Budget statement 2017

With the two key decisions of implementing GST and demonetization, taken last year, the Union Budget 2017-18 was announced amidst huge anticipation. The Budget was even more special and historic because the Modi government broke the legacy of announcing a separate Railway Budget after 92 years and merging it with the Union Budget. Added was the fact the budget was announced on February 1 as against the historic practice of announcing it on the last day of February. The Finance minister had to meet the huge expectations of everyone while also handle the three major challenges of lower capital inflows & higher outflows, uncertainty around commodity prices and potential of affecting exports. Considering these aspects and ensuring that the economy continues on its growth trajectory (exhibited through reduction in CPI Inflation Index, decline in current account deficit and increase in FDI; in first half of 2016-17); the finance minister focused the budget on ten distinct themes centered around farmers, rural population, youth, poor and the underprivileged, infrastructure, financial sector, digital economy, public service, prudent fiscal management and tax administration. The Budget also carried several breakthrough announcements including the proposed abolition of the FIPB, creation of an integrated oil & gas PSU major to rival foreign majors, increase of the strategic petroleum reserves from the current 5MMT to 15.33 MMT. 

The announcement to shortly enact a law whereby loan defaulters fleeing to foreign countries would be subject to stringent action wherein their properties in India would be confiscated by the Government was met with widespread approval. On the tax policies, the Finance Minister reduced the corporate tax rates for small companies to 25%. It is unfortunate that the rate reduction was not effected for the larger companies as well. Abolition of MAT, while considered has been negated but relief has been granted to the taxpayers whereby MAT credit will now be available for a period of 15 years as opposed to the earlier 10 years. The Finance Minister also addressed the major issue confronting the financial markets which is the unintended taxation of FIIs and FPIs investing in India. These entities have now been exempted from these provisions with retrospective effect. Domestic transfer pricing provisions have been rationalised and will now apply only in cases where one of the parties is enjoying a profit linked incentive. Also, the threshold limit tax for audit has been increased from Rs. 1 crore to Rs. 2 crores. Provisions governing start-ups have been given a much needed rationalisation. The condition of continuous holding of 51% voting rights has been relaxed while the profit linked deduction/ exemption available from 3 out of 5 years has been increased to 3 out of 7 years. To capitalise on the benefits promised by the demonetisation drive, measures have been proposed to promote the digitisation of transactions. Cash transactions above Rs. 3 Lakhs are not permitted while allowability of both revenue and capital expenditure has also been restricted to Rs. 10,000. Necessary exemptions from BCD, Excise/CV Duty and SAD have also been provided on miniature POS card reader, micro ATM standard, finger print readers and other such devices.