Major changes made by Union Budget 2018

Mr. Arun Jaitley today presented the final full budget of Modi government before the country goes to polls next year, amid subdued economic growth and challenging fiscal situation. Given that rural India constitutes two-thirds of the country's population, the agricultural sector is generously rewarded in this Budget along with education, healthcare and other populist policies being the focus areas. During the Budget 2018 speech, Mr. Jaitley said that common man will continue to be getting utmost importance from Modi government. Even Prime Minister Narendra Modi hailed the Budget, 2018 as "farmer friendly, common citizen friendly, business environment-friendly and development friendly". Opposed to the expectations of aam aadmi, this Budget chose to keep income tax slabs unchanged for salaried class. It also clarified that Crypto currencies shall not be deemed as legal tender.

Lauding the efforts of GST and demonetisation, Mr. Jaitley said that GST had ensured tax simplicity while demonetisation had paved the way for a digital economy. With GST being a new taxation system subsuming Service Tax and Excise, this Budget did not see much changes in Indirect Taxes except changes in Customs Act and Tariff. Mobile phones and import of mobile phone parts are likely to be cost more with the Union Budget 2018 increasing Customs duty to 20% (from 15% existing) and 15% respectively. It was stated that Customs duty hike is primarily done to boost jobs in various sectors in India and support Make in India. Certain amendments have been made in Customs Act to further improve ease of doing business in cross border trade, and to align certain provisions with the commitments under the Trade Facilitation Agreement along with smoothing dispute resolution process. With the roll out of GST, name of CBEC is proposed to be changed to Central Board of Indirect Taxes and Customs (CBIC).

In Nutshell, Union Budget, 2018, brought number of sops for MSME sector and kept its focus on infrastructure creation, higher farmers' income and economic reforms.

Though certain announcements could have been made as regards future roadmap of GST to address various concerns of trade for ease of business for GSTN Network, GST return filing, refund to exporters, Tran 1 deadline, Open issues in transitional credits and other GST law related issues still left unanswered.

General Economy

1. Agriculture

• Minimum selling price(MSP) for Kharif crops has been set at least 1.5 times the production cost. 

2. Rural Economy

• Substantially increase in allocation of National Rural Livelihood Mission to Rs. 5750 crore in 2018-19. 

3. Education

• Government aims to move from black board to digital board schools by launching revitalising Infrastructure and systems (RISE) by 2022. 

4. Health

• Flagship National Healthcare protection scheme will be launched to cover 10 crore poor & vulnerable families (with approximately 50 crore beneficiaries) providing coverage of up to Rs 5 lakh per family per year for secondary & tertiary care hospitalization.
• In order to further enhance accessibility of quality medical education and healthcare, 24 new Government Medical Colleges will be set up and Hospitals by upgrading existing district hospitals in the country. 

5. MSME

• Rs 3,794 crore allocated to the MSME sector in the form of credit support, capital &interest subsidy and innovations. 

6. Employee provident fund

• Govt will contribute 12% to EPF for new employees for three years in sectors employing large number of people like textile, leather and footwear.
• Women's contribution to EPF reduced to 8% for first 3 years. 

7. Infrastructure

• Bharatmala project: To develop 35,000 KM under phase 1 with an outlay of Rs 5.35 lakh crore
• Out of 100 smart cities, 99 cities have been selected, with an outlay of Rs 2.04 lakh crore 

8. Railways

• Rs 11,000 crore has been allocated for Mumbai rail network and Rs 17,000 crore for the Bengaluru metro 

9. Aviation

• Airport Authority of India (AAI) has 124 airports. It has been proposed to increase the airport capacity by at least 5 times to 1 billion trips a year, Rs 60 crore has been allocated to kick start the initiative in 2018-19.

10. Technology

• Allocation to Digital India scheme doubled to Rs 3073 crore. 

11. Fiscal Situation

• Fiscal deficit is 3.5% of GDP at Rs 5.95 lakh crore in 2017-18. Projected fiscal deficit to be 3.3% of GDP in the next fiscal. 

12. Miscellaneous

• Rs 7,148 crore allocated for industries in the textile sector
• Recapitalisation will pave the way for public banks to lend an additional Rs 5 lakh crore
• Disinvestment target of Rs 80,000 crore for FY19

Highlights of changes in Indirect Tax

Name of Central Board of Excise and Customs is being changed to Central Board of Indirect Taxes and Customs (CBIC) with consequential amendments in the following Acts: -

1. The Central Boards of Revenue Act, 1963 (54 of 1963)
2. The Customs Act, 1962 (52 of 1962)
3. The Central Goods and Services Tax Act, 2017 (12 of 2017)

CUSTOMS: 

Arrival Manifest and Departure manifest: 

Reference to import manifest and export manifest, wherever they occur in the Customs Act, 1962, to include Arrival Manifest and Departure Manifest respectively. 

