Union Budget can Still Eschew Nosebleed for Taxpayers

The fundamental chemistry, also a baffling mystery, of the budget-making is a puzzling maths! Finance Minister Nirmala Sitharaman has to demonstrate different shades of wizardry to pinch one pocket and put a part of the ‘haul’ in another pocket.

By Shailendra Kumar

For the likes of economists, statisticians and accountants, the Union Budget may be a dossier of facts-skirting or trend-setting or even trend-revealing data of receipts and expenditures of the central government for the entire fiscal but, for the vox populi, it lucidly means more cash in hand! Myriad classes of taxpayers pin Himalayan-size hope for their turn to pocket the concessions either in the form of extra deductions or lower tax rate as per the Income Tax Act, 1961! Obviously, no budget can afford to offer a bowl of joy to all the segments of the taxpayers!

TRICK OR TREAT

The fundamental chemistry, also a baffling mystery, of the budget-making is a puzzling maths! The reigning Finance Minister has to demonstrate different shades of wizardry to pinch one pocket and put a part of the ‘haul’ in another pocket! Aha! Also keep oodles of it for the Exchequer! This involves a high degree of art soaked with smack dab computation of arithmetical nitty-gritty as well as a complex calculus! Had it been a pandemic-free period, we would perhaps have seen a live display of such enviable proficiency in fiscal economics!

However, the pandemic still hangs thick in the air and its pulverising effects would perhaps persist for more than a year. With the unforeseen onus falling on the head of the central as well state governments to deal with the devastating disruption of economic activities and the pipeline of revenue suddenly going dry to a few drops, it has been an existential challenge for the governments in the past two years. What strained the relations between the Centre and the States was the gigantic shortfall in the GST compensation kitty which tied the fiscal hands of the States to do much for their citizens at the local-level. Direct as well as indirect taxes kitties nosedived to a new low and the government borrowings skyrocketed to a new high, the background of the budget-making was too tricky and soul-wrenching for any government. In this backdrop, it was simply suicidal for any Finance Minister to go rabbiting for more revenue from the taxpayers writhing in pain and economic distress.

For a few necessary inputs entailed by the electronics industry, the import duty has been reduced but on a large basket of goods, the duty rate has gone up. On the GST front, a few technical amendments have been proposed to protect the turf of revenue

Thankfully, the Finance Minister did not tinker with the tax rates nor imposed COVID tax like many other tax jurisdictions. However, with a sleight of hand of a magician, the Finance Minister has made a few intelligible amendments in the tax laws which would yield extra revenue to the fiscal kitty! The two popular ways to garner revenue from taxes is – one, to raise tax rates or impose new taxes, and the second, to disallow expenditure or call it deductions of expenses incurred by the businesses.

The Finance Minister, obviously cornered by multiple pressing political reasons, avoided fiscal windbaggery and opted for the latter option. Businesses have been subjected to multiple disallowances of expenditure which were earlier permitted by various judicial decisions. In other words, what was allowed as legitimate expenses by the higher forums of judiciary, have now been reversed by resorting to retrospective amendment. Unlike the criminal and other laws, reverse gear is historically embedded in the fiscal laws and there have been very few Finance Ministers who have not developed charms for such an arrow in their quiver. And Nirmala Sitharaman has also made good use of such a tool-kit in the Budget 2022.

HAND OF MAGICIAN

Apart from liberally using scissors, the Finance Minister has also gifted longer limitation periods to return-filers to update their returns. It is a facility to benefit both – the taxpayers as well as the taxmen. Taxmen will have more time to extract actionable intelligence from multiple gigabytes of information in the CBDT Server and then take follow-up action. For the taxpayers who may realise it later that they missed out declaring vital income in their returns, they can correct their ITRs up to two years. But, of course, one needs to cough up extra dough – 25% of tax with interest on extra income declared within 12 months and 50% between 12 months to 24 months! Yuck! But no leeway is provided to declare lesser income! It can be updated only upwardly! Bloody nose promised! It is indeed not just to make it a one-way highway! When the taxpayer is being given an option to correct one’s ITR, the correction needs to be allowed a ‘reverse gear’ as well! Secondly, what doubles down on seemingly gross injustice is the ‘noseless’ provision to trigger litigation while strangely talking about a litigation-free business environment!

