New Delhi: Hike in excise duty and infrastructure cess on petrol and diesel by Re 1 a litre each and customs duty on gold and other precious metals and a raise in the surcharge on super-rich individuals were announced in the Union Budget for 2019-20 that seeks to make India a 3 trillion dollar economy this year by giving a push to investments in infrastructure and rural development and incentives for start-ups.
Presenting her maiden budget, also the first by the Modi government after returning to power, Finance Minister Nirmala Sitharaman did not make any changes in personal income tax rates but extended the benefit of lower corporate tax rate of 25 per cent to companies with an annual turnover of Rs 400 crore.
The additional resource mobilisation measures announced in the Budget is expected to net in Rs 25,000 crore in a year. The net increase due to changes in direct and indirect taxes will be Rs 6,000 crore to 7,000 crore. The loss on account of the widening of 25 per cent rate to companies will be around Rs 4,000 crore.
Sithraman announced the government's intention to invest Rs 100 lakh crore in infrastructure in the next five years, enhance the target of Rs 1.05 lakh crore of disinvestment in the current fiscal and recapitalisation of public sector banks by Rs 70,000 crore to boost growth.
She also promised housing for all by 2022 under the Pradhan Mantri Rural Housing Scheme under which 1.95 crore houses are to be given by 2022. The scheme to upgrade 1.25 lakh km of rural roads in five years with an outlay of Rs 80,000 crore was also announced in the Budget.
Maintaining that crude oil prices have softened from their highs which gives her a room to review duties, Sitharaman proposed to increase the special additional excise duty and road and infrastructure cess each by Re 1 a litre each on petrol and diesel. She also proposed to increase customs duty on gold and other precious metals from 10 per cent to 12.5 per cent.
At a post-Budget media briefing, the minister ruled out the levies fueling inflation. She said it was an attempt to move away from using fossil fuels to renewable energy.
The Finance Minister said that the government has already moved Goods and Services Tax (GST) Council to lower the GST rate on electric vehicles from 12 to 5 per cent. Also to make electric vehicles affordable to consumers, the Union Budget says the government will provide additional income tax deduction of Rs 1.5 lakh on the interest paid on loans taken to purchase electric vehicles.
This amounts to a benefit of around Rs 2.5 lakh over the loan period to the taxpayers who take loans to purchase electric vehicle. To further incentivise e-mobility, customs duty is being exempted on certain parts of electric vehicles.
In a bid to boost affordable housing, the Budget proposed to allow an additional deduction of upto Rs 1.5 lakh for interest paid on loans borrowed upto March 2020 for purchasing a house valued upto Rs 45 lakh.
While leaving the personal income tax levels untouched, the minister proposed to enhance surcharge on individuals having taxable income from Rs 2 crore to 5 crore and Rs 5 crore and above so that effective rates for these two categories by 3 per cent and 7 per cent respectively.
In order to discourage cash withdrawals from banks, the Budget proposed to provide for tax deduction at source at the rate of 2 per cent on cash withdrawal by a person in excess of Rs 1 crore in a year from his bank account. Some business models, whose large cash withdrawal is a necessity, are proposed to be exempted.
To provide a level-playing field to domestic industry, customs duties have been increased on 36 items including cashew kernels, fatty acids, plastic articles, paper for newsprint and magazines, CCTV cameras and digital video recorded and network video recorders.
Claiming that the days of policy paralysis and licence-quota-regimes are gone, the Finance Minister said India Inc are India job creaters and wealth creaters. "Together with mutual trust we can gain, catalyse fast and attain sustained national growth. I wish to propose a number of initiatives as part of a framework for kickstarting the virtuous cycle of domestic and foreign investments." Referring to connectivity as the lifeblood of economy, the Finance Minister said the government has given a massive push to all forms of physical connectivity through Prime Minister's Gram Sadak Yojna, industrial corridors, dedicated freight corridors, Bharatmala and Sagarmala projects, Jal Marg Vikas and Udaan schemes.
As the world's third largest domestic aviation market, the Finance Minister said, for providing an enabling an ecosystem for growth in India of maintenance, repair and overhaul (MRO) industry, it is proposed to leverage India's engineering advantage and potential to achieve self-reliance in this vital aviation segment.
She said the government will adopt suitable policy interventions to create a congenial atmosphere for the development of MRO in the country.
Dwelling on railways, the minister said it is estimated that railway infrastructure will need an investment of Rs 50 lakh crore between 2018-20. Considering the expenditure outlays at around Rs 1.5 lakh crore to Rs 1.6 lakh crore per annum, she said it is proposed to use public private partnership to unleash faster development and completion of tracks, rolling stock manufacturer and delivery of passenger freight services.
On foreign direct investments, Sitharaman said the FDI inflows into India have remained robust despite global headwinds. India FDI inflows in 2018-19 remained strong at USD 64.37 billion, marking a six per cent growth over the previous year.
She said the government will examine suggestions of further opening up FDI in aviation, media (animation and AVGC) and insurance sectors in consultation with all stakeholders. She said 100 per cent FDI will be permitted for insurance intermediaries, easing of local sourcing norms for FDI in single-brand retail sector and permitting foreign portfolio investments to subscribe to listed debt securities by ReITs and InvITs.