Expansion in the scope of Customs Act:

Section 1 is being amended so as to expand the scope of the Customs Act to any offence or contravention committed thereunder outside India by any person. 

Insertion of new Sections 25A and 25B:

• A new Section 25A is being inserted, so as to empower the Central Government to exempt goods imported for repair, further processing or manufacture ['Inward Processing of Goods'] from payment of whole or any part of duty of customs, leviable thereon subject to certain conditions.
• A new Section 25B is being inserted so as to empower Central Government to exempt goods re-imported after export for repair, further processing or manufacture ['Outward Processing of Goods'] from payment of whole or any part of duty of customs, leviable thereon subject to certain conditions.

Changes in recovery provisions [SECTION 28]:

• Provision introduced for pre-notice consultation in non-fraud cases.
• Provision introduced for supplementary SCN within existing time period.
• Providing a definite time frame of 6 months (non-fraud cases) and 1 year (fraud cases) for adjudication of SCN which is extendable to further period of 6 months/ 1 year.
• If the SCN is not adjudicated even within the extended period, it would be deemed as if no demand had been issued.

Few major amendments in the first schedule to the Customs Tariff Act, 1975:

• To make 'Make in India' initiative a great success, Customs duty on certain products, such as mobile phones, televisions, specified parts/accessories of motor vehicles, motor cars, motor cycles etc. has been increased.
• Import of solar tempered glass for manufacture of solar cells exempted from Customs duty.
• Customs duty on crude edible vegetable oils like groundnut oil, safflower seed oil hiked from 12.5% to 30%; on refined edible vegetable oil from 20% to 35%.
• Customs duty on imitation jewellery hiked from 15% to 20%.
• Customs duty on Video game, Articles and equipment for sports or outdoor games, entertainment articles doubled from 10% to 20%.

Introduction of Social Welfare Surcharge

Levy of Social Welfare Surcharge @ 10%, as a duty of Customs on imported goods to finance education, housing and social security. However, rate shall be 3% in case of petrol, diesel, silver and gold.

Education Cess and Secondary and Higher Education Cess have been abolished on imported goods.

Introduction of Road and Infrastructure Cess

• Levy of the Road and Infrastructure Cess on the goods specified in the Sixth Schedule (i.e. Petrol and Diesel), being the goods imported into India at the rate of Rs. 8 per litre for the purpose of financing infrastructure projects.
• Abolition of Additional Duty of Customs [ROAD CESS] on imported motor spirit commonly known as petrol and high speed diesel oil.

EXCISE:

• Road and Infrastructure Cess on motor spirit, commonly known as petrol and high speed diesel oil, to be levied @ Rs. 8 per litre (@ Rs. 4 per litre in case it is manufactured in and cleared from 4 specified refineries located in the North-East India).
• Additional Duty of Excise [ROAD CESS] on motor spirit commonly known as petrol and high speed diesel oil has been abolished.
• Basic excise duty on Branded and Unbranded petrol and diesel has been reduced.

SERVICE TAX: 

Retrospective Exemption:

• Services provided or agreed to be provided by the Naval Group Insurance Fund by way of life insurance to personnel of Coast Guard, under the Group Insurance Schemes of the Central Government.
• Services provided or agreed to be provided by the Goods and Services Tax Network (GSTN) to the Central Government or State Governments or Union territories administration.
• Consideration paid to the Government in the form of Government's share of profit petroleum in respect of services provided or agreed to be provided by the Government by way of grant of license or lease to explore or mine petroleum crude or natural gas or both.

Where, Service tax was paid on above mentioned services, refund claim can be filed within 6 months from the enactment of the Finance Bill, 2018. 

Major Amendments in Direct Tax:

• In case of domestic company, the rate of income-tax shall be 25% of the total income if the total turnover or gross receipts of the previous year 2016-17 does not exceed rupees 250 Cr. and in all other cases the rate of Income-tax shall be 30%.
• For bringing clarity and certainty in the taxation of deemed dividends, it is proposed to delete the Explanation to Chapter XII-D occurring after section 115Q of the Act so as to bring deemed dividends also under the scope of dividend distribution tax under section 115-O.
• Long term capital gains exceeding Rs 1 Lakh will be taxed at 10% without the benefit of indexation.
• Senior citizens to get Rs 50,000 per annum deduction for medical insurance u/s 80D and limit u/s 80DDB, deduction of amount paid for medical treatment of specified diseases, has been raised to Rs 1 Lakh for all senior citizens.
• Standard deduction of Rs 40,000 allowed in lieu of existing exemption in respect of transport allowance and reimbursement of miscellaneous medical expenses.
• Education cess to be replaced with “Health & Education Cess” and the rate is to be increased to 4% from current rate of 3% which will lead to additional collection of Rs 11000 crore.
• Government has also made PAN mandatory for any entity entering into a financial transaction of Rs 2.5 lakh or more.