The “New Economy” based on innovation and disruption with AI, drones, 3D printing, DNA, data storage, quantum computing are rewriting the world economic order, Finance Minister Nirmala Sitharaman said in her Union Budget Speech earlier today. “India has embraced the sharing economy with aggregator platforms” and “has harnessed new tech via DBT (Direct Benefit Transfer) and financial inclusion on a scale never before,” she said. Here are a few of the announcements she made in this regard:
- Proposed to build data centre parks throughout the country to enable private sector firms “to incorporate data in every step of the value chain”
- FTTH connections via Bharatnet will link 1 lakh gram panchayats this year, proposes to allocate Rs 6,000 crore to BharatNet in 2020-21
- Intellectual property protection is important; proposes digital platform to capture IPR, complexity and innovation in start-up economy to be protected through knowledge centres. “Also, in an Institute of Excellence, a centre would be established that would work on the complexity and innovation in the field of Intellectual Property,” she said.
- Announced 5 new Smart Cities under PPP mode in collaboration with states
- Health and Wellness Centres, Anganwadis, Post Offices, Police Stations, etc. will be provided with digital connectivity
- More than 6 lakh Anganwadi workers are equipped with smartphones to upload the nutritional status of more than 10 crore households.
All buzzwords included. SoftBank will be tempted to invest.
— Ivan Mehta (@IndianIdle) February 1, 2020
New policies and schemes announced
- National Policy on Statistics which will use latest technology including AI. It will be a roadmap towards modernised data collection, integrated information portal, and disbursal/dissemination of data.
- National Recruitment Agency which will be an independent agency that will conduct computer-based national tests for recruitment to non-gazetted posts
- National Logistics Policy will be released soon. It will enable single-window clearance and will clarify role of Central government, state governments, and of regulators.
- Quantum technology is opening new frontiers in various fields, including cybersecurity. Commercial applications are expected to emerge. Outlays Rs 8,000 crore over next 5 years for National Mission on Quantum Computing.
- Mapping genetic & DNA landscape is important for agriculture and biodiversity, Sitharaman said; proposed national level science schemes for such mapping and database creation
- Stating that the potential of electronics manufacturing industry is immense, she announced a scheme to promote manufacturing of semiconductor packaging, mobile phones, and medical devices in India
Promoting digital economy: GeM, FASTags, and more
- Banking: App-based invoice financing loans product will be launched to resolve issues of delayed payments and consequential cash flows mismatches for MSMEs.
- GeM (Government e-Marketplace) will create a unified procurement system for goods and services, and offers great opportunity for MSMEs. 3.4 lakh vendors are now listed on GeM, is turnover is expected to increase to Rs 3 lakh crore in 2020-21. Rs 27,300 crores have been allocated for GeM in this financial year.
- Highways monetisation and FASTags: Talking about connectivity via highways, expressways, waterways, she said FASTag will lead to greater commercialisation of highways. Sitharaman proposed monetisation of at least 12 lots of highway bundles or over 6,000 km before 2024.
- Smart metering for electricity: Conventional meters will be replaced with pre-paid smart meters in the next 3 years, allowing consumers to choose their rates and suppliers.
- Health: While allotting Rs 69,000 crore to the health sector, Sitharaman said that by using AI and ML in Ayushman Bharat scheme, health authorities and medical fraternity can target diseases with a structured regime.
Key announcements on taxation
Sitharaman GDP estimated at 10% for 2020-21.
- Start-ups can use ESOPs to retain employees, which are currently taxes as perquisites, Sitharaman said. To boost the start-up economy, Sitharaman announced two key changes:
- Defer tax payment by 5 years or till the employee leave the company or they sell shares, whichever is the earliest.
- Extend period of claim of deduction for a start-up from 7 to 10 years
- Increase turnover limit for profit exemption from Rs 25 crore to Rs 100 crore
- TDS on e-commerce operators: TDS of 1% to be imposed on e-commerce operator “to widen and deepen the tax net’ by bringing e-commerce companies within the tax net. This will not be applicable on payments made by e-commerce businesses if sales amount made by the company is below Rs 5 lakh in the previous fiscal year
- MSMEs: For MSMEs, audit threshold will be increased from Rs 1 crore to Rs 5 crore. This shall apply only to MSMEs with less than 5% cash transactions in a move to encourage digitisation.
- ‘Faceless appeals’ while processing IT returns: For efficiency, transparency and accountability, amend IT Act to include faceless appeals. Currently, the faceless assessment scheme allows for return filing, processing, assessment and issuance of refund. Sitharaman claimed that personal interface with tax administration is at an all-time low; refunds and assessments are completely electronic, she further claimed.
- Digital refunds for exporters at central, state, and local levels on duties and taxes such as VAT to be launched in 2020 itself.
- PAN on the basis of Aadhaar: PAN shall be instantly allotted online on the basis of Aadhaar without any other verification required. The Union Budget 2019-20 had introduced interchangeability of PAN and Aadhaar. Aadhaar-based verification of taxpayers will be introduced.
Digitising tax payments and processes
- E-assessment scheme introduced wherein taxpayers can file and process returns, claim refunds and demand notices online or via electronic methods. This is aimed at bringing efficiency, and accountability in tax assessment and filing. This will come into effect on April 1, 2020.
- Similarly, an e-penalty system is introduced along the lines of E-Assessment Scheme of 2019, wherein the Central government can notify an e-scheme to impose penalties.
- E-appeals on the same functions can also now be made online, the Finance Bill empowers the Central government to notify schemes for e-appeals, e-penalties, and to eliminate the interface between department officials and the taxpayer to the extent technologically feasible. This will come into effect on April 1, 2020.