Announcements made by the Hon’ble Finance Minister during the Press Conference held on 23 August 2019
The Indian Parliament had passed the Finance Act (No. 2), 2019 during July 2019. Being the first Budget presented by the Government after a sweeping majority in the recent elections to the Lower House of the Parliament, the focus was on stabilising the economy and undertaking structural macro-economic reforms to inter alia derive benefits from the demonetisation exercise conducted in November 2016 and the introduction of Goods and Services Tax in July 2017. The budget was also focussed on tax optimisation, increasing the tax base and focus on all-round sustainability.
Since the dawn of 2019, the global economy has been severely crippled by ongoing trade wars, economic sanctions, interest rate hikes, political uncertainties, natural calamities etc.
The impact of global factors coupled with the reduction in domestic consumption and tepid investments has led to panic calls across the Industry. Corporate earnings have witnessed reduced growth rates and the stock markets have dived. The panic started off with the automobile sector, which later on extended to FMCG, Banks, Financial Institutions, Engineering, Metals and other core sectors.
Coincidentally, the growth rate of Gross Domestic Product (‘GDP’) of the Indian economy for the period April 2019 to June 2019 has fallen to a 6 year low of 5% from a QoQ growth rate of 5.8% and a QoY growth rate of 8%.
In order to address the concerns raised by global as well as domestic investors and provide assurance to the Industry at large on the Government’s commitment to steering the economy to growth, the Hon’ble Finance Minister Smt. Nirmala Sitharaman (‘FM’) made an hour-long presentation on 23 August 2019, in what can be termed as a ‘mini-budget’ in itself.
The FM made a corporate style presentation, listing down measures taken by the Government thus far announced and to be taken in the future. The announcements ranged from equity markets to the auto sector to Micro, Small and Medium Enterprises (‘MSMEs’) and overall are focussed to help the economy overcome the impact of a global slowdown.
The Finance Minister has reiterated that the Government respects wealth creators and would undertake various reforms and simplification of laws by making life easy for Taxpayers. As already announced in the Budget, these measures would be announced soon.
In addition, the government has also announced various structural reforms, cross-sector co-ordination, simplification of processes, measures for expansion of credit and domestic demand, increased investments into capital markets etc.
The key announcements on various subjects are summarised below:
1. Income Tax Prefilling of IT returns
Pre-filled income tax returns are expected to be a reality from 2020. The Central Board of Direct Taxes (‘CBDT’) is working on creating the necessary infrastructure. This facility is aimed at providing ease of tax filing and compliance process to the Taxpayers.
Income Tax Highlights
Key Income Tax Announcements
| S. No. |
Feature |
Description |
| 1 |
Faceless Income Tax scrutiny |
Most income tax scrutiny proceedings to be faceless, expanding the scope of ‘e-proceedings’ to cover various other processes under the Income Tax laws. |
| 2 |
Unique Document Identification Number |
All communications by income tax authorities from 1 October 2019 must have a computer-generated DIN. Communications without it are invalid. |
| 3 |
Time limit for disposal of notices |
All pending notices before 1 Oct 2019 must be reissued with DIN. All notices from 1 Oct 2019 must be resolved within 3 months of taxpayer's response. |
| 4 |
Relief from enhanced surcharge on Capital Gains |
Exemption from enhanced surcharge on LTCG and STCG (Section 111A & 112A) for equity shares and equity-oriented mutual funds to boost market confidence. |
| 5 |
Withdrawal of Angel Tax for Startups |
Section 56(2)(x) not applicable to DPIIT-registered Startups. Dedicated CBDT cell to resolve Startup tax issues quickly. |
| 6 |
Higher depreciation for vehicles till March 2020 |
Additional 15% depreciation (total 30%) on vehicles acquired during FY 2019-20 to support the automobile industry. |
2. Corporate Law
Key Company Law Reforms
| # |
Initiative |
Description |
| 1 |
Quick incorporation of Companies |
Incorporation can now be done within one day with a Central Registration Centre and an integrated form offering auto-registration under multiple laws. |
| 2 |
CSR Violations |
Violations are now treated as civil liabilities instead of criminal offences. Companies also get more time to complete ongoing CSR projects. |
| 3 |
Shifting 16 offences to penalties |
Several offences have been converted to monetary penalties and made compoundable to reduce harsh treatment and avoid prosecutions. |
