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JSA Viewpoint – GST Changes, Budget 2021

In the backdrop of improving GST collections, the GST proposals contained in the Union Budget presented today, largely focus on easing the compliance burden for the assesses and strengthening the penal provisions in case of defaults.

Doing away with the requirements of submission of Audited financial and reconciliation statements should avoid delays in discharge of annual compliances and bring simplicity. However, this would increase the onus on the assesses to ensure proper disclosures in the Annual Returns, which now need to be filed on self-certification basis.

Among other changes, giving retrospective effect to the provisions for charging of interest on net cash liability provides much-needed clarity and will avoid litigation.

Proposal to limit the option of effecting zero-rated supplies with payment of tax, only to specified class of goods and services or taxpayers could be restrictive and need to be analysed in greater detail, once appropriate notifications are issued in this regard.

JSA Viewpoint by Manish Mishra.

Education Sector – Budget 2021

An allocation of 3,002.21 crores to skill development ministry and its various programmes is a welcome step but not sure whether that’s enough given the current pandemic and need to create a digital infrastructure for education.

Higher Education Commission, an Umbrella body to regulate education, is a welcome step and hopefully would provide clarity and ease for educational institutions to introduce multiple academic programs.  However, there is a disappointment due to no relief from the burdensome 18% GST on Edtech industry which is doing a massive job of educating our next generation.

Quote by Nitin Potdar published in Business World, Education Times, Skill Outlook, Online and You, Medianews4u, CEO Insights India and Data Quest.

FDI in insurance from 49% to 74% – A key change

FDI in insurance from 49% to 74% is a key change, and this will help bring in more investments to scale up business in India. Prior to this change, insurance companies had to be Indian owned and controlled, and with the change foreign ownership and control will now be permitted with safeguards. There is also a proposal to have sufficient number of independent directors, given the sensitivity of the sector. Will help boost the sector particularly given the pandemic and the likely inclination for more insurance cover. FDI in insurance intermediaries has already been permitted upto 100%, so this was an expected next step to provide an effective stimulus for the sector.

Quote by Raj Ramachandran published in The Banking & Finance Post and Fortune India.

Decriminalisation of offences under the LLP Act – Budget 2021

The proposal for the decriminalisation of offences under the LLP Act as contemplated for the Companies Act, 2013 is an important step, to protect stakeholders from unnecessary litigation, and will provide level playing field to the form of entity, given the broader benefits otherwise available to LLPs. One person company will now be permitted with relaxed conditions, and this will also motivate entrepreneurs to have a corporate structure with limited liability, and will also help start-ups and early-stage ventures.

JSA Viewpoint – Raj Ramachandran.

Transformational infrastructure for healthcare – Budget 2021

The government has announced an amount of INR 35,000 crores for the vaccination programme in wake of Covid-19. However, the negotiations between Indian vaccine manufacturers had hinted at a ballpark figure of Rs 60,000-70,000 crores for only the procurement of vaccines during the first phase. Thus, the budgetary outlays falls short of the initial estimates. It is important to note that this estimate also excludes the costs for transformational infrastructure and storage at low temperatures, which have been estimated around $30-80 million.

Quote by Sidharrth Shankar.

JSA Viewpoint Healthcare – Budget, 2021

For FY 21 GoI had budgeted Rs. 69,000 crore for healthcare, which was 1.6% of GDP. The budgeted amount for FY 22 shows a significant increase. If this growth were to be extrapolated, the GoI should achieve the target of healthcare spend of 2.5 – 3% of GDP (as envisaged in the National Health Policy 2017) well before its target date. This is quite promising and clearly illustrates the importance that the GoI is placing on the sector spurred by the Covid pandemic. What is also very commendable is that the GoI has allocated Rs. 35,000 crore for the Covid vaccine as a separate line item. This shows that the GoI has avoided the pitfall of focussing all its resources on tackling communicable diseases at the cost of building healthcare systems generally because of the Covid pandemic, which notwithstanding its materially adverse impact on the health and economy, is an extraordinary event. The GoI has thus avoided the saliency bias which the Economic Survey had warned against.

