PwC Union Budget 2018 booklet

The Finance Minister presented the Union Budget for the year 2018 to a populace looking at more reform, and the world at large watching when India will once again become the fastest growing large economy.

The thrust of the Budget was on the agricultural sector, rural economy, healthcare, MSMEs and infrastructure. The National Healthcare Scheme introduced promises to bring in a transformational change in the arena of healthcare, covering almost one-third of India’s population. Additional measures for strengthening the growth and successful operation of alternative investment funds has been promised – though it fell short on providing parity on taxation with listed equity. There is also an assurance that the outbound direct investment guidelines would be reviewed to bring in a coherent and integrated policy.

The government has continued with its quest for development placing reliance on the technological advancements. The Budget emphasised the use of technology for various sectors, laying down the theme of moving from ‘‘black board’’ to ‘‘digital board’’ in the education sector and blockchain technology to usher in a wider spread of the digital economy, amongst others. The mandatory e-audits by tax authorities is a significant step towards digitisation of government processes. These reforms are in tandem with the Prime Minister’s message at the World Economic Forum in Davos to transform the Indian administration - minimising government and maximising governance. 

The domestic tax provisions for non-resident taxation are proposed to be aligned with BEPS Action Plans of OECD. The concept of “business connection” is proposed to be widened to align the domestic tax laws to BEPS Action Plans and the multilateral treaty instrument, and a concept of “significant economic presence” has been introduced. The provisions relating to CbCR are proposed to be rationalised. As anticipated, long term capital gains tax at 10% has been imposed on listed securities, units of equity oriented fund and units of business trust. The tax rate for companies having turnover of less than INR 2.5 bn has been proposed to be reduced from 30% to 25%. However, a marginal increase in the tax rate is proposed due to replacement of existing