Finance Minister Nirmala Sitharaman presented a please-all Budget on Friday giving something for everyone. We tell you all you need to know about how it will impact you:
Gold duty hike to make jewellery more expensive
The increase in import duties on gold and other precious metals announced in the Budget is set to make jewellery purchases significantly more expensive. According to the industry, the duty hike from 10 per cent to 12.5 per cent will “negatively impact” the sector while also leading to an increase in illegal trade and smuggling of gold.
“The import duty hike will negatively impact India’s gold industry. This will impede efforts to make gold as an asset class particularly when gold prices are already rising globally,” World Gold Council India Managing Director Somasundaram PR said reacting to the budget proposal.
All India Gem and Jewellery Domestic Council (GJC) Vice-Chairman Shaankar Sen also expressed disappointment, and said: “We had proposed to reduce the import duty on gold gradually to 4 per cent. But, the Centre proposed to increase it by 2.5 per cent, which will have an adverse impact on demand for gold jewellery as the raw material will be costlier and buyers will face the brunt of it.”
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Grey market to thrive
Among the top worries of the industry is the concern that the increase in import prices will make the grey market bigger, encouraging smuggling of the yellow metal. T S Alyanaraman, CMD, Kalyan Jewellers, said the hike in custom duty may affect “short term sentiments on gold buying and lead to an increase in the illegal supply of gold in the market”.
Imported cars to burn a hole in your pocket
If you can afford an imported car, you will need to shell out a little extra tax, with the finance minister proposing an increase in customs duty on all luxury imported cars have a seating capacity of up to 10 persons from 25 per cent to 30 per cent. According to experts, the move is likely to make cars from several foreign automobile manufacturers Audi, BMW, Mercedes-Benz, Volvo, Jaguar and Land Rover.
The move comes in the wake of requests from a few luxury carmakers to reduce GST on imported cars from 28 per cent to 18 per cent. According to sources, with import duty being increased, prices of these units are likely to go up by at least Rs5 lakh.
Last year, the GST on imported cars had been increased from 20 per cent to 25 per cent while the same for completely knocked down (CKD) kits was increased to 15 per cent from 10 per cent. This had resulted in luxury car prices going up by 5 per cent.
Imported engines attract levies too
Sitharaman has also proposed a hike in customs duty to 15 per cent from 10 per cent on vehicles that come with imported engines. Further, customs duty on items such as windscreen wipers, defrosters, demisters, sealed beam lamp units, parts of visual or sound signalling systems, horns, intake air filters, oil or petrol filters, catalytic converter, vehicle locks, glass mirrors, friction material have also been increased from 2.5 per cent to 7.5 per cent.
Govt hikes import duty on cashew kernels to 70%
Exporters body has hailed government’s decision to hike the import duty on cashew kernels to 70 per cent from the current 45 per cent, a move which will help reviving the crisis-hit industry. As per the budget 2019-20 document, the customs duty on both plain and broken cashew kernels will be raised.
However, the council’s request for hike in the import duty and placing roasted cashew under prohibited items is yet to be decided, Cashew Export Promotion Council of India (CEPCI) Chairman R K Bhoodes said.
“Also, the request to withdraw 2.5 per cent import duty on raw cashew nut which was much awaited by the industry is not seen addressed in the budget,” he said.The CEPCI also demanded the government to put a complete ban on the import of roasted cashew, semi-finished cashews and husk, and to roll back the import duty on raw cashew nuts.
Surge in imports of cashew
Industry claims there has been a surge in imports of plain and also semi-finished cashew kernels into the country. Large volume of plain cashew kernels are imported under the pretext of roasted cashews which attracts zero duty under various Free Trade Agreements. Also, bulk volumes of semi-finished kernels are imported under Advance Authorisation scheme and sold in the domestic market
Many electronics products to become costlier
Several electronics and associated products, especially in the communications sector, are set to see prices increase, with import duties on chargers or power adapters of CCTV cameras and IP cameras, loudspeakers, and optical fibre increased to 15 per cent. Meanwhile, customs duty on digital video recorders (DVR), network video recorders (NVR), CCTV cameras and IP cameras have been increased by 5 per cent to 20 per cent.
