The systematic coverage of the agriculture sector in Union Budget 2020 through the 16-point agenda shared by the Finance Minister, reflects a definite intention to bring fundamental development in the Indian agriculture and allied sectors.
The intent to transform the agriculture sector is reflected in the increased allocation of 1.6 lakh crores towards agriculture. The ‘Blue Economy’ initiative is a good move towards organising the aqua/fisheries sector and creating capacities across the value chain. It is a step further from the last budget that created a fisheries development board to regulate the sector.
Touted as the toughest budget in a decade, the Government had its task cut for pleasing the taxpayer and investors with Union Budget 2020. While the direction is clear to – eliminate tax harassment and simplify taxes, whether it would provide the necessary impetus and optimism in the economy only time would tell. There have been significant changes proposed in the tax provisions which would have impact on the transactions/Mergers & Acquisitions (M&A) space:
The amendments/incentives may act as one of the key parameters during an M&A deal.
Central GST collection target for this financial year (FY 19-20) has been revised downwards from INR 526,000 crores to INR 514,000 crores. The target for FY 20-21 has been pegged at INR 5,80,000 crores, a growth of about 13% from the revised collection target, which seems to be a positive step towards setting up more realistic targets.
On GST, directionally, thrust towards simplification and technology-led administration are expected to continue. The proposal of implementing a system of cash reward to incentivise customers seeking invoice should help create a more compliant GST ecosystem. Proposal to make fraudulent claim of input tax credit without any invoice or bill a cognizable and non-bailable offence is important and should help the Government enforce a check on tax evasion, though it needs to be ensured that the same is implemented well on the ground.
Changes incorporated in the Customs Act to provide for stringent checks on preferential duty claims on goods imported under a free trade agreement (FTA) based on rules of origin requirements would necessitate a complete review of current imports by the businesses.
There has been a decision to review all Customs duty exemptions by September 2020, which is a directional shift to provide additional incentive to domestic manufacturing. However, it will have to be seen if increasing Customs duty alone would help the Government meet this objective.
Global pessimism on growth which broadly aligned with Indian sentiments, an increased fiscal deficit on account lower GST collections and an unprecedented corporate tax rate cut, and the continuing credit issues was certainly not a comfortable backdrop for Union Budget 2020. The fiscal deficit was, expectedly, allowed to increase to 3.8%. While a perceived lack of fiscal stimulus probably saw the markets reacting the way they have done so far, there were a few interesting developments:
There are some positives from a tax perspective:
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