The Week India – July 21, 2019

58 THE WEEK • JULY 21, 2019

ECONOMY

BUDGET

Corporate tax

Slashed from

30% to 25% for

enterprises with a

turnover of up to

0 400 crore

Home loan

Homebuyers can ge n

additional 0 1.5 lakh

deduction on home oa

interest for propert

worth up to 0 45 lak

et an

h

e loan

ies

kh

tax and direct taxes. Data released

by the controller general of accounts

show that the government had a net

tax shortfall of 0 1.7 lakh crore in the

last fiscal.

Sitharaman said gross tax revenue

would grow by 9.5 per cent to 0 24.6

lakh crore this year. “This could be an

overestimation, given the continu-

ing slowdown in the economy,” said

Sandeep Chilana, managing partner,

Chilana and Chilana Law Offices.

“GST collections are more likely

to average at the current levels of

0 85,000 crore a month, rather than go

up to 0 1.2 lakh crore.”

A lot is expected from the income

tax department. “There is a lack of

social contract between taxpayers

and the tax department,” said Rupak

Saha, tax partner at PwC India.

“The complexity of tax compliance

bothers smaller firms. Refunds are

still unduly held back. All these, if

optimised, could lead to a higher tax

compliance rate.”

While smaller firms with annual

turnovers of less than 0 400 crore

would benefit from a lower tax rate,

the bigger firms would face a higher

tax bill. “Apart from 99.3 per cent

firms that are covered under 0400

crore [benchmark], the remaining

0.7 per cent companies would face

tax rates that are among the highest

in the world,” said Rakesh Nangia,

managing partner and founder of the

accounting firm Nangia & Co LLP.

“This will have a big impact on the

competitiveness of larger firms in the

domestic and export markets.”

Experts say the rate hike had been

in the offing. “India’s tax on the su-

per-rich was actually low,” said Saha.

“One will have to live with it given

the need of the nation.” He wants

the tax department to incentivise

compliance rather than send out no-

tices. “So far, it has been a stick-only

approach,” he said.

The government is all ears, it

seems. “We are reviewing our as-

sessment processes and including

technology big time to make life

easier for the taxpayer,” said Akhilesh

Ranjan, member (legislation), CBDT.

“We have identified some pain points

in the finance bill and are reviewing

those. The bottom line is to develop

trust and cooperation.”

The message of social equity forms

the core of the budget. “India’s signif-

icant population is still not connect-

ed to its growth,” said Sanjeev Sanyal,

principal economic adviser. “Ease

of living is an important criterion

and the government will continue

to focus on rural development and

infrastructure.”

On the fiscal consolidation front,

Sitharaman surprised everyone with

a fiscal deficit target of 3.3 per cent,

which was lower than expectations.

The gross expense of the government

was increased 18.5 per cent to 027

lakh crore, to accommodate the

government’s plan to infuse 0 80,000

crore into infrastructure. “Ultimately,

the budget was not only about the

distribution of income. It was also

about creating economic growth,”

said Gopal Krishna Agarwal, the

BJP’s national spokesperson on eco-

nomic affairs.

The government, he said, em-

ployed some unconventional

methods—like sourcing a part of its

borrowings from external markets—

to raise capital for its increased social

spend. “Domestic borrowings cost

the government an interest rate of 7.2

per cent. Globally, this cost is cheap-

er by 2-3 per cent,” said Agarwal.

In 2015, RBI governor Raghuram

Rajan had warned the government

against external commercial borrow-

ings, saying they could further weak-

en the rupee. Agarwal said strength-

ening the rupee remains a focus. “As

the government stops to crowd out

the debt market, real interest rates

will come down for private borrow-

ers,” he said. “This will strengthen,

and not weaken, the rupee in the mid

to long term.”

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