Budget 2018-19 Moderators CA. T .V. Mohandas Pai and CA. H. - - PowerPoint PPT Presentation

Analysis of Union Budget 2018-19

Moderators

• CA. T

.V. Mohandas Pai and

• CA. H. Padamchand Khincha

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India at a glance

Population 1.35 bn Jan 2018 (E) Population Growth Rate 1.3% Census 2011 Life Expectancy: Male 67.6 yrs 2018 (E) Life Expectancy: Female 70.1 yrs 2018 (E) Literacy 79% 2018 (E) GDP (at current prices) US$ 2,603 bn 2018 (E) Real GDP growth 6.5% 2018 (E) GDP (in PPP) 3rd Largest Economy US $9,447 bn 2017 (E) Per capita Income US $1,928 2018 (E) Exports US $ 297 bn 2018 (E) Imports US $ 451 bn 2018 (E) Foreign Exchange Reserves US $ 414 bn Jan 2018 (E) Government External Borrowings US $ 95.8 bn 2018 (E) External Debt (Govt & Non-Govt) US $ 495.7 bn Sep 2017 (E) Interest to Gross Revenue 24.0% 2018 (E) Gross Debt / GDP ratio 69.5% 2018 (E)

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India at a glance

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India – Key Economic Indicators 2018 vs. 1991 ….. 27 years’ snapshot post liberalisation

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2018 1991 CAGR Population (Bn) 1.35 0.89 1.6% Life expectancy (Years) 69 58.8 0.6% Literacy rate 79% 52% 2.1% GDP Growth Rate 6.5% 5.3% GDP (at current prices) - INR cr 1,67,84,679 5,31,814 13.6% GDP (at current prices) - US $ Bn 2,603 275 8.7% Per capita income - US $ 1,928 310 7.0% Exports - US $ Bn 2018 (E) 297 18 10.9% Imports - US $ Bn 2018 (E) 451 24 11.5% Share in world trade (exports + imports) 4% 1% Foreign Currency Reserves - US $ Bn 414 5.8 17.1% Exchange Rate (US $) 64.49 17.9 4.9% Savings Rate 28.0% 22.9% Investment Rate 30.0% 22.5%

India’s GDP Growth % - Last 11 Years

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GDP expected to grow approximately @ 7.4% in 2018-19

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India – GDP Projection

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To be a $ 10 trillion economy in 2035, India needs to grow at a CAGR of 8.5+% p.a. China’s GDP grew at an average of 9.9% p.a. from 1979 to 2011

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The World is Changing …

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Regions GDP 2016(E) $ Trilliion GDP 2021 $ Trilliion GDP 2031 $ Trilliion CAGR 2016-2031 US 18.6 21.0 26.9 2.5% EU 17.1 18.4 21.4 1.5% Japan 4.7 4.9 5.5 1.0% Total OECD 40.4 44.4 53.8 1.9% China 11.4 15.3 24.9 5.3% India 2.3 3.5 8.6 8.5% Others 21.2 28.4 50.8 6.0% Total: RoW 34.9 47.2 84.3 6.0% Total Global 75.3 91.6 138.1 4.0%

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India & China – at a glance ……………..China has grown faster

Estimates as of

India China

Population 2018 (E) 1.35 bn 1.42 bn Population Growth Rate Census 2011 1.30% 0.39% Life Expectancy: Male 2018 (E) 67.6 yrs 75 yrs Life Expectancy: Female 2018 (E) 70.1 yrs 78 yrs Literacy 2018 (E) 79.0% 96.4% GDP (at current prices) 2018 (E) US$ 2,578 bn US $ 13,338 bn Real GDP growth 2018 (E) 6.5% 6.9% GDP (in PPP) 2017 (E) US $ 9,447 bn US $ 23,120 bn Per capita Income 2018 (E) US $ 1,928 US $ 9,392 Exports 2018 (E) US $ 233 bn US $ 2,157 bn Imports 2018 (E) US $ 338 bn US $ 1,731 bn Foreign Currency Reserves Jan 2018 (E) US $ 414 bn US $3,140 bn External Debt Sep 2017 (E) US $ 496 bn US $ 1,649 bn Gross Debt / GDP ratio 2018 (E) 69.5% 260%

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Video 1

• Governance, Economy & Development
• FM Speech – Para 2 & 3
• “Madam, four years ago, we pledged to the people of India to give this nation an

honest, clean and transparent Government. We promised a leadership capable of taking difficult decisions and restoring strong performance of Indian economy. We promised to reduce poverty, expedite infrastructure creation and build a strong, confident and a New India. When our Government took over, India was considered a part of fragile 5; a nation suffering from policy paralysis and corruption. We have decisively reversed this. The Government, led by Prime Minister, Shri Narendra Modi, has successfully implemented a series of fundamental structural reforms. With the result, India stands

• ut among the fastest growing economies of the world.
• The journey of economic reforms during the past few years has been challenging but
• rewarding. As a result of the reforms undertaken by the Government, foreign direct

investment has gone up. Measures taken by the Government have made it much easier to do business in India. Natural resources are now allocated in a transparent and honest

• manner. There is a premium on honesty.”