Quote by Rohitashwa Prasad published in IIFL Securities, Pharmabiz and Global News Network of India.

National Infrastructure Pipeline – Infrastructure Development, Budget 2021

The budget speech expectedly has given a strong signal for infrastructure development focusing on actualizing the ambitious national infrastructure pipeline targeting an investment of Rs.111 lakh crores over 5 years. The signal comes from the announced budgetary allocations and decisions (a) central allocation of Rs5.54 lakh crores, (b) state allocations of Rs.2 lakh crores, (c) announcement to tap into budgetary resources of PSUs and wide-ranging InvITs monetising assets in highways, power transmission, gas pipelines, dedicated freight corridors, airport.

The above announcements are strengthened by announcement of establishing Bad Bank in nature of AMC; a development financial institution with a seed investment of Rs.20,000 crores and a target to be build a lending portfolio of Rs. 5 lakh crores in 3 years; an extensive disinvestment program with target of Rs.1.75 lakh crores; zero coupon bonds that will help arrange the infra financing.

The devil lies in the details and the success in reviving the economy would depend on effective structural reforms in infrastructure sectors removing barriers to growth + how the government goes about monetising the land bank and assets held by PSUs.

Quote by Amit Kapur published in Business World, Deccan Herald, Firstpost, News Free Ads World and Mumbai Live.

Reducing compliances and uncertainty while providing some boost for investments

A step towards easing compliance and reducing uncertainty is that the time limit for reopening income tax assessments will be restricted to 3 years from the six years currently applicable. Only serious offences beyond a non-compliance threshold of 50 lakhs in a year will be subject to a 10-year window for reopening of assessment. Payment of advance tax to meet tax liability for dividend income can be after the declaration of dividend. Dividends to InVITs and REITs will be exempted from TDS. As an incentive for startups, tax holiday and capital gains exemption has been extended by one more year up to 31 March 2022. 

Quote by Raj Ramachandran.

Securities market code to include SEBI Act – Government securities act and depositories act, Budget 2021

The consolidation of securities laws, existing decriminalisation of offences under the Companies Act and the proposed decriminalisation under the LLP Act marks an important move towards making Indian corporate legal framework, simpler, business friendly and ultimately (hopefully) reducing compliance costs.  The securities market code is in line with previous discussions on the NFRA. It marks a step towards streamlining the multiple laws, ordinances, guidelines and regulations. If drafted and executed in a proper manner, it will be helpful to market participants and remove any possible conflicts in the regulatory framework and will provide clarity in policy making to investors and stakeholders.

Quote by Arka Mookerjee, published in CNBC, Moneycontrol, Indian Express, Fortune India, IIFL Group, Yahoo.com, Firstpost.

JSA viewpoint – Sustainable Development and Climate Change – Economic Survey, 2021

India has made significant and commendable progress towards meeting its sustainability and climate goals. The nation’s commitment to sustainability has been enshrined as a central tenet of governance by the Supreme Court. A sweeping and broad-ranging set of initiatives have been launched, ranging from increasing its renewable footprint to creating a carbon sink to upscaling electric vehicle roll-out. As a result of these efforts, the country has ensured that it ends the decade on a positive note, and has laid a robust foundation to build on these successes in coming years. Of particular note is the rise in the installed capacity of solar power pursuant to the National Solar Mission, with a cumulative capacity of 36.9 GW having been commissioned as of November 2020, around 36 GW in development, and a further 19 GW tendered.

In coming years, thanks to financial support under the FAME scheme, we may expect to see over two lakh electric vehicles traversing India’s roadways, a development that is sure to put India firmly on the path to decarbonising its vehicular fleet. Going forward, it is imperative that India maintains momentum and start taking global centre-stage and leadership through both action and intent. In sync with and taking cue from international best practice, present climate resilience efforts may be bolstered by means of market based tools and instruments to fund, finance and incentivise climate action. It is time for the spotlight to be cast on climate finance to catalyse efforts to tackle climate change and for greening the economy. The Economic Survey has rightly highlighted the many successes, and it is for the budget to build on these foundations.

Viewpoint by Vishnu Sudarsan and Kartikeya GS.

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