Budget 2019: Industry wants clarity in e-KYC norms, rationalisation in GST and increase in tax deduction limits
The government may come out with new policies or benefits even though this is only an interim budget, says India Inc
The finance ministry has sought inputs from different central ministries for the budget speech, which would be the last budget of the current NDA govt
This will be the sixth consecutive budget to be presented by Union Finance Minister Arun Jaitley.
The Narendra Modi-government scrapped the colonial-era tradition of presenting the budget at the end of February.
Finance minister Arun Jaitley will present the interim budge for 2019-20 fiscal on February, 2019. The finance ministry has sought inputs from different central ministries for the budget, which would be the last one of the current BJP-led NDA government before the 2019 general polls.
This will be the sixth consecutive budget to be presented by Jaitley.
As per practice, a vote-on-account or approval for essential government spending for a limited period is taken in an election year and a full-fledged budget is presented by the new government.
The Narendra Modi-government scrapped the colonial-era tradition of presenting the budget at the end of February. With the preponement of the budget, ministries are now allocated their budgeted funds from the start of the financial year beginning April.
This gives government departments more leeway to spend as well as allows companies time to adapt to business and taxation plans.
Previously, when the budget was presented at the end of February, the three-stage Parliament approval process used to get completed sometime in mid-May, weeks ahead of the onset of monsoon rains. This meant government departments would start spending on projects only from August-end or September after the monsoon season ended.
Firstpost spoke to chief executive officers of various sectors on their budget expectations:
Gaurav Chopra, Founder & CEO, IndiaLends, a digital marketplace for unsecured consumer loans, says Year 2018 was a good year for the fintech industry. There were new product launches, bank and fintech collaborations and huge investments coming in to the sector.
Push digitization for more financial inclusion: The government has taken tremendous efforts to promote 'Digital India' but there is scope for growth especially in interiors of the country. After the Aadhaar verdict, we hope that the government brings more clarity in the e-KYC process. A policy framework and budget allocation, if placed, for the adoption of the Electronic National Automated Clearing House (e-NACH) and DigiLocker technologies can act as a catalyst in further helping the industry and consumers at large. This will also enable small value lending without excessive documentation and ease the lending process altogether.
Strengthen cyber security systems: Although the government has strengthened its measures to curb cyber frauds with the National Security Council Secretariat functioning as the nodal agency, they should implement stricter laws and policies and conduct programmes to spread awareness about the cyber threats and how to deal with them.
Expansion of Jan Dhan Yojana: The popular scheme Jan Dhan Yojana has improved the access to banking services for the rural sector of India. Till 9 January 2019, over 33.82 crore individuals were added to the banking sector of India. We hope the government plans to allocate a budget for expansion of the scheme.
Akshay Bhatia, Founder, Mutterfly, a peer-to-peer rental platform is hoping the interim Budget makes some startup-friendly announcements.
GST rates rationalisation: GST rates are one such area that needs attention and I hope we see some rationalisation or reduction for startups is made. In order to build investor confidence, hope the government lessens regulatory compliance and introduces certain tax reliefs such as extending the tax exemption window from three years to 5-6 years for startups.
The premise of the 2018 budget was to accelerate economic growth. This has come true as India is expected to achieve 7.2 percent GDP growth in this fiscal year. Job creation and affordable housing are two focus areas where the government is found lagging behind. Prime Minister Narendra Modi’s announcement in 2014 of creating two crore jobs per year and delivery of five million affordable houses per year are strong numbers that have not reached its mark.
Ease of doing business should be focus: The ease of doing business should be one of the main focus points for the government in the coming year. Whether it is homegrown startups or MNC’s moving to India, if the government wants to attract new businesses, more simplified compliance is required when it comes to setting up a company, FDI and company closure. At the same time, the government needs to set up mechanisms which aid in fast clearance of approvals and licenses. In the past, these things have been major deterrents to a business’s growth.
Adhil Shetty, CEO, BankBazaar, says that the government may come out with new policies or benefits even though this is only an interim budget. He hoped the government introduces changes that could help people save more and save better.
Increased tax exemption: Indian middle class would like the government to be more considerate about investments. Currently, the maximum tax exemption that can be availed under Section 80C is Rs 1.5 lakh through investment in PPF, equity, provident fund etc. Considering the increase in income and inflation, this limit is relatively low. An increase in this limit to Rs.2-2.5 lakh would be welcome.
The government should consider increasing the tax deduction limit of Rs 2 lakh for housing loans. A revision of the current limit of Rs 2 lakh will be favourable to many borrowers, especially from metro and suburban cities, where most houses are priced at Rs 1 crore and above and the ticket sizes of the home loans are higher.
Set up fintech committee: In his last Budget speech, the finance minister announced the setting up of a fintech committee, created within Ministry of Finance to look into the growth and development of the Indian fintech sector, and help ease regulations and boost entrepreneurship in the sector. We hope that this interim budget further strengthens the mandate of the fintech committee to make India the top fintech innovation centre in the world by ensuring policy to fast track paperless and presence-less access to finance.