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• Has the present Government, led by Prime Minister, Shri

Narendra Modi, successfully implemented a series of fundamental structural reforms?

• Is there a premium on honesty?

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Governance, Economy & Development

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Video 2

• Agriculture and Rural Economy
• FM Speech – Para 11
• “My Government is committed for the welfare of farmers. For decades,

country’s agriculture policy and programme had remained production

• centric. We have sought to effect a paradigm shift. Honourable Prime

Minister gave a clarion call to double farmers’ income by 2022 when India celebrates its 75th year of independence. Our emphasis is on generating higher incomes for farmers. We consider agriculture as an enterprise and want to help farmers produce more from the same land parcel at lesser cost and simultaneously realize higher prices for their produce. Our emphasis is also on generating productive and gainful on-farm and non- farm employment for the farmers and landless families.”

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• Minimum support price (MSP) of at least at 1.5 times the production cost extended

to all crops.

• Increase institutional credit for agriculture sector to Rs. 11 lakh crore for 2018-19.
• Niti Ayog, in consultation with Central and State Governments, to put in place a

fool-proof mechanism for farmers to get adequate price for their produce.

• To institutionalise appropriate policies and practices for price and demand forecast,

use of futures and options market and expansion of warehouse depository system.

• To set up Fisheries and Aquaculture Infrastructure Development Fund (FAIDF) for

fisheries sector and an Animal Husbandry Infrastructure Development Fund (AHIDF) for financing infrastructure requirement of animal husbandry sector. Total corpus of these two new Funds -- Rs. 10,000 crore.

• To set up an Agri-Market Infrastructure Fund with a corpus of Rs. 2,000 crore for

developing and upgrading agricultural marketing infrastructure in the 22,000 GrAMs and 585 APMCs.

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Agriculture and Rural economy

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• To promote establishment of specialized agro-processing financial institutions.
• Allocation of Ministry of Food Processing doubled from Rs. 715 crore to Rs. 1, 400

crore in 2018-19.

• To develop and upgrade existing 22,000 rural haats into Gramin Agricultural

Markets (GrAMs).

• To scientifically develop cluster based model for identified agriculture products.
• To encourage organic farming by Farmer Producer Organizations (FPOs) and Village

Producers’ Organizations (VPOs) in large clusters, preferably of 1,000 hectares each.

• To encourage Women Self Help Groups (SHGs) to take up organic agriculture in

clusters under National Rural Livelihood Programme.

• Allocation of Rs. 500 crore for “Operation Greens”, an initiative to promote FPOs,

agri-logistics, processing facilities and professional management.

• To liberalise export of agri-commodities. To set up state-of-the-art testing facilities

in all the 42 Mega Food Parks.

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Agriculture and Rural economy

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• To extend the facility of Kisan Credit Cards to fisheries and animal husbandry

farmers to help them meet their working capital needs.

• For creation of livelihood and infrastructure in rural areas, Rs. 14.34 lakh crore to be

spent in 2018-19.

• To launch a re-structured National Bamboo Mission with an outlay of Rs. 1,290

crore to promote bamboo sector in a holistic manner.

• To establish a dedicated Affordable Housing Fund (AHF) in National Housing Bank,

funded from shortfall of priority sector lending and fully serviced GoI bonds.

• “Our emphasis is on generating higher incomes for farmers. We consider

agriculture as an enterprise and want to help farmers produce more from the same land parcel at lesser cost and simultaneously realize higher prices for their produce. Our emphasis is also on generating productive and gainful on-farm and non-farm employment for the farmers and landless families.”

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Agriculture and Rural economy

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• Has the FM done enough this year to enable the farmers to double

their income in 5 years?

• Are these measures comprehensive to improve agriculture

productivity?

• Will the situation in the rural sector improve?
• Do these measures address the bottom of the pyramid?
• Are any other measures required to improve the rural sector?

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Agriculture and Rural economy

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Video 3

• Social Security and protection programme
• FM Speech – Para 46
• “My Government’s goal is to assist and provide opportunity to every

Indian to realize her full potential capable of achieving her economic and social dreams. Our Government is implementing a comprehensive social security and protection programme to reach every household of old, widows, orphaned children, divyaang and deprived as per the Socio- Economic Caste Census. Allocation on National Social Assistance Programme this year has been kept at Rs. 9, 975 crore.”

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• Two major initiatives announced as part of “Ayushman Bharat” programme, to

address health holistically, in primary, secondary and tertiary care system covering both prevention and health promotion.

• To launch a flagship National Health Protection Scheme, world’s largest government

funded health care programme. To cover over 10 cr poor and vulnerable families (approximately 50 cr beneficiaries) providing coverage upto Rs. 5 lakh rupees per family per year for secondary and tertiary care hospitalization. Adequate funds will be provided for smooth implementation of this programme.