The pandemic still hangs thick in the air and its pulverising effects would perhaps persist for more than a year. With the unforeseen onus falling on the head of the central as well state governments to deal with the devastating disruption of economic activities 

This scheme is to enable taxpayers to keep one’s nose clean by correcting omissions if any in one’s ITR. This means voluntary compliance or declaration expected from a taxpayer! If it is to woo voluntary compliance then comeuppance of 25% and 50% additional tax countervails the ethos lying behind this idea! But, if such a punitive provision is not inserted in the law, it would perhaps put the policy maker’s nose out of joint! My tale-tell hunch is that it would not work, nor attract voluntarily compliant taxpayers! However, the Finance Minister would have a chance to rephrase or re-draft this proposed scheme at the time of moving amendments to the Finance Bill while passing the same in the Lok Sabha.

On the indirect tax side, she has raised the height of ‘China Wall’ and also lengthened the size of protective umbrella for the domestic industry. It was widely expected against the much-orchestrated slogan of Atmanirbhar Bharat! Unlike smaller economies, India has consciously taken a policy decision to go for expansion of the manufacturing sector; raise the threshold of industrial output and diminish the forex outgo by reducing imports. Against this extant policy, the Finance Minister had no choice but to spike the basic customs duty and protect investments made under the much-showboated PLI Scheme. For a few necessary inputs entailed by the electronics industry, the import duty has been reduced but on a large basket of goods, the duty rate has gone up. On the GST front, a few technical amendments have been proposed to protect the turf of revenue. However, tightening the screw on availability of Input Tax Credit is unlikely to be liked by the industry and trade.

Unlike smaller economies, India has taken a policy decision to go for expansion of the manufacturing sector; raise the threshold of industrial output and diminish the forex outgo by reducing imports. the Finance Minister had no choice but to spike the basic customs duty

In a nutshell, the Budget 2022 is as good as a prevailing time may permit so! Undoubtedly, the health of finances of the beleaguered governments like the households and other institutions and also corporates, is precarious and some salubrious doses do need to be jabbed as early as possible! With limited wiggle room, the Modi Government which has to battle out in state elections as well as feed millions of mouths of the poor, had no choice but to mobilise some resources by embedding harsh amendments in the fine prints of the Bill! Unlike the US which can liberally print Dollars, no other country has similar luxury to let their mints work overtime as it would further add to woes to the basket of consumers who have begun to feel the heat of scorching inflationary pressure on the prices of essential goods in the economy. If the disrupted global supply chain continues to remain a shipwreck condition for more months, Indians are also heading for chilling months ahead like the Americans!  

PIVOTAL SCHEMES
  • 60 lakh new jobs to be created under the productivity linked incentive scheme in 14 sectors. 
  • PLI Schemes have the potential to create an additional production of Rs 30 lakh crore. 
  • Entering Amrit Kaal, the 25 year long lead up to India @100, the budget provides impetus for growth along four priorities :

PM GatiShakti:  The seven engines that drive PM GatiShakti are Roads, Railways, Airports, Ports, Mass Transport, Waterways and Logistics Infrastructure. 

PM GatiShkati National Master Plan 

  • The scope of PM GatiShakti National Master Plan will encompass the seven engines for economic transformation, seamless multimodal connectivity and logistics efficiency. 
  • The projects pertaining to these 7 engines in the National Infrastructure Pipeline will be aligned with PM GatiShakti framework. 

Road Transport 

  • National Highways Network to be expanded by 25000 Km in 2022-23. 
  • Rs 20000 Crore to be mobilized for National Highways Network expansion. 

Multimodal Logistics Parks 

Contracts to be awarded through PPP mode in 2022-23 for implementation of Multimodal Logistics Parks at four locations.

Railways

  • One Station One Product concept to help local businesses & supply chains.
  • 2000 Km of railway network to be brought under Kavach , the indigenous world class technology and capacity augmentation in 2022-23.
  • 400 new generation Vande Bharat Trains to be manufactured during the next three years.
  • 100 PM GatiShakti Cargo terminals for multimodal logistics to be developed during the next three years.

Parvatmala

  • National Ropeways Development Program, Parvatmala to be taken up on PPP mode.
  • Contracts to be awarded in 2022-23 for 8 ropeway projects of 60 Km length.

Inclusive Development

Agriculture

  • Rs. 2.37 lakh crore direct payment to 1.63 crore farmers for procurement of wheat and paddy.
  • Chemical-free Natural farming to be promoted throughout the county. The initial focus is on farmer’s lands in 5 Km wide corridors along river Ganga.
  • NABARD to facilitate funds with blended capital to finance startups for agriculture & rural enterprise.
  • Kisan Drones’ for crop assessment, digitization of land records, spraying of insecticides and nutrients.