Arun Singh, Lead Economist at Dun and Bradstreet, says over the last 2-3 years, the banking sector in India has been going through a difficult phase. Provisioning for Non-Performing Assets (NPAs) had pulled down the banking sector into losses in FY18 and also has eroded lending ability of several banks, in turn affecting the credit supply. This has necessitated the government action in the form of recapitalisation of Public Sector Banks (PSUs) along with other qualitative measures.
As a result of prompt corrective measures taken by the RBI and the government, gross NPAs have declined from 11.5% in March 2018 to 10.8% in September 2018. Credit growth has picked up in the up. Further, concerns about asset-liability mismatches in the NBFC sector are being proactively addressed. Given this scenario, we have formed our expectations from the Union Budget.
Long-Term Capital Gain, Security Transaction Tax, Dividend Distribution Tax result in triple taxation of corporate earnings that are distributed. This has led companies to favour debt capital over equity capital. Given the high NPA levels, the Union Budget 2019-20 is likely to announce measures towards the rationalisation of these taxes so that corporates can move towards equity capital.
Barring of private companies from using Aadhaar for KYC authentication has increased compliance cost. We expect the budget to provide some incentives to the BFSI industry to come up with alternate mechanism to authenticate their customers online. Further, we also expect the government to propose plans for centralisation of compliance processes in order to lower compliance costs.
Prompt Corrective Action (PCA) framework has set certain thresholds in terms of capital, asset quality and profitability for weaker banks, these banks might require further capital infusion in order to help them meet their regulatory capital norms. Hence, in the Union Budget, the government is expected to propose further bank recapitalization plan.
Distress in the farm sector would be resolved to some extent if the government might propose farm loan interest waiver for farmers who repay loan on time.
Issues in the NBFC segment can be resolved if the government were to set up a committee which would suggest an action plan. There is a lack of a single data repository and a systemic risk mapping for the entire segment is absent. A common comprehensive database for sharing of information and joint analysis by relevant authorities covering the entire NBFC segment can help map the risk of contagion and common emerging risks.
Sarvesh Shrivastava, Co-Founder and Managing Director, Eupheus Learning, a Delhi-based ed-tech startup wants the government to focus on funding startups.
Increase funding to boost startups: We are expecting an increase in access to funding to boost startup growth along with tax cuts, easy license clearances and lesser regulatory clearances. Specifically for the education sector we are expecting that input resources like printing, paper etc. are not taxed under the GST thereby lowering the prices of educational goods and services. The urgent need of the hour for startups is easier access to funding and the Angel Tax that may become a deterrent.
Remove riders from tax cuts: While a lot has been done in the past three years, considerable work is still required to ensure that schemes formulated do trickle down to the startups, for example tax cuts have still riders on it. Such hurdles need to be removed and streamlined.
Viraj Malik, founder, VURoll, a multi-channel DIY social media engagement platform, hopes the government makes more announcements to make the going easy for startups.
Flexibility in GST rules: What we are looking at is government policies to make it easy for startup to raise seed capital, remove angel tax and make it easy for startups to raise non collateral based debt by measuring each banks exposure to such debt in the startup segment. We also need more flexibility in GST rules. Since don't have working capital, an allowance of 90 days credit period would be very helpful.
Clarity on funds: Budget 2018 brought in some great initiative for startups with the launch of funds of funds and Atal incubation centres. However, what was lacking was clarity on how these funds can be accessed by startups and long-winded process involved in applying for funding. This meant only a bunch of startups could take benefit of these policies.
Sameer Vakil - Cofounder & Chief Executive Officer, GlobalLinker, a SME enablement ecosystem
Initiatives of SME segment: The government has gone the extra mile in introducing a series of initiatives to help the SME segment, particularly in creating greater employment opportunities, growing India's exports, to borrow more conveniently and in their direct and indirect taxation rates. I hope Budget 2019 budget follows in the same vein and offers greater relief to the sector. With SMEs becoming increasingly digitally adaptive, I would like the government to continue recognizing and supporting the digital lending sector. The recent announcement of loans upto Rs 1 crore being approved online in 59 minutes is a step in the right direction and the sector will benefit from similar initiatives.
Reduced tax rates: I am expecting the Finance Minister to announce tax sops that include reduced tax rates and easing working capital blockages. GST in particular needs to be addressed and whilst the wheels have already been set in motion, I feel optimistic that a formal announcement will be made during Budget 2019 about simplifying the compliance requirements by SMEs.
Vijay Bobba Co-founder, Wizely, money-saving app
Invest in Artificial Intelligence: Entrepreneurship remains paramount to innovation-driven growth. While India missed the bus on many of the technological innovations of the last few decades—aerospace, electronics, automotive, computing etc. I believe that there is tremendous scope for us to embark on the AI and ML innovation journey, that is expected to create new industries whilst disrupting existing ways of doing business. The government can certainly play a big role here; from encouraging investments to conducive policy-making. I hope that the government sets into motion, policies for reduced regulatory supervision to enable start-ups to thrive. I also hope that the government continues to promote the digital narrative for financial inclusion.
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