The Consumer Electronics and Appliances Manufacturers Association said that imposition of customs duty on a number of emerging and high-growth product categories such as CCTV and IPTV cameras and digital video recorder and network video recorders which are largely imported will attract interest from domestic manufacturers as the import duty imposed (20 per cent) gives them a level of protection.
“Make in India is a cherished goal. In order to provide domestic industry a level playing field, basic customs duty is being increased,” said Finance Minister Nirmala Sitharaman.
Split AC prices to increase
The prices of the split AC are expected to increase around 8 per cent, as the government has proposed to double customs duty to 20 per cent on air conditioners from the present 10 per cent. “While outdoor units have by and large been indigenised, indoor units are yet to achieve the same degree of localisation, which will now be boosted,” CEAMA president Kamal Nandi said.
Imported books, newsprint turn more expensive
Import duties on imported books, newsprint and paper for magazines have been hiked in the Union Budget, resulting in increased cost for the print industry and higher prices for rare imported books. This in the first time customs duties on newsprint are being imposed. Now, a 10% import duty on newsprint and 5% import duty on printed books have been imposed. “To encourage domestic publishing and printing industry, 5% custom duty is being imposed on imported books,” Finance Minister Nirmala Sitharaman said. Under this definition, printed books, including covers for printed books and printed manuals, will attract duty.
In addition to this, imported newsprint, uncoated paper used for printing of newspapers and lightweight coated paper used for magazines will also now attract 10 per cent customs duty. According to industry representatives, this decision is expected to have a significant impact on the industry as most of India’s newsprint requirements are met through imports.
Publishers welcome move
Ashok Gupta, publisher and general secretary of Association of Indian Publishers, welcomed the move and said it would encourage the Indian writers. “This is a very good step. It is going to encourage Indian literary works and authors,” Gupta said. He said that without the custom duty, foreign authors would sell their unsold stock in India. “Without the custom duty on imported books, the international publishers would just dump their books in India and other countries as it would help them escape the cost of warehousing,” he said.
Tobacco products to pinch more
The government has continued the trend of increasing taxes on tobacco products, with the finance minister announcing that excise duty on tobacco products, bidis and cigarettes, depending on the length and type will be increased from nil to Rs10 paisa per thousand to Rs10 per thousand. The finance minister has also levied excise duty on hookah, chewing tobacco, jarda scented tobacco, smoking cigarette mixtures and other tobacco products from 0.5-1 per cent.
“Tobacco products and crude attract National Calamity and Contingent duty. In certain cases this levy has been contested on the ground that there is no basic excise duty on these items. To address this issue, nominal basic excise duty is being imposed,” the finance minister said. However, cigarettes manufacturers ITC, Godfrey Phillips and Golden Tobacco shares gained on the market after the announcement, since the industry had expected a higher duty hike.
No major impact on companies
Analysts, however, say that there is unlikely to be much of a negative impact on the sector from the duty increases. “This implies very small increase of 0.5 paise per stick for below 75 mm and 1 paisa per stick above this size of threshold. Thus, the impact on cigarette is quite limited. It is levied to plug some legal loopholes. So this may not be viewed as a structural negative,” said Abneesh Roy, executive vice president, Edelweiss Securities.
E-payments to become cheaper
In a bid to promote cashless transactions, the government on Friday said that businesses with annual turnover of over Rs50 crore can offer low-cost digital modes of payments and no charges or Merchant Discount Rate (MDR) will be imposed on them or their customers. “...propose that the business establishments with annual turnover more than Rs 50 crore shall offer such low-cost digital modes of payment to their customers and no charges or MDR shall be imposed on customers as well as merchants,” finance minister Nirmala Sitharaman said.
MDR is a charge levied for facilitating a digital transaction and is generally distributed among various parties. “To promote digital payments further, I propose to take a slew of measures. To discourage the practice of making business payments in cash, I propose to levy TDS of 2 per cent on cash withdrawal exceeding Rs1 crore in a year from a bank account,” she added.
