India: Union Budget 2019

​published on July 9, 2019 | reading time approx. 2 minutes

On July 5, 2019, the first budget of the newly elected Indian Government was presented by the first full-time woman Honourable Finance Minister of India, Mrs. Nirmala Sitaraman.  While the budget highlighted various reforms and achievements of the same Government during the last five years, it was seen as a major step towards making India a USD 5 trillion economy by the year 2025.

To this goal, there were key announcements towards increasing of investments in India, procedural simplification towards investments by FPIs, permitting investments by FFI/FPIs in debt securities issued by infrastructure debt funds, increasing liquidity in the market by way of re-capitalization of banks as well as partial guarantee to public sector banks for acquiring assets of financial sound NBFCs.

The Government lowered the fiscal deficit target for FY 2019-20 to 3.3 percent of the GDP as against 3.4 per cent set in the Interim Budget announced in February 2019.

In order to drive the economy forward, there were several announcements made towards improving the Start-Up eco-system, high investments in infrastructural projects and building of “One nation one grid” as well as strategic disinvestments. The Government also announced an additional outlay over the next three years to incentivize purchase and adoption of electric vehicles.

The Finance Minister also announced that the government would launch a scheme to invite global companies through a transparent competitive bidding to set up mega-manufacturing plants in sunrise and advanced technology areas such as semi-conductor fabrication, solar photo voltaic cells, etc. and provide them investment linked income tax exemptions and indirect tax benefits.

Major changes in the tax and regulatory laws include the following:

• On the regulatory side, the Government also announced its intent to further reform the FDI space by increasing FDI limits in select sectors such as aviation, insurance, media etc and easing out of local sourcing norms in single brand retail. The Finance Minister also announced simplifications of labour laws by combining the existing labour laws into four legal codes.

• On the direct tax side, while the personal tax rates and slabs were not changed, additional surcharge has been proposed on individuals having taxable income above INR 20 million and INR 50 million. The reduced corporate tax rate benefit of 25 per cent is further extended to companies with annual turnover of up to INR 4 billion from the existing limit of INR 2.5 billion covering a total of 99.3 per cent of the existing companies. Imposition of 2 per cent withholding tax on annual cash withdrawals above INR 10 million per annum underlines the Government's agenda of boosting the digital economy.

• On the indirect tax side, with an aim to mobilize additional resources and reduce existing litigation under the erstwhile indirect tax laws, a new dispute resolution scheme has been introduced allowing companies to opt for partial payments on pending litigations and immunity from interest, penalty and prosecution. Customs duty rates have been increased on certain goods to provide impetus to the “Make in India” campaign. However, increase in Basic Customs Duty rates on automotive parts, CBUs, chassis fitted with engine and other is going to negatively impact an already ailing auto sector. Further, changes in the GST laws have also been proposed in line with the agenda agreed during the last GST Council meeting.

To read our detailed analysis of the India Union Budget 2019, please click below:

 India Budget 2019: Analysis of Tax Changes – Impact on Business »