| 4 |
Easier Mergers & Acquisitions |
Approval processes for M&A transactions have been rationalised and simplified, making them faster and more efficient. |
| 5 |
Differential Voting Rights (DVR) |
Promoters can retain control while raising funds via DVRs—helpful for long-term growth and attracting global investors. |
| 6 |
Withdrawal of prosecutions |
Over 14,000 prosecutions under the Companies Act have been withdrawn to promote ease of doing business and shift away from criminal proceedings. |
| 7 |
IBC amendments for MSMEs & homebuyers |
IBC framework is strengthened to support MSMEs and protect home buyers, ensuring clarity and consistent interpretation by courts. |
3. Labour Law
Key Labour Law Reforms
| # |
Initiative |
Description |
| 1 |
Fixed term employment for flexibility in hiring |
Permits businesses to hire on fixed-term contracts, offering more transparent and flexible alternatives to contract-based hiring. |
| 2 |
Reduced ESIC contribution to 4% |
Statutory ESIC contribution by employers and employees has been reduced from 6.5% to 4%, increasing employees’ take-home pay. |
| 3 |
Web-based Inspections |
Inspections are now web-based and jurisdiction-free to reduce harassment. Physical inspections must be followed by a report within 48 hours. |
| 4 |
Compounding of offences |
Offences under labour laws can now be compounded, similar to other laws, making compliance easier and litigation less frequent. |
| 5 |
Startup-friendly labour law self-certification |
Startups can self-certify compliance with labour laws and will not face inspections for the first 3 years unless complaints arise. |
4. Goods and Services Tax (‘GST’) Law
Key GST Reforms
| # |
Initiative |
Description |
| 1 |
Reduction in GST returns and simplification of forms |
The GST Council has revised return formats under GST, launched on a trial basis. The return filing system is simplified and applicable from November 2019. |
| 2 |
Simplification of refund process under GST |
Procedural issues in processing GST refunds have been simplified, with most processes automated and approval timelines streamlined. |
| 3 |
Risk-based approach in dealing with taxpayers |
The CBIC is implementing a risk-based policy approach for assessments and inquiries under GST law. This method aims to enhance efficiency in the collection and administration of GST. |
| 4 |
GST Refunds to MSMEs |
All pending GST refund claims for MSMEs will be processed within 30 days. Future refunds will be processed within 60 days from the application date. |
5. Measures in the Banking and NBFC Sectors
Key Banking Reforms and Initiatives
| # |
Initiative |
Description |
| 1 |
Additional Credit expansion through Public Sector Banks (‘PSBs’) |
The Government will release INR 70,000 crores as announced during Budget 2019 to boost credit. This will benefit corporates, MSMEs, small traders, etc. |
| 2 |
Banks to effect timely rate cuts |
Banks will pass on rate cuts by reducing the Marginal Cost of Funds based Lending Rate (MCLR) to borrowers, benefiting loan recipients. |
| 3 |
Banks to launch Repo rate/ external benchmark linked loan products |
Banks will introduce loan products linked to Repo rates or external benchmarks, translating into lower EMIs for housing, vehicle loans, and working capital. |
| 4 |
Customer Ease – Return of documents provided as security |
PSBs will ensure return of loan documents within 15 days of loan closure, reducing hassle for borrowers who have mortgaged assets. |
| 5 |
Support to NBFCs/ HFCs |
The Government will provide additional liquidity support of INR 20,000 crores by NHB to HFCs, supporting house, vehicle, and consumption goods purchases. |
| 6 |
Transparent One Time Settlement (OTS) Policy |
Banks will issue an improved and transparent OTS policy for settling overdue loans with MSME and retail borrowers, fostering greater transparency. |
| 7 |
Protecting honest decision making by bankers in commercial decisions |
The Central Vigilance Commission has issued guidelines to protect bankers' decisions in commercial matters, with the IAC's decision being final. |
| 8 |
Use of Bank KYCs by NBFCs |
NBFCs can use Aadhaar authenticated bank KYC for customer onboarding, streamlining the process and ensuring faster customer access. |
| 9 |
Co-origination of loans by PSBs jointly with NBFCs |
PSBs will collaborate with NBFCs to provide loans to various segments such as MSMEs, Small traders, and Self Help Groups, boosting last-mile connectivity. |
6. MSME Sector
Key MSME Initiatives
| # |
Initiative |
Description |
| 1 |
MSME Bill discounting through GSTN |
The Trade Receivable Discounting System (‘TreDS’) is an online bill discounting platform helping MSMEs raise funds by selling trade receivables to buyers. The GSTN system will be used in the medium term to facilitate bill discounting for MSMEs. |