RBI, banks to absorb costs
According to Sitharaman, the Reserve Bank of India (RBI) and banks will absorb these costs from the savings that will accrue to them on account of handling less cash as people move to these digital modes of payment. Necessary amendments are being made in the Income Tax Act and Payments and Settlement Systems Act, 2007.
Start-ups get a new channel
To encourage and promote start-ups in the country, the government on Friday has proposed to start a television show on Doordarshan, and announced easing the much-debated Angel Tax norms and Foreign Direct Investment (FDI) rules.
Finance Minister Nirmala Sitharaman also announced to ease Angel Tax norms, likely to bring relief to the start-up community in India. She said the start-ups and their investors, who file requisite declarations and provide information in their returns, will no longer be subjected to any kind of scrutiny with respect to valuations of share premiums. “The issue of establishing identity of the investor and source of his funds will be resolved by putting in place a mechanism of e-verification. With this, funds raised by start-ups will not require any kind of scrutiny from the Income Tax Department,” the FM added.
The norms were introduced in 2012 to stop small companies from being used in money laundering. The tax ended up putting severe regulatory pressure on early stage start-ups which issued shares at a significant premium to fair value.
Measures to set off losses
The Finance Minister in the budget proposals has also proposed measures to enable young companies to carry forward and set-off losses, which is expected to help start-ups in their initial years. Sitharaman has also proposed to increase in-period exemption of capital gains from the sale of residential houses for investment in start-ups up to March 2021.
TDS must for payments exceeding Rs 50 L
To widen the tax net, the government has proposed to introduce a 5 per cent Tax Deducted at Source on all payments made by individuals to contractors or professionals in excess of Rs 50 lakh a year. The government added that TDS could be deposited in the treasury using his or her permanent account number (PAN) only.
Finance Minister Nirmala Sitharaman also proposed in the Budget 2019-20 that filing of income tax return will be mandatory for people depositing more than Rs1 crore in current account, spending over Rs1 lakh towards electricity bill payment and Rs2 lakh on foreign travel in a year. Currently, there is no requirement for an individual or Hindu Undivided Family (HUF) to deduct tax at source on payments made to a resident contractor or professional when it is for personal use, or if the individual or HUF is not subjected to audit for his business or profession.
I-T returns: PAN, Aadhaar interchangeable
Now, if you have an Aadhaar, this should be enough to file your taxes, with the Finance Minister Nirmala Sitharaman saying that PAN and Aadhaar have been made interchangeable, allowing those who do not have PAN to file income tax returns. Sitharaman also said Aadhaar card for NRIs with Indian passports will be issued after their arrival in India, without waiting for the mandatory 180 days.
Social enterprises to be listed
The government, in an effort to boost social enterprises, has announced that it will launch an electronic platform to list themselves and raise funds. “(We will) initiate steps towards creating an electronic fund raising platform, a social stock exchange, under the regulatory ambit of Sebi for listing social enterprises and voluntary organisations working for the realisation of a social welfare objective so that they can raise capital as equity, debt or as units like a mutual fund,” the FM said.
“It is time to take our capital markets closer to the masses and meet various social welfare objectives related to inclusive growth and financial inclusion,” she added. According to experts, allowing the listing of social enterprises can be a game changer for organisations that are trying to transform the social dynamics. “This is one of the very creative and innovative ideas which is now going to be a reality. FM has put up this idea and this can be a game changer for those social enterprises and organisations that are actually trying to change the social dynamics,” said Mustafa Nadeem, the CEO, Epic Research.
No hike in defence outlay from Feb’s Interim Budget
Nirmala Sitharaman, who was the defence minister during the first term of the Modi government, allocated Rs3.18 lakh crore for the sector, the same amount which was set aside for defence in the interim budget presented in February.
The revenue expenditure, which includes the day-to-day running cost, salaries etc. is Rs210 crore while Rs108 crore has been earmarked for capital expenditure for modernisation of armed forces. The only change is waiver of customs duty on imports. “Defence has an immediate requirement of modernisation and upgradation...imports of defence equipment...are being exempted from basic customs duty,” the FM said.