MSME 

  • Udyam, e-shram, NCS and ASEEM portals to be interlinked.
  • 130 lakh MSMEs provided additional credit under Emergency Credit Linked Guarantee Scheme (ECLGS)
  • ECLGS to be extended up to March 2023.
  • Guarantee cover under ECLGS to be expanded by Rs 50000 Crore to the total cover of Rs 5 Lakh Crore.
  • Rs 2 lakh Crore additional credit for Micro and Small Enterprises to be facilitated under the Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE).
  • Raising and Accelerating MSME performance (RAMP) programme with an outlay of Rs 6000 Crore to be rolled out.

Health 

  • An open platform for the National Digital Health Ecosystem to be rolled out.
  • National Tele Mental Health Programme ‘ for quality mental health counseling and care services to be launched.
  • A network of 23 tele-mental health centers of excellence will be set up, with NIMHANS being the nodal center and the International Institute of Information Technology-Bangalore (IIITB) providing technical support.

Har Ghar, Nal Se Jal

  • Rs. 60,000 crores allocated to cover 3.8 crore households in 2022-23 under Har Ghar, Nal se Jal. Housing for All
  • Rs. 48,000 crores allocated for completion of 80 lakh houses in 2022-23 under PM Awas Yojana.

Urban Planning

  • Modernization of Building Bye-laws, Town Planning Schemes (TPS), and Transit-Oriented Development (TOD) will be implemented.
  • Battery swapping policy to be brought out for setting up charging stations at scale in urban areas.

Land Records Management

Unique Land Parcel Identification Number for IT-based management of land records.

Export Promotion

Special Economic Zones Act to be replaced with new legislation to enable States to become partners in ‘Development of Enterprise and Service Hubs’.

AtmaNirbharta in Defence

68% of the capital procurement budget earmarked for the domestic industry in 2022-23, up from 58% in 2021-22.

Sunrise Opportunities

Government contribution to be provided for R&D in Sunrise Opportunities
like Artificial Intelligence, Geospatial Systems and Drones, Semiconductor and its ecosystem, Space Economy, Genomics and Pharmaceuticals, Green Energy, and Clean Mobility Systems.

Energy Transition and Climate Action

Additional allocation of Rs. 19,500 crore for Production Linked Incentive for the manufacture of high-efficiency solar modules to meet the goal of 280 GW of installed solar power by 2030.

Public Capital Investment

  • Public investment to continue to pump-prime private investment and demand in 2022-23.
  • The outlay for capital expenditure stepped up sharply by 35.4% to Rs. 7.50  lakh crore in 2022-23 from Rs. 5.54 lakh crore in the current year.
  • The outlay in 2022-23 to be 2.9% of GDP.
  • Effective Capital Expenditure’ of the Central Government is estimated at Rs. 1 0.68 lakh crore in 2022-23, which is about 4.1% of GDP.

GIFT-IFSC

  • World-class foreign universities and institutions to be allowed in the GIFT City.
  • An International Arbitration Centre to be set up for timely settlement of disputes under international jurisprudence.

Fiscal Management

  • Budget Estimates 2021-22: Rs. 34.83 lakh crore
  • Revised Estimates 2021-22: Rs. 37.70 lakh crore
  • Total expenditure in 2022-23 estimated at Rs. 39.45 lakh crore
  • Total receipts other than borrowings in 2022-23 estimated at Rs. 22.84 lakh crore
  • Fiscal deficit in the current year: 6.9% of GDP (against 6.8% in Budget Estimates)
  • Fiscal deficit in 2022-23 estimated at 6.4% of GDP

Cooperative Societies

  • Alternate Minimum Tax paid by cooperatives brought down from 18.5 percent to 15 per cent.
  • To provide a level playing field between cooperative societies and companies.
  • Surcharge on cooperative societies reduced from 12 per cent to 7 per cent for those having a total income of more than Rs crore and up to Rs 10 crores.

Incentives for Start-ups

The period of incorporation is extended by one year, up to 31.03.2023 for eligible start-ups to avail tax benefits. Previously the period of incorporation was valid up to 31.03.2022.  

Shailendra Kumar

Founder Editor of India’s first PIB recognized online press- www.taxindiaonline.com popularly known as TIOL. He is recognized for his distinguished services of more than 21 years in the field of online journalism besides the 10 years of service in the print media (newspapers). Through his highly popular weekly column ‘The Cob(Web)’ he has been sharing innovative and inventive ideas with the policymakers on a regular basis. He has published a book on black money titled “It’s Raining Black.”

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