• The National Health Policy, 2017 envisioned Health and Wellness Centres as the

foundation of India’s health system. These 1.5 lakh centres to provide comprehensive health care, including for non-communicable diseases and maternal and child health services. These centres will also provide free essential drugs and diagnostic services. Rs. 1,200 cr allocated for this flagship programme in this

• budget. Private sector through CSR and philanthropic institutions urged to adopt

these centres.

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Health and social security

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• Additional allocation of Rs. 600 crore to provide nutritional support to all TB

patients at the rate of Rs. 500 per month for the duration of their treatment.

• To further enhance accessibility of quality medical education and health care, GoI

to set up 24 new Government Medical Colleges and Hospitals by upgrading existing district hospitals in the country. To ensure at least 1 Medical College for every 3 Parliamentary Constituencies and at least 1 Government Medical College in each State.

• To expand the coverage under Prime Minister Jan Dhan Yojana by bringing all 60

crore basic accounts within its fold and undertake measures to provide services of micro insurance and unorganized sector pension schemes through these accounts.

• To implement a comprehensive social security and protection programme to reach

every household of old, widows, orphaned children, divyaang and deprived as per the Socio-Economic Caste Census. Rs. 9,975 cr allocated to National Social Assistance Programme.

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Health and social security

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• Allocation of Rs. 56,619 cr for Scheduled Castes and Rs. 39,135 cr for Scheduled

Tribes in 2018-19 towards economic and social advancement.

• Government’s estimated schematic budgetary expenditure on health, education

and social protection for 2018-19 is Rs. 1.38 lakh crore (estimated expenditure of

• Rs. 1.22 lakh crore in 2017-18).

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Health and social security

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• Is it possible for government hospitals to provide quality medical health

care?

• Is it practical to implement a social security system in India only for the

under privileged?

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Health and social security

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Video 4

• Higher Education
• FM Speech – Para 51
• “To step up investments in research and related infrastructure

in premier educational institutions, including health institutions, I propose to launch a major initiative named ‘‘Revitalising Infrastructure and Systems in Education (RISE) by 2022’’ with a total investment of Rs. 1,00,000 crore in next four years. Higher Education Financing Agency (HEFA) would be suitably structured for funding this initiative.”

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• To invest Rs. 1 lakh crore in next four years for ‘‘Revitalising Infrastructure and

Systems in Education (RISE) by 2022’’. Higher Education Financing Agency (HEFA) to be suitably structured for funding this initiative.

• More than 13 lakh untrained teachers to get trained for improving quality of
• teachers. To use technology to upgrade the skills of teachers through the recently

launched digital portal ‘‘DIKSHA’’.

• To increase digital intensity in education and move gradually from ‘‘black board’’ to

‘‘digital board’’.

• To set up two new full-fledged Schools of Planning and Architecture (SPA). 18 new

SPAs would be established in the IITs and NITs as autonomous schools.

• To launch ‘‘Prime Minister’s Research Fellows (PMRF)’’ Scheme this year. To identify

around 1,000 best B.Tech students from premier institutions and provide them facilities to do Ph.D in IITs and IISc, with a handsome fellowship.

• To improve investments in R&D infrastructure in premier educational institutions.

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Higher education

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• To improve investments in R&D infrastructure in premier educational institutions.
• To establish Ekalavya Model Residential School in order to provide best quality

education to the tribal children in their own environment. By the year 2022, every block with more than 50% ST population and at least 20,000 tribal persons to have an Ekalavya Model Residential School.

• Ekalavya schools will be on par with Navodaya Vidyalayas and will have special

facilities for preserving local art and culture besides providing training in sports and skill development.

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Higher education

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• Are these measures adequate to improve the quality of

education in India, both at the elementary and higher level?

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Higher education

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Video 5

• Employment
• FM Speech – Para 77 & 78
• “Creating job opportunities and facilitating generation of employment has been at the

core of our policy-making. During the last three years, we have taken a number of steps to boost employment generation in the country. These measures include:-

• Contribution of 8.33% of Employee Provident Fund (EPF) for new employees by the

Government for three years.

• Contribution of 12% to EPF for new employees for three years by the Government in

sectors employing large number of people like textile, leather and footwear.

• Additional deduction to the employees of 30% of the wages paid for new employees

under the Income Tax Act.

• Launch of National Apprenticeship Scheme with stipend support and sharing of the cost
• f basic training by the Government to give training to 50 lakh youth by 2020.
• These measures have started showing results. An independent study conducted

recently has shown that 70 lakh formal jobs will be created this year. “

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• Steps to improve employment generation through

– Contribution of 8.33% of Employee Provident Fund (EPF) for new employees by the Government for 3 years. – Contribution of 12% to EPF for new employees for 3 years by the Government in sectors employing large number of people like textile, leather and footwear. – Additional deduction to employers of 30% of the wages paid for new employees under the Income Tax Act. – Launch of National Apprenticeship Scheme with stipend support and sharing of the cost of basic training by the Government to give training to 50 lakh youth by 2020. – Introducing system of fixed term employment for apparel and footwear sector. – Increasing paid maternity leave from 12 weeks to 26 weeks, along with provision of crèches.

