Key Announcements Made in the Budget:

  1. Extension of a lower rate of corporate tax (25%) to companies having an annual turnover up to ₹400 crores.
    Impact: This will mean that 99.3% of companies will get the benefit of the lower tax rate, and we can expect that this benefit will be extended to all companies by the next budget.
  2. Establishment of Payment Platform for MSMEs and provision of 2% interest subvention for GST-registered MSMEs.
    Impact: The Payment Platform will enable MSMEs to file their bills and also get paid on the same platform. At the same time, the interest subvention will provide better financial support to MSMEs. These measures will make it easier for MSMEs to conduct business and grow in India.

Overall Analysis: An excellent budget presented by the Hon’ble FM Nirmala Sitharaman. It is truly a welfare-oriented budget with announcements like ‘Housing for All’ by 2022, ‘Power and LPG connections to All’ by 2022, pension for informal sector workers, overdraft facility for women SHG members, etc. Heavy emphasis on infrastructure, with planned investments of ₹100 lakh crores over 5 years, augurs well for the long term growth of the economy. A 78% increase in direct tax collections over a period of 5 years – from ₹6.39 lakh crores in 2013-14 to ₹11.38 lakh crores in 2018-19 is a tremendous achievement, which may be mainly due to demonetization. Increasing the turnover limit from ₹250 crores to ₹400 crores for corporate income tax benefit is a very good change in direct tax. Supporting MSMEs through a new Payment Platform and 2% interest subvention will certainly facilitate their business better.

A slew of fiscal incentives has been announced to give a boost to Electric Vehicles (EVs), such as upfront incentive on the purchase of EVs, a tax deduction of ₹1.5 lakh for interest on the loan to buy EVs and proposal to reduce the GST from 12% to just 5%. All these incentives are expected to create tremendous interest in EVs, ultimately leading to a cleaner environment.

Overall, the budget is both welfare and growth-oriented.

Top 5 – Expected Growth Drivers for 2019-20:

  1. Infrastructure spending on roads, highways, ports, and river transportation
  2. Ayushman Bharat Health Plan
  3. Electric Vehicles
  4. Digital India schemes
  5. Housing for All

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Balasundaram V

V. Balasundaram is CFO – India, Middle East and Africa at Frost & Sullivan

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