INDIAN BUDGET 2015: Balance in socio-economic reform

INDIAN BUDGET 2015: Balance in socio-economic reform

By Rohini Kappadath

India’s Finance Minister, Mr. Arun Jaitley presented the Union Budget – 2015 focused on maintaining the desired balance between fiscal prudence and investor expectations.  Considering the size of expectations surrounding the Modi government and the economic challenges at hand, the budget 2015 balances both social and economic reforms.  This is a realistic, politically honest budget which goes some distance towards laying down a future growth roadmap with a focus on ease of doing business in India.

The Highlights of the budget proposal include proposed change in the corporate tax rate from 30% to 25% over a period of 4 years, reduction in the tax rate of both royalty and fees for technical service (FTS) from present 25% to 10%, increase in the threshold limits for applicability of domestic transfer provisions from existing INR 50 million to INR 200 million, providing 50% value as threshold to tax indirect transfers in India, abolishing of wealth tax and substituting an additional surcharge of 2% on the super-rich having a taxable income of over INR 10 million.

Another major relief has been provided by deferral of General Anti-Avoidance Rule (GAAR) provisions for further two years and by also clearly stating that the provisions of GAAR shall only apply prospectively.

To facilitate a smooth transition to GST, necessary steps have been taken including increase in general rate of Central Excise Duty from 12.36% to 12.5% and increase in Service Tax rate from 12.36% to 14%. Various proposals are made to facilitate the ease of doing business in India such as online registration for central excise and service tax in two working days. In order to promote manufacturing in India, the budget proposes a reduction in custom duties on certain inputs and raw materials.

The government has intended to bring in a new law on black money. Some of the serious consequences under the law shall be 300% of tax as penalty, rigorous imprisonment for up to 10 years with no compounding and also without any remedy to approach the Settlement Commission. Corresponding amendments to the Foreign Exchange Amendment Act (FEMA) to confiscate assets of equivalent value situated in India and to the Prevention of Money Laundering Act (PMLA) are planned.  The proposals in the budget dealing with this issue also signal a clear intention from the Government to curb domestic black money.

The focus of the present budget is to take India on an aggressive growth path in light of the government’s vision 2022, which shall include, a roof for each family, basic facilities and employment for all, making India a manufacturing hub while also increasing agricultural productivity.

To discuss the 2015 Indian Budget and what it means for Foreign Investors, Sky Business interviewed Rohini Kappadath, Director of Cross-Border Business, Pitcher Partners.  Click here to view this comprehensive analysis.

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