• These measures have started showing results. An independent study conducted

recently has shown that 70 lakh formal jobs will be created this year.

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Employment

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• Government to contribute 12% of the wages of the new employees in the EPF for

all the sectors for next three years. Also, the facility of fixed term employment will be extended to all sectors.

• To incentivize employment of more women in the formal sector and to enable

higher take-home wages, women employees' contribution to PF reduced to 8% for first three years of their employment against existing rate of 12% or 10% with no change in employers' contribution.

• An outlay of Rs. 7,148 cr provided for the textile sector in 2018-19.
• Setting up a model aspirational skill centre in every district of the country under

Pradhan Mantri Kaushal Kendra Programme. 306 Pradhan Mantri Kaushal Kendra have been established for imparting skill training through such centers.

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Employment

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• Are these measures sufficient to generate adequate

employment?

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Employment

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Video 6

• Infrastructure
• FM Speech – Para 83 & 84
• “Infrastructure is the growth driver of economy. Our country needs

massive investments estimated to be in excess of Rs. 50 lakh crore in infrastructure to increase growth of GDP, connect and integrate the nation with a network of roads, airports, railways, ports and inland waterways and to provide good quality services to our people.

• We have made an all-time high allocation to rail and road sectors. We are

committed to further enhance public investment. Provision of key linkages like coal for power, power for railways and railway rakes for coal have been rationalized and made very efficient. Prime Minister personally reviews the targets and achievements in infrastructure sectors on a regular basis. Using online monitoring system of PRAGATI alone, projects worth 9.46 lakh crore have been facilitated and fast tracked.”

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• 99 cities have been selected under Smart Cities Mission with an outlay of Rs. 2.04 lakh
• cr. Projects worth Rs. 2,350 cr have been completed and works of Rs. 20,852 cr are

under progress

• AMRUT programme focuses on providing water supply to all households in 500 cities.

State level plans of Rs. 77,640 cr for 500 cities have been approved. Water supply contracts for 494 projects worth Rs. 19,428 cr and sewerage work contract for 272 projects costing Rs. 12,429 cr has been awarded

• To preserve and revitalize soul of the heritage cities in India, National Heritage City

Development and Augmentation Yojana (HRIDAY) has been taken up in a major way

• Bharatmala Pariyojana approved for providing seamless connectivity of interior and

backward areas and borders of the country. To develop about 35,000 kms in Phase-I at an estimated cost of Rs. 5.35 lakh crore. To raise equity from the market for its mature road assets, NHAI will consider organizing its road assets into SPVs and use innovative monetizing structures like Toll, Operate and Transfer (TOT) and Infrastructure Investment Funds (InvITs)

• Capex for railways for 2018-19 has been pegged at Rs. 1,48,528 cr. A large part of the

capex is devoted to capacity creation. 18,000 kms of doubling, 3rd and 4th fourth line works and 5,000 kms of gauge conversion would eliminate capacity constraints

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Infrastructure

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• A ‘Safety First’ policy, with allocation of adequate funds under Rashtriya Rail

Sanraksha Kosh is cornerstone of Railways’ focus on safety. Maintenance of track infrastructure is being given special attention. Over 3,600 kms of track renewal is targeted during the current fiscal

• Other major steps include increasing use of technology like ‘‘Fog Safe’’ and ‘‘Train

Protection and Warning System’’. To eliminate 4,267 unmanned level crossings in the broad gauge network in the next two years

• Mumbai’s transport system being expanded and augmented to add 90 kms of double

line tracks at a cost of over Rs. 11,000 cr. 150 kms of additional suburban network being planned at a cost of over Rs. 40,000 cr, including elevated corridors on some sections

• A suburban network of approximately 160 kms at an estimated cost of Rs. 17,000 cr is

being planned to cater to the growth of the Bengaluru metropolis

• Airport Authority of India (AAI) has 124 airports. To expand airport capacity more

than 5 times to handle a billion trips a year under a new initiative - NABH Nirman. Balance sheet of AAI to be leveraged to raise more resources for funding this expansion

• Allocation on Digital India programme doubled to Rs. 3,073 crore in 2018-19

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Infrastructure

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• The system of toll payments physically by cash at road toll plazas is being fast replaced

with Fastags and other electronic payment systems to make road travel seamless. Number of Fastags has gone up from about 60,000 in Dec 2016 to more than 10 lakh

• now. From Dec 2017 all class ‘‘M’’ and ‘‘N’’ vehicles are being sold only with the

Fastags

• In order to create employment and aid growth, Government’s estimated budgetary

and extra budgetary expenditure on infrastructure for 2018-19 is being increased to

• Rs. 5.97 lakh cr against estimated expenditure of Rs. 4.94 lakh cr in 2017-18

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Infrastructure

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Infrastructure Investment

… India is spending much below its need and China, way above

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Infrastructure Investment

China’s spend is over twice the rate of India, on a much higher GDP base in the last 20 years

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• Is the budgetary expenditure on infrastructure of Rs. 5.97 lakh cr

adequate to meet India’s infrastructure requirements?

