring in greater efficiency.
- PSBs to ensure mandated return of loan documents within 15 days of loan closure. It will benefit the Borrowers who have mortgaged assets.
Online tracking of loan applications
- Online tracking of loan applications by customers of Retail, MSME (Micro, small and medium enterprises), Housing, Vehicle, working Capital, limit enhancements, renewals etc.
- It would increase transparency, reduce harassment, and improve turnaround time for customers.
Transparent One Time Settlement (OTS) Policy
- Banks to issue improved transparent OTS policy to benefit MSME and retail borrowers in settling their overdues.
- Policy to be based on checkbox approach.
Protecting honest decision making
- To support decision making and to prevent harassment for genuine commercial decisions by bankers, CVC (Central Vigilance Commission) has issued directions that Internal Advisory Committee (IAC) in banks to classify cases as vigilance and non-vigilance.
- Decision of the IAC and bank CVO/ DA to be treated as final.
Support to NBFCs/HFCs
- More credit support for purchase of houses, vehicles, consumption goods.
- The National Housing Bank (NHB) can now extend up to Rs 30,000 crore credit lines to Non-Banking Financial Companies (NBFCs), instead of Rs 20,000 crore earlier.
- Partial Credit Guarantee Scheme for purchase of pooled assets of NBFC/housing finance companies (HFCs) to up to Rs 1 lakh crore will be monitored at the highest level in each bank.
- Prepayment notices issued to NBFCs to be monitored by Banks.
Use of Bank KYCs by NBFCs
- NBFCs to be permitted to use the Aadhaar authenticated bank KYC )Know Your Customer) to avoid repeated processes.
- Necessary changes shall be made in Prevention Of Money Laundering Act (PMLA) rules and Aadhaar Regulations.
Co-origination of loans by PSBs jointly with NBFCs
This is done to take advantage of liquidity with PSBs and last mile customer connect of NBFCs, PSBs to fast track collaboration for loans to MSMEs, small traders Self Help Groups, MFI clients borrowers in coorigination mode with NBFCs.
GST Refund to MSME within 30 days
All pending GST (Goods and Service Tax) refund due to MSMEs shall be paid within 30 days. In future all GST refunds shall be paid within 60 days from the date of application.
MSME Bill discounting
Trade Receivables Discounting System (TReDS) to use Goods and Service Tax Network (GSTN) system in the medium term to enhance market for bill discounting for MSMEs.
MSME Definition
Amendment to MSME Act to move towards single definition to be considered.
UK Sinha Committee recommendationsÂ
Decisions on recommendations such as on ease of credit, marketing, technology, delayed payments etc. made within 30 days.
Capital Flow/Financial Markets
Deepening of bond markets in IndiaÂ
- In order to improve access to long term finance, it is proposed to establish an organisation to provide Credit Enhancement for infrastructure and housing projects. This would enhance debt flow towards such projects.
- The government would soon take further action on development of Credit Default Swap markets soon, in consultation with the Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI).
- In order to improve domestic market in bonds, Ministry of Finance will work with RBI to make it more conducive for investors and bond issuers, as well as facilitate increased trading for price discovery
- Government has amended the Companies (Share capital and Debenture rules) 2014 to remove the requirement for creation of Debenture Redemption Reserve (DRR) of outstanding debentures in respect of listed companies, NBFCs and HFCs.
Access of Indian Companies to the Global Markets
The Depository Receipt Scheme 2014 is expected to be operationalised soon by SEBI. This will give Indian companies increased access to foreign funds through American Depository Receipt (ADR)/ Global Depository Receipt (GDR).
Use of Aadhaar based KYCs for domestic retail investors
- In order to improve market access for the domestic retail investors, Aadhaar-based KYC to be permitted for opening of Demat account and making investment in mutual funds.
- Necessary notification for amendments in PMLA Rules will be issued.
Simplified KYC for foreign and investors and FPIs
Simplified KYC procedure to improve market access for foreign investors including FPIs.
Offshore Rupee marketÂ
To bring offshore Rupee market to domestic stock exchanges and permit trading of USD -INR derivatives in Gujarat International Finance Tec-City International Financial Services Centre (GIFT IFSC), Ministry of Finance is working with RBI to introduce this measure shortly.
Infrastructure
Delayed Payments
Delayed payments from Government/ Central Public Sector Enterprises (CPSEs) to be monitored by the Department of Expenditure and performance to be reviewed by the Cabinet Secretariat.
Decision to pay 75% of the arbitration awards
In contractual disputes by Government/ CPSEs to be implemented and monitored by the Cabinet Secretariat.
Rs 100 lakh crores for developing modern infrastructure over 5 years
- An inter-ministerial Task Force is being formed by the Department of Economic Affairs to finalise the pipeline of infrastructure projects.
- Rs 100 lakh crores for developing modern infrastructure over 5 years initiative is expected to boost growth and creation of jobs. These projects would be monitored actively to accelerate capital expenditure and investments in the economy.
Automotive SectorÂ
- Bharat Stage IV (BS IV) vehicles purchased till March 31, 2020 to remain operational for the entire period of registration.
- Revision of one time registration fees being deferred till June 2020.
- Ministry of Finance to continue to engage with stakeholders for timely and suitable interventions for different sectors.
Higher depreciation for all vehicles
Additional 15% depreciation on all vehicles. It is increased to 30%, acquired during the period from now till March 31, 2020.
Electric vehicles (EVs) and Internal Combustion Vehicles (ICV)
- Both EVs and ICVs will continue to be registered.
- Government’s focus will be on setting up of infrastructure for development of ancillaries /components including batteries for export.
To boost demand
- Government will lift the ban on purchase of new vehicles for replacing all old vehicles by Departments.
- Government will consider various measures including scrappage policy.
Growth
India’s growth is relatively better than US and China
- Union Finance Minister Nirmala Sitharaman has said that India’s growth in comparison to other countries is relatively better. India’s growth rate is higher than the United States and China.
- Global GDP growth may be revised downwards from the current estimate of 3.2%.
Reform & Simplification
Ease of life for tax payers – Income tax, GST, Customs
- Prefilling of Income Tax (IT) returns.
- Faceless tax assessment will be introduced in the country on Vijayadashami, October 8, 2019, removing the need for one-to-one interactions with assessees.
- Reduction in GST returns and simplification of forms
- Refund process of GST simplified.
- Risk based approach in dealing with tax payers.
Labour laws
- Fixed term employment for flexibility in hiring.
- Contribution of Employees’ State Insurance Corporation (ESIC) reduced from 6.5% to 4%.
- Web-based and jurisdiction-free Inspections
- Inspection report to be uploaded within 48 hours
- Compounding of offences.
- Self certification for start-ups – 6 labour laws.
Environment clearances
- Single air and water clearance for MSMEs.
- Single consent to establish a factory by MSMEs .
Corporate Affairs
- 1 day to incorporate a company – Central Registration Centre for name reservation & incorporation.
- Integrated Incorporation Form.
- Shifting of 16 offence sections to monetary penalty only.
- Faster & easier approvals for mergers and acquisitions.
- Modifications in provisions for Differential Voting Rights.
- Withdrawal of over 14,000 prosecutions under Companies Act.
- Robust IBC (Insolvency and Bankruptcy Code) framework with amendments supporting MSMEs and home buyers.
About Ministry of Finance:
♦ Headquarters: New Delhi
♦ Founded: 29 October 1946