Friday, February 2, 2018

Budget 2018

Direct Taxes

The Budget 2018 updates with regards to direct taxation, had a plethora of initiatives:
  • INR 6.4 Lakh Crore total tax collection in FY 2014-15 has increased to INR 8.47 Lakh Crore total tax collection in FY 2016-17
  • Tax payer base has increased – 85.51 Lakh new tax payers who filed income tax returns in FY 16-17
  • INR 80,000 Crore disinvestment target to be set
  • 100% Tax Deduction to be provided to farmer producer companies with turnover of up to INR 100 Crore, for 5 years
  • Reduced Corporate Tax of 25% to be extended to companies with turnover of up to 250 Crore
  • Government to contribute 12% of new employee wages as part of EPF for next 3 years
  • New women employees’ contribution to EPF to be reduced from 12% to 8%
  • Personal income tax slabs to remain unchanged
  • Standard deduction of INR 40,000 to be re-introduced in lieu of the medical reimbursement worth INR 15,000 and transport allowance worth INR 19,200 which are currently available. Thus the net benefit will only be INR 5,800, which will reach over 2.5 Crore tax payers
  • Health And Education Cess to be increased from 3% to 4%
  • Host of tax benefits to be provided for senior citizens
  • Capital gains tax at 10% to be re-introduced on gains of over INR 1 lakh on long-term investments
  • E-assessment platforms to be rolled out across all touch-points to reduce human intervention

Indirect Taxes

This was the first budget to be presented in the GST era, and also probably the first budget with no substantial indirect tax component, as most of the initiatives were already being notified by the GST Council from time to time. Nevertheless, a few Budget 2018 highlights pertaining to indirect taxes, are as follows:
  • As per the budget news, the GST revenue shortfall is to be balanced by higher direct tax and disinvestment collections. Overall INR 21.57 Lakh Crore transferred as net GST to states as against projection of INR 21.47 Lakh Crore
  • GST compensation cess has been budgeted at INR 90,000 Crore for FY 18-19, while revised estimates for FY18 are at INR 61,000 Crore. The GST compensation cess funds are to be kept under public accounts
  • GST collections projection are pegged at INR 7.43 Lakh Crore in FY 18-19 as against INR 4.44 lakh Crore in nine months of the current fiscal
  • Central Board of Excise and Customs to be renamed as Central Board of Indirect Taxes and Customs
  • Excise Duty – As per the Budget 2018 highlights, the price of petrol and diesel has effectively come down by INR 2 per litre due to the cut in excise duty
  • Imports & Customs Duty – A social welfare surcharge of 10% has now been introduced on imported goods. In addition, the following rate changes were declared:
Increase in Rates ⇑Decrease in Rates ⇓
ItemOld RateNew RateItemOld RateNew Rate
LCD / LED / OLED panels, parts of TV7.5%15%Cashews5%2.5%
Smart watches, wearable devices, footwear10%20%Solar Tempered Glass for manufacture of solar cells5%Exempted
Mobile Phones15%20% –
Crude Vegetable Oils20%35% –
Refined Vegetable Oil15%20% –
Imitation Jewellery15%20%
In conclusion, Budget 2018 India Inc. was largely a pro-agriculture, pro-healthcare and pro-rural budget, which aims to improve the quality of life of the financially backward sections of the society. At the same time, as per the Budget 2018 highlights, the government will also be looking forward in terms of investment in modern fields – robotics, AI, block chain and cyber security, which will surely bolster the Indian economy in times to come.

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