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Infrastructure

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Video 7

• Fiscal Management
• FM Speech – Para 141
• “Our Government assumed office in May, 2014 when fiscal deficit was

running at very high levels. Fiscal Deficit for 2013-14 was 4.4% of GDP. The Prime Minister and the Government have always attached utmost priority to prudent fiscal management and controlling fiscal deficit. As Hon’ble Members would recall, we embarked on the path of consistent fiscal reduction and consolidation in 2014. Fiscal Deficit was brought down to 4.1% in 2014-15 to 3.9% in 2015-16, and to 3.5% in 2016-17. Revised Fiscal Deficit estimates for 2017-18 are Rs. 5.95 lakh crore at 3.5% of GDP. I am projecting a Fiscal Deficit of 3.3% of GDP for the year 2018-19.”

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Trends in Fiscal Deficit

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(Rs. cr)

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Trends in Revenue and Fiscal Deficit

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(% of GDP)

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Trends in Inflation (CPI)

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2 4 6 8 10 12 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 10.4 8.4 10.2 9.5 5.9 4.9 4.5 3.3

Is the Budget Credible?

39 SIRC of ICAI 02-02-2018 Rs cr 2013-14 2014-15 2015-16 2016-17 2017-18 BE Actual BE Actual BE Actual BE Actual BE RE Receipts 14,08,122 13,37,604 15,77,029 14,42,742 16,71,223 17,06,908 19,53,809 19,88,653 22,00,336 21,82,093 Tax Receipt 12,35,870 11,38,734 13,64,524 12,44,885 14,49,490 14,55,648 16,30,888 17,15,822 19,11,579 19,46,119 Non Tax Revenue 1,72,252 1,98,870 2,12,505 1,97,857 2,21,733 2,51,260 3,22,921 2,72,831 2,88,757 2,35,974 Expenditure 16,65,297 15,59,447 17,94,892 16,63,673 17,77,477 17,90,783 19,78,060 19,75,194 21,46,735 22,17,750 Subsidies 2,31,084 2,54,632 2,60,658 2,58,258 2,43,811 2,41,833 2,33,835 2,04,025 2,40,339 2,29,716 GDP growth rate % (nominal) 13.3 11.0 10.4 10.8 10.0

Nominal GDP is expected to grow approximately @ 11.5% in 2018-19

Is the Budget Credible?

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2014-15 2015-16 2016-17 2017-18 2018-19 Budgeted Tax Revenue growth % 10% 6% 13% 17% 19% Actual Tax Revenue Growth % 9% 17% 18% 13% Actual Total Receipts % of BE 91% 102% 102% 99% Actual Subsidy % of BE 99% 99% 87% 96%

• FRBM Committee in FY 2016-17 recommended 3% fiscal deficit

for next 3 years.

• The FM had projected fiscal deficit of 3.2% in FY 2017-18.

Revised fiscal deficit for FY 2017-18 is 3.5%.

• Projected fiscal deficit for FY 2018-19 is 3.3%

Will the slippage in fiscal deficit increase inflation? Will the FM be able to prudently manage fiscal deficit in FY 2018-19?

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Fiscal Management

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Source: Budget 2018-19

INR cr

Budget at a glance

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2016-2017 Actuals 2017-18 (BE) 2017-18 (RE) 2018-19 (BE) Total Receipts 19,75,194 21,46,735 22,17,750 24,42,213 Non-Scheme Expenditure 11,44,428 12,04,639 12,97,850 14,27,762 Scheme Expenditure 8,30,766 9,42,096 9,19,900 10,14,451 Total Expenditure 19,75,194 21,46,735 22,17,750 24,42,213 Revenue Deficit 3,16,381 3,21,163 4,38,877 4,16,034 Fiscal Deficit 5,35,618 5,46,531 5,94,849 6,24,276 Primary Deficit 54,904 23,454 64,006 48,481

Source: Budget 2018-19 *Includes draw-down of cash balance **Based on projected GDP for BE 2018-19 at INR 1,87,22,302

INR cr

Budget at a glance

43 SIRC of ICAI 02-02-2018 2016-17 Actuals 2017-2018 (BE) 2017-2018 (RE) 2018-19 (BE) Gross Tax revenue 17,15,822 19,11,579 19,46,119 22,71,242 Revenue Receipts – A 13,74,203 15,15,771 15,05,428 17,25,738 Tax Revenue (net to Centre) 11,01,372 12,27,014 12,69,454 14,80,649 Non-tax revenue 2,72,831 2,88,757 2,35,974 2,45,089 Capital Receipts - B 6,00,991 6,30,964 7,12,323 7,16,475 Recoveries of Loans 17,630 11,933 17,473 12,199 Other Receipts 47,742 72,500 1,00,000 80,000 Borrowings and other Liabilities * 5,35,619 5,46,531 5,94,850 6,24,276 Total Receipts (A + B) 19,75,194 21,46,735 22,17,750 24,42,213 Gross Tax to GDP ratio 11.30% 11.30% 11.60% 12.1%**

