FM unveils measures to revive auto sales and capital market inflows
The government will consider various measures including scrappage policy. The scrappage policy, if implemented, is likely to give stimulus to customers to make new purchases supported by government incentives in place of their old vehicles.BS4 vehicles purchased up to March 2020 will all remain operational for their entire period of registration. Revision of one-time registration fees being deferred till June 2020.
Finance Minister Nirmala Sitharaman on Friday said that to boost demand in the automobile sector several temporary relief measures will be introduced including an increased depreciation cost for automobiles for corporates and businesses, however, she stopped short of giving a GST cut for automobiles, something the industry has been lobbying for.
Amid fears of slowdown of economy, the government on Friday offered a slew of measures such as rollback of the surcharge on foreign portfolio investors, simplifying more on taxation, strict labour laws, easy environment clearance, relief to banks, non-banking financial companies, MSMEs, auto, realty sectors and ease of doing business among others.
Announcing the 32-point economy booster dose, finance minister Nirmala Sitharaman dismissed all talk about economic slowdown, saying that India’s economy is growing at a faster rate than any other major world economy. More sops are on the anvil, she said.
Addressing a press meet at New Delhi, she said reform is a continuous process for the government and it tops the agenda.
"India's GDP continues to grow at a faster pace than the global economy and any other major economy,"the Finance Minister said
The move of the government came after huge criticism over the slowdown of economy. In order to allay fears among the people, the finance ministry is learnt to have forced to take such steps after reviewing the demands of different sectors.
As far as the other measures are concerned, to start with Sitharaman announced that the government withdrew surcharge on long and short-term capital gains on foreign portfolio investors levied in the Budget 2019, both for foreign and domestic investors. “The pre-Budget position is restored,” the minister said, adding that it is being done to encourage investment in the capital market.
It was estimated that the surcharge affected FPIs adversely and they have withdrawn Rs 23,000 crore from domestic markets post-Budget. The Budget announcement of surcharge on higher tax-income groups reportedly affected 40 per cent of FPIs.
The government will consider various measures including scrappage policy. The scrappage policy, if implemented, is likely to give stimulus to customers to make new purchases supported by government incentives in place of their old vehicles.
BS4 vehicles purchased up to March 2020 will all remain operational for their entire period of registration.
Revision of one-time registration fees being deferred till June 2020.
Additional 15% depreciation on all vehicles, to increase it to 30% acquired during the period from now till 31st March 2020.
The FM also lifted the ban on purchase of vehicles by government departments, and allowing additional 15 per cent depreciation, taking it to 30 per cent, on vehicles acquired from now till March 2020.
Besides, both electric vehicles (EVs) and Internal Combustion Vehicles (ICV) will continue to be registered.
The minister said the government's focus will be on setting up of infrastructure for development of ancillaries/components, including batteries for exports.
Further, the increase in the one-time vehicle registration fee, which the government had earlier mooted, will be deferred until June 2020. The automobile industry had argued that an increase in the vehicle registration fee would further hurt demand.
The Indian automobile industry is going through a prolonged slowdown for the past twelve months. Monthly sales have seen the worst decline in the past two decades.
In response to the slowdown, the companies have resorted to job cuts and production cuts to keep costs in check.
“The Budget announcement of the surcharge had pushed the effective income tax rate for individuals with taxable income of Rs 2-5 crore up to 39 per cent from 35.88 per cent and for those above Rs 5 crore to 42.7 per cent,” Sitharaman said.
On banking financial health, she also announced upfront capital infusion of Rs 70,000 crore into public sector banks in order to boost lending and improving liquidity situation. “The move is expected to generate an additional lending and liquidity in the financial system to the tune of Rs 5 lakh crore,” she said.
Sitharaman also declared corporate social responsibility (CSR) as a civil offence, not a criminal one.
The finance minister further said that banks have decided to pass on RBI rate cut benefits to borrowers through MCLR reduction. Further, banks will launch repo rate and external benchmark-linked loan products that will lead to reduced easy monthly installments for housing, vehicle and other retail loans.
No angel tax
In a major relief to entrepreneurs and startups, the FM said that the 'angel tax' provision will be withdrawn for startups and their investors. Angel tax has been a major issue among entrepreneurs and in the startup ecosystem. Although the government announced some measures earlier, but the startups were not satisfied and wanted a complete revocation of the tax liability. Sitharaman also announced several other measures to ease tax liabilities and address the ongoing concerns of tax harassment by tax officials.
MSMEs to get all their pending GST refunds within 30 days. Further, all GST refunds of micro, small and medium enterprises (MSMEs) will be paid within 60 days from the date of application. The FM also said the decision on recommendations of the U K Sinha Committee regarding ease of credit, marketing, technology and delayed payments to MSMEs will be taken within 30 days. The government would also consider amendment to the MSME Act to move towards a single definition.