The Week India – July 21, 2019

JULY 21, 2019 • THE WEEK 57

a o cash

w thd awal

ction at

sou ce o 2% on

cas drawal in

e cess o 0 1 crore

a y r

Electric

vehicles

Income tax benefits

of 0 1.5 lakh to the

interest paid on loans

to buy EVs. GST

Council has been

asked to reduce the

tax rate on EVs to 5%

from 12%

Tax on

withdr

A tax dedu

source of 2

cash withd

excess of 0

a year

businesses, which paid for services
and staffers in cash. “We had sought
immediate focus on the cash crunch
situation and asked the government
for a subsidy for computerising small
businesses to deal with competition
from online retailers,” said Khan-
delwal. “None of these requests was
granted.”
Concerns abound on the tax front,
too. An additional surcharge has
been introduced on incomes above
0 2 crore and 0 5 crore at 3 per cent
and 7 per cent, respectively. The levy
will affect foreign portfolio investors
(FPIs), who contribute a major chunk
of investments in the stock market.
Expectedly, Sensex lost around 1,150
points after Sitharaman presented
the budget, as FPIs rushed to with-
draw their investments.
The unintended repercussion now
has the government in a huddle. “The
matter [concerning FPIs] has been
brought to our notice. We will discuss
it and see what possible solutions
could be arrived at,” said P.C. Mody,
chairman of Central Board of Direct
Taxes (CBDT).
Chief Economic Adviser K.V.
Subramanian had earlier cited the
importance of attracting private
investments for achieving the target
of becoming a $5 trillion economy
by 2024. Asked about the level of
improvement needed in investment

levels, Subramanian said the rise

has to be a significant one. “Gross

capital formation is right now about

29 per cent,” he told THE WEEK. “To

match up to most Asian developing

economies, including China, this

level has to reach at least the 35 per

cent range.” The statement means the

government could bring some relief

to the investor community.

The surcharge has dismayed

domestic investors as well. “This will

be counterproductive for the big

companies and their promoters who

might want to take their investments

from India to other places with lower

tax levels,” said an industrialist. The

new levies, according to the indus-

trialist, means that India’s super-rich

now fall in the 37 per cent to 42.7 per

cent tax bracket—“among the highest

in the world”.

Sitharaman, however, remains

resolute. “Investors know the growth

potential of India. It is now their

choice whether they want to tap this

growth or not,” she said in her post-

budget conference.

Citing data, the government also

denied that India has the highest

personal tax bracket. “In India, the

highest tax slab is at 35.88 per cent,”

said revenue secretary Ajay Bhushan

Pandey. “But in the UK, this is 45 per

cent. It is 45.9 per cent in Japan, 54

per cent in Canada and 66 per cent in

France.”

According to Sitharaman, the gov-

ernment’s tax collections have nearly

doubled in five years. “Direct tax

revenue, which was 0 6.38 lakh crore

in 2013-14, rose to 0 11.37 lakh crore

in 2018-19. This is a 78 per cent rise,”

she said in her budget speech. But

tax experts say the figure is compro-

mised, given the government’s low

revenues from goods and services

We have identified

some pain points in

the finance bill and

are reviewing those.

The bottom line is

to develop trust and

cooperation.

—Akhilesh Ranjan, member, CBDT