2014-2015 2015-2016 2016-2017 2017-2018 Revised Estimates Gross Tax revenue 12,44,885 14,55,648 17,15,822 19,46,119 Growth in gross tax revenue (%) 9.32% 16.93% 17.87% 13.42% Revenue Receipts 11,01,472 11,95,025 13,74,203 15,05,428 Tax Revenue (net to Centre) 9,03,615 9,43,765 11,01,372 12,69,454 Non-tax revenue 1,97,857 2,51,260 2,72,831 2,35,974 Capital Receipts 5,62,201 5,95,748 6,09,886 7,51,702 Recoveries of Loans 13,738 20,835 17,630 17,473 Other Receipts 37,737 42,132 47,742 1,00,000 Borrowings and other Liabilities 5,10,725 5,32,791 5,35,619 5,94,850 Total Receipts 16,63,673 17,90,773 19,75,194 22,17,750

Source: Budget 2018-19

INR cr

Tax revenues for the past four years

The gross tax revenue for 2018-19BE is estimated to increase by 16.71% over 2017-18RE

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Tax revenue

TAX REVENUE RECEIPTS 2016-17 Actuals 2017-18 Budget Estimates 2017-18 Revised Estimates 2018-19 Budget Estimates Gross Tax Revenue * 17,15,822 19,11,579 19,46,119 22,71,242 Corporation tax 4,84,924 5,38,745 5,63,745 6,21,000 Income tax 3,64,604 4,41,255 4,41,255 5,29,000 Wealth tax 185

• Customs

2,25,370 2,45,000 1,35,242 1,12,500 Excise 3,82,094 4,06,900 2,76,995 2,59,600 Service tax 2,54,499 2,75,000 79,507

• GST
• 4,44,631

7,43,900 Taxes on Union Territories 4,146 4,679 4,744 5,242 Direct Tax 8,49,713 9,80,000 10,05,000 1,150,000 Indirect Tax 8,66,109 9,31,579 9,41,119 1,121,242 Direct tax to GDP ratio 5.60% 5.80% 6.00% 6.10% Indirect tax to GDP ratio 5.70% 5.50% 5.60% 6.00%

INR cr

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Video 8

• Income-tax proposals
• FM Speech – Para 150
• “In the Union Budget, 2017, I had announced the reduction of corporate tax rate

to 25% for companies whose turnover was less than Rs. 50 crore in financial year 2015-16. This benefitted 96% of the total companies filing tax returns. Towards fulfilment of my promise to reduce corporate tax rate in a phased manner, I now propose to extend the benefit of this reduced rate of 25% also to companies who have reported turnover up to Rs. 250 crore in the financial year 2016-17. This will benefit the entire class of micro, small and medium enterprises which accounts for almost 99% of companies filing their tax returns. The estimate of revenue forgone due to this measure is Rs. 7,000 crores during the financial year 2018-19. After this, out of about 7 lakh companies filing returns, about 7,000 companies which file returns of income and whose turnover is above Rs. 250 crores will remain in 30% slab. The lower corporate income tax rate for 99% of the companies will leave them with higher investible surplus which in turn will create more jobs.”

46 SIRC of ICAI 02-02-2018

• Significant growth rate of direct taxes of 12.6% in 2016-17 and 18.7% up to 15th

January, 2018

• Tax buoyancy in personal income tax is 1.95 for 2016-17 and 2.11 in 2017-18
• Excess revenue collected in the last two FYs from personal income tax compared to

the average buoyancy pre 2016-17 amounts to about Rs. 90,000 crs. To be attributed to the strong anti-evasion measures taken by the Government

• Huge increase in the number of returns filed by taxpayers. 85.51 lakh new

taxpayers filed their IT returns in 2016-17 (66.26 lakhs in 2015-16).

• Number of effective tax payer base increased from 6.47 crs at the beginning of FY

2014-15 to 8.27 crs at the end of F.Y.16-17.

• 41% more returns filed under presumptive income scheme in FY 2016-17
• Long term capital gains arising on transfer of listed equity shares and units of equity
• riented MF units exceeding Rs. 1 lakh to be taxed @ 10% without benefit of
• indexation. All gains up to 31st Jan 2018 will be grandfathered
• Dividend income from equity oriented mutual fund to be taxed at 10%
• Existing 3% education cess to be replaced by a 4% “Health and Education Cess”. Will

generate an estimated additional amount of Rs. 11,000 crs in 2018-19.