| 2 |
Definition of MSME |
The Government is considering amendments to the MSME Act to adopt a single definition for MSMEs. |
| 3 |
Recommendations of the UK Sinha Committee |
The UK Sinha Committee has provided recommendations on credit, marketing, technology, and delayed payments for MSMEs. The Government plans to review these recommendations and implement necessary actions within 30 days. |
7. Financial Markets
Key Financial Market Initiatives
| # |
Initiative |
Description |
| 1 |
Deepening of bond markets in India |
The Government plans to establish an organization to provide Credit Enhancement for infrastructure and housing projects, improving debt flow. Efforts are underway to develop Credit Default Swap markets and enhance bond market conditions. Additionally, the requirement for a Debenture Redemption Reserve (DRR) has been removed for listed companies, NBFCs, and HFCs. |
| 2 |
Access of Indian Companies to the Global Markets |
The Depository Receipt Scheme, expected to be operational soon, will give Indian companies greater access to foreign funds through ADRs and GDRs. |
| 3 |
Use of Aadhaar-based KYCs for domestic retail investors |
Aadhaar-based KYC is now permitted for opening Demat accounts and investing in mutual funds, streamlining market access for domestic retail investors. |
| 4 |
Simplified KYC for foreign investors and FPIs |
The KYC procedure for foreign investors, including FPIs, will be simplified to improve market access and investment inflows. |
| 5 |
Offshore Rupee market |
The Ministry of Finance is collaborating with the RBI to facilitate increased participation in the offshore Rupee market and introduce trading of USD-INR derivatives in the GIFT IFSC. |
8. Infrastructure
Key Government Infrastructure Initiatives
| # |
Initiative |
Description |
| 1 |
Delayed Payments |
All delayed payments from Government/ CPSEs will be monitored by the Department of Expenditure and reviewed by the Cabinet Secretariat to provide cash flows into the system, facilitating infrastructure investments. |
| 2 |
Payment of Arbitration Awards |
The Government has decided to make payments aggregating to 75% of arbitral awards in case of contractual disputes by Government/ CPSEs while pursuing legal remedies. These payments will be implemented and monitored by the Cabinet Secretariat. |
| 3 |
Investments for Developing Modern Infrastructure Over 5 Years |
An Inter-Ministerial Task force has been constituted to finalize the pipeline of infrastructure projects and make investments of INR 100 lakh crores over the next 5 years to boost growth and create jobs. These projects will be actively monitored. |
9. Automotive Sector
- All BS IV vehicles purchased till 31 March 2020 would remain operational for the entire period of registration.
- The revision of one-time registration fees for vehicles is being deferred till June 2020.
- Both Electric Vehicles (‘EVs’) and Intermediate commercial vehicle (‘ICVs’) would continue to be registered even after April 2020
- The Government’s focus would be on setting up of infrastructure for development of automobile ancillaries/ components including batteries for export.
- The Government has lifted the ban on purchase of new vehicles for replacing all old vehicles by its Departments in order to boost demand. The Government expects other stakeholders in the economy to follow suit
- The Government is actively considering various other measures including the introduction of a scrappage policy for old vehicles.
10. Housing Sector
Key Government Housing Initiatives
| # |
Initiative |
Description |
| 1 |
Relaxation of ECB Guidelines for Affordable Housing |
ECB guidelines would be relaxed to facilitate financing of eligible home buyers under the PMAY, in consultation with RBI. These benefits are in addition to the existing ECB norms for the affordable housing segment. |
| 2 |
House Building Advance |
The interest rate on House Building Advance shall be lowered and linked with the 10 Year Government Securities (G-Sec) Yields. Government servants contribute to a major component of demand for houses, encouraging more government servants to buy new houses. |
| 3 |
Special Window for Affordable and Middle-Income Housing |
A Special Window will be provided for last mile funding of housing projects in the affordable and middle-income categories. The Fund, with an expected size of INR 10,000 crores, will focus on unfinished units and will receive contributions from both the Government and private investors like LIC, banks, sovereign funds, etc. |
Here’s all that you need to know: Measures to Boost Exports | Part 2 | Announcements by Finance Ministry
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