The first of this new decade and the first digital, budget 2021-22 proposed a slew of measures to aid the recovery of an economy hit by the Covid-19 pandemic.
This year’s budget proposals rested on six broad pillars (i) Health and Wellbeing (ii) Physical and Financial Capital, and Infrastructure (iii) Inclusive Development for Aspirational India (iv) Reinvigorating Human Capital (v) Innovation and R&D (vi) Minimum Government and Maximum Governance.
While the fiscal deficit target is pegged at 6.8 per cent of GDP for FY22, it is estimated to jump to 9.5 per cent for FY21 – nearly thrice the government’s target of 3.5 per cent set before the pandemic struck. The budget has also proposed to bring down the fiscal deficit to 4.5 per cent of GDP by FY25-26. Increasing the buoyancy of tax revenue and increased receipts from monetisation of assets including PSUs and land would be key to meeting the fiscal deficit projection.
Despite the limited fiscal headroom, the government proposed doubling healthcare spending and various infrastructure projects to boost spending and spur growth. Schemes for improving the healthcare infrastructure including the launch of a centrally sponsored scheme – PM Atmanirbhar Swasth Bharat Yojana were announced. Besides, a dedicated sum of INR35000 crores has been allocated for the COVID-19 vaccine for FY2021-22.
Agriculture market (e-NAM)
Other significant announcements include –1000 more mandis to be linked to e-national agriculture market (e-NAM), privatisation of two PSUs and one general insurance company in FY22. Setting up of seven textile parks over three years under the scheme of mega-investment textile parks, increase in FDI limit in insurance to 74 per cent and the launch of voluntary vehicle scrapping policy to retire unfit/outdated vehicles via a vehicle fitness test were among the other key announcements.
In an endeavour to promote digitalisation, government has announced the faceless scheme at the Income-tax Appellate Tribunal level. Taking cues from the abolishment of the Dividend Distribution Tax from the last Budget, government has taken certain measures viz. withholding tax in case of foreign portfolio investors to be made at tax treaty rate, dividend income of REIT and INVIT being exempt from TDS, advance tax liability on earning dividend income has been aligned with the declaration or payment of dividend.
The government has extended the benefits of additional deduction of INR1.5 lakh for affordable housing in case of loans taken up to 31 March 2022 as well extension of the dates for availing the tax holiday in case of approval of housing projects till 31 March 2022. To have greater certainty, the timeframe for reopening the assessments has been reduced from the existing six to three years with an exception in case of serious tax evasion cases. The announcement of the faceless Dispute Resolution Committee will also be another measure in reducing litigation.
On the indirect tax front, changes in customs related procedures have been announced which include a definite timeline of two-years for completion of proceedings under customs. The bill of entry would be required to be filed mandatorily one day prior to the arrival of the conveyance.
Similar to the common portal under GST, a common portal under Customs i.e. ‘Common Customs Electronic Portal’ to be constituted to facilitate registration, filing of bills of entry, shipping bills, any other document or form issuance of a notice, summons, order, etc. The government has proposed to review more than 400 old exemptions to customs duty, and from October 1 will put in place a revised customs duty structure free of any distortion.
Further, customs duty rates have been increased on certain goods with the aim to promote domestic manufacturing.
A new cess ‘Agriculture Infrastructure and Development Cess’ has been introduced on import of specified goods. The cess shall be used to finance the improvement of agriculture infrastructure.
On the GST front, few proposals were announced with a major change being the audited reconciliation in GSTR-9C being replaced by a self-certified reconciliation statement, with the aim to reduce the compliance burden on the taxpayer.
Input tax credit on invoices and/or debit notes can only be availed when the details of such invoices/debit notes has been furnished by the suppliers in their respective GSTR-1 and the same has been communicated to the recipient (reflected in GSTR-2A/2B). Further, changes related to zero rated supplies have been made to restrict the refund of GST paid on zero rated supplies to notified taxpayers and on notified goods / services.
Also, the refund of the unutilised input tax credit in case of zero rate supply of goods has been linked to receipt of foreign exchange within the timelines prescribed under the FEMA.