SIRC of ICAI

Direct taxes

47 SIRC of ICAI 02-02-2018

• Rolling out of E-assessment across the country which will transform the age-old

assessment procedure of the IT department and the manner of interaction with taxpayers and other stakeholders

• TDS at the applicable rate shall be made in respect of interest exceeding Rs. 10,000

from newly introduced 7.75% GOI Savings (Taxable) Bonds, 2018

SIRC of ICAI

Direct taxes

48 SIRC of ICAI 02-02-2018

• Income tax rate reduced to 25% for companies with annual turnover up to Rs. 250

crs in FY 2016-17. Entire class of micro, small and medium enterprises accounting for almost 99% of companies filing IT returns to benefit from this rate reduction. The estimate of revenue forgone due to this is Rs. 7,000 crs during FY 2018-19.

• Lower corporate IT rate for 99% of companies will leave them with higher investible

surplus which in turn will create more jobs.

• About 7,000 companies filing IT returns and whose turnover is above Rs. 250 crs

will remain in 30% slab.

• Companies will be liable for prosecution for non filing of IT return irrespective of

the fact that whether any tax is payable or not

• Concessional tax rate of 25% for new domestic companies engaged in

manufacturing shall be subject to the special rates in respect of specified income provided under Chapter XII of the Act

• Receipt of any property by a wholly-owned Indian subsidiary from its holding

company and by an Indian holding company from its subsidiary shall be exempt from tax under sec 56(2)(x) of the Act

SIRC of ICAI

Corporate taxes

49 SIRC of ICAI 02-02-2018

• Sec 9 of the Act to be amended to provide that significant economic presence of a

non-resident shall constitute "business connection" with India. It is also proposed to define the phrase ‘significant economic presence’.

• MAT provision shall not apply in respect of foreign companies having income

solely from businesses referred to in sections 44B, 44BB, 44BBA and 44BBB of the Act provided such income has been offered to tax at the specified rates

• Section 79 of IT Act regarding restriction on shareholding for the purpose of carry

forward loss shall not apply in case of change of shareholding pursuant to an approved resolution plan under IBC, 2016 where an opportunity of being heard has been given to the Principal Commissioner or Commissioner

• To encourage start-ups, the definition of ‘eligible business’ is proposed to be

aligned with the modified definition notified by DIPP.

• Incorporation date for availing benefit under section 80-IAC of the Act extended to

31 Mar 2021 from 31 Mar 2019

• 100% deduction to Farmer Producer Companies having annual turnover upto Rs.

100 crs in respect of assistance provided to its members engaged in primary agricultural activities for a period of five years from FY 2018-19. This measure to encourage “Operation Greens” mission.

02-02-2017

SIRC of ICAI

Corporate taxes

50

• No rate change for individuals
• Standard deduction of Rs. 40,000 in lieu of tax exemption for transport allowance and

reimbursement of miscellaneous medical expense

• Tax exemption for Senior Citizens on interest income from deposits with banks and post
• ffices to be increased from Rs. 10,000 to Rs. 50,000. This benefit shall be available also

for interest from all fixed deposits schemes and recurring deposit schemes. No TDS shall apply on such income, under section 194A

• All senior citizens will now be able to claim deduction under section 80D upto Rs. 50,000

p.a. in respect of any health insurance premium and/or any general medical expenditure incurred

• Deduction for medical expenditure in respect of certain critical illness under section

80DDB increased to Rs. 1 lakh for all senior citizens

• Pradhan Mantri Vaya Vandana Yojana under which an assured return of 8% is given by

LIC is extended up to March 2020. The existing limit on investment of Rs. 7.5 lakh per senior citizen under this scheme is also being enhanced to Rs. 15 lakh.

• Exemption for withdrawal up to 40% from National Pension System Trust (NPS) extended

to all subscribers and not only to employees.

02-02-2017

SIRC of ICAI

Personal income taxes

51

Worldwide corporate tax rates

52

• The worldwide average statutory corporate income tax rate in 2017, measured

across 202 tax jurisdictions, is 22.96%*. When weighted by GDP, the average statutory rate is 29.41%

• The worldwide corporate tax rate has declined significantly since 1980, from an

average of 38.68% to 22.96%, a 41% reduction over the 37 years surveyed

• Europe has the lowest regional average rate at 18.35% (25.58% when weighted by

GDP). Conversely, Africa and South America has the highest regional average statutory rate at 28.73% (28.2% weighted by GDP for Africa, 32.98% weighted by GDP for South America). Asia’s regional average statutory rate is 20.05% (26.26% GDP weighted)

• Today, most countries have corporate tax rates below 30%. Thirty countries have a

statutory corporate tax rate between 30 and 35%*

• Countries with large economies in the top twenty tax bracket are India (@ 34.61%,

including 12% surcharge and 3% cess) and France (34.43%), which rank near the bottom of the category. India holds the 18th spot, while France holds the 20th spot*

*Source: Tax Foundation. Data compiled from numerous sources including: PwC, KPMG, Deloitte, and the U.S. Department of Agriculture. SIRC of ICAI 02-02-2018

