Growth-oriented and pro-development, India’s Union Budget 2022-23 seeks to lay down the foundation of the economy for the next 25 years.
The Union Budget for 2022-23 was presented today by the Finance Minister Ms. Nirmala Sitharaman. This was presented in the backdrop of Gross Domestic Product (GDP) growth rate of 9.2 per cent for the year coupled with strong exports and robust increases in both direct and indirect tax revenues.
Despite repeated waves of the COVID-19 infection, supply-chain disruptions and inflation, the Indian economy is expected to register a growth rate of 9.27 per cent in the current financial year, implying that the overall economic activity has recovered from the pre-pandemic levels.
With an aim to boost domestic manufacturing and create jobs following an increase in unemployment over the last two years, the Union Budget 2022-23 revolves around four key pillars.
- Inclusive Development
- Productivity Enhancement
- Financing Investments and
- PM GatiShakti.
To pump prime the economy, the budget emphasised on the PM GatiShakti National Master Plan as a transformative approach to boost economic growth and sustainable development driven by its seven engines. This includes – Mass Transport, Waterways, Railways, Roads, Airports, Ports, and Logistics Infrastructure. The strategy also covers National Master Plan aimed at world class modern infrastructure and logistics synergy.
From kisan drones to public private partnerships to help deliver high-tech services to farmers, the Union Budget’s focus was clearly on increasing the overall use of technology in the agricultural sector. To provide such hi-tech services to farmers, private agritech players are likely to engage with the public sector, under a scheme that will be launched in the PPP mode. Along with the focus on increasing farmers’ digital presence, the proposal also provides the much-needed boost to agritech start-ups, including a fund with blended capital, raised under the co-investment model, which will be facilitated through NABARD.
Additionally, chemical-free natural farming will be promoted throughout the country with a focus on farmers’ lands in the 5km wide corridors along the river Ganga. For farmers to adopt natural farming, a comprehensive package for the participation of state governments and MSMEs is to be introduced
There is no denial that the pandemic took a toll on education, especially at government run schools. The budget has come as a relief with ‘one class, one TV channel’ program of PM eVIDYA which will be expanded from 12 to 200 TV channels to enable states in providing supplementary education in regional languages for classes 1 to 12.
With the pandemic accentuating mental health problems in people across ages, the government has announced a plan to set up a National Tele-Mental Health programme in India. While this will lead to a boost in the mental health segment, other essential services in the healthcare sector did not receive the required impetus. Some of the areas that will see a lift are rollout of National Digital Health Ecosystem, National Tele Mental Health Programme for quality counselling, Integrated architecture: Mission Shakti, Mission Vatsalya, Saksham Anganwadi, and Poshan 2.0 to be launched and last but not the least Two lakh Anganwadis to be upgraded to Saksham Anganwadis.
Some of the key developments announced under the Inclusive Development pillar are Har Ghar, Nal Se Jal: 3.8 crore households to be covered, PM Awas Yojana, PM-DevINE; to fund infrastructure and social development based on felt needs of the North East, Aspirational Blocks Programme: For development of lagging blocks of aspirational districts, Vibrant Villages Programme: Targeting development of villages on the Northern Border left out from the development gains, Digital Banking by Post Offices: 100 per cent of post offices to come on the core banking system, Digital Payments: Scheduled Commercial Banks to set up 75 digital banking units in 75 districts.
On the productivity enhancement and investment front certain crucial steps likes integration of central and state level systems through IT bridges, end to-end online e-billing system and utilising surety bonds in government procurement, support to 5G under PLI scheme and opening defence R&D for industry, start-ups and academia were also announced. At the same time certain measures like issuance of chip embedded e-passports and providing a battery swapping policy as an alternative to setting up charging stations in urban areas will make a positive impact on the way of living.
With the proposed introduction of digital rupee, using blockchain and other technologies, by the Reserve Bank of India, currency management system may prove more efficient and cheaper.
On the fiscal front, there were concerns that the government would likely see a sharp slippage on its fiscal deficit target. But the Finance Minister has announced only a marginal slippage – as against a budget target of 6.8 per cent of GDP in 2021-22, the fiscal deficit is now estimated at 6.9 per cent. In line with the path of consolidation, the Finance Minister has pegged to bring down its fiscal deficit to 6.4 per cent of the GDP in 2022-23.
To provide greater fiscal space to States, two key steps have been introduced namely, an enhanced outlay to scheme for Financial Assistance Capital Investment and allowing a fiscal deficit of 4 per cent of GSDP of which 0.5 per cent will be tied to power sector reforms.
On the Direct Tax front, there has been no change in basic income tax exemption limit, income slabs and tax rates. The surcharge rate on all long-term capital assets have been capped at 15 per cent. Option has been provided to file updated returns within two years from the end of the assessment year subject to payment of additional taxes and fulfilment of conditions. The proposals also provide tax relief to people with disabilities. The period of incorporation of eligible start-ups has been extended by an additional year. Newly incorporated manufacturing entities will also be entitled to a year’s extension in the time for commencement of manufacture to qualify under the concessional tax regime. Income from transfer of virtual assets will be taxed at 30 per cent. The budget also emphasises on better litigation management to avoid repetitive appeals. The concessional rate of 15 per cent on foreign dividends has been removed from FY 2022-23.
With respect to indirect tax, the time-limit has been extended by 2 months (up to 30 November) with respect to transactions of previous financial year, such as availing of credit, issuance of credit note. Powers have been granted to impose restrictions on utilisation of balance in Electronic Credit Ledger, blocking the credit in specified cases. SEZ reforms leading to replacement of SEZ Act, changes in customs administration of SEZ, introduction of risk-based intervention and usage of common EDI platform (w.e.f. 30 September 2022). Customs duty exemptions on capital goods will be gradually withdrawn.
India Union Budget 2022-23 (home.kpmg)
Authored by Rajeev Dimri, National Head of Tax, KPMG in India