Direct taxes

53

Country Name

• Corp. Tax Rate

US 21.00% France 33.33% Germany 33.00% Australia 30.00% Netherlands 25.00% China 25.00% Japan 23.90% UK 19.00% Singapore 17.00%

Corporate tax rates across the world

SIRC of ICAI 02-02-2018

Effective Tax Rate of Companies in India

54

Profit Before Taxes Number of Companies Share in PBT (%) Share in Total Income (%) Share in Total Corporate Tax Liability (%) Total Income to PBT Effective Tax Rate (%) Less than Zero 2,60,194

• 0.7

0.7 Zero 17,192

• 9.3

3.1 Rs 0-1 cr 2,90,250 2.6 3.0 2.8 89.4 29.4 Rs 1-10 cr 31,941 6.6 7.3 7.2 84.2 29.2 Rs 10-50 cr 5,997 8.7 8.9 9.4 77.6 29.0 Rs 50-100 cr 1,110 5.3 5.2 5.5 74.5 28.1 Rs 100-500 cr 1,094 15.6 15.3 16.8 74.6 28.9 Greater Than 500 cr 335 61.2 50.3 54.5 62.5 23.9 All Companies 6,08,836 100.00 100.00 100.00 76.1 26.9

SIRC of ICAI 02-02-2018

Effective Tax Rate of Companies in India

55

Effective Tax Rate Number of Companies Share in Total Profits Share in Total Income Share in Total Tax Liability Less Than Zero and Zero 2,75,176 3.6 0.8

• 0. 7

0-20 70,390 20.6 8.6 9.5 20-25 24,619 28.0 17.9 23.5 25-30 78,022 11.3 12.8 11.9 30-33 1,03,596 30.1 43.8 39.6 >33 39,121 6.4 16.1 14.8 Indeterminate (PBT = 0) 17,912 TOTAL 6,08,836 100 100 100 In %

SIRC of ICAI 02-02-2018

• No real tax incentive provided to start-up companies.
• No effective tax relief to salaried tax payers
• Is this Budget disappointing as the FM has not cut the corporate

tax rate for all companies as per the road map given in 2015 budget?

• Did the reintroduction of capital gains tax result in double

taxation?

SIRC of ICAI

Direct Taxes

56 SIRC of ICAI 02-02-2018

Video 9

• Indirect tax
• FM Speech – Para 160
• “In this budget, I am making a calibrated departure from the underlying policy in

the last two decades, wherein the trend largely was to reduce the customs duty. There is substantial potential for domestic value addition in certain sectors, like food processing, electronics, auto components, footwear and furniture. To further incentivise the domestic value addition and Make in India in some such sectors, I propose to increase customs duty on certain items. I propose to increase customs duty on mobile phones from 15% to 20%, on some of their parts and accessories to 15% and on certain parts of TVs to 15%. This measure will promote creation of more jobs in the country. Details of changes made in rates of customs duty as well as certain changes made in the excise duty structure are given in Annexure 6 to my speech.’’.

57 SIRC of ICAI 02-02-2018

• Increase of customs duty on mobile phones from 15% to 20%, on some of their

parts and accessories to 15% and on certain parts of TVs to 15%. This measure will promote creation of more jobs in the country.

• Abolishing the Education Cess and Secondary and Higher Education Cess on

imported goods and replacing it with a Social Welfare Surcharge at 10% of the aggregate Customs duties on imported goods. This is to provide for social welfare schemes of the Government. Goods which were hitherto exempt from Education Cesses on imported goods will, however, be exempt from this Surcharge.

• Reduction in customs duty on raw cashew from 5% to 2.5%
• Name of Central Board of Excise and Customs is being changed to Central Board of

Indirect Taxes and Customs with consequential amendments in the relevant Acts

Indirect Taxes

58 SIRC of ICAI 02-02-2018

• Is the GST implemented effectively?
• Will the GST Buoyancy help in meeting the fiscal deficit

target?

• Is GST helping in “ease of doing business?

Indirect Taxes

59 SIRC of ICAI 02-02-2018

Video 10

• Conclusion
• FM Speech – Para 165
• “Madam, while making the proposals in this year’s Budget, we have been

guided by our mission to especially strengthen agriculture, rural development, health, education, employment, MSME and infrastructure sectors of Indian economy. I am sure the New India which we aspire to create now will emerge. Swami Vivekanand had also envisioned decades ago in his Memoirs of European Travel, ‘‘You merge yourselves in the void and disappear, and let new India arise in your place. Let her arise – out of the peasants’ cottage, grasping the plough; out of the huts of the

• fisherman. Let her spring from the grocer’s shop, from beside the oven of

the fritter-seller. Let her emanate from the factory, from marts, and from

• markets. Let her emerge from groves and forests, from hills and

mountains’’.

60 SIRC of ICAI 02-02-2018

• Is this a political budget aimed at next year’s elections?

Conclusion

61 SIRC of ICAI 02-02-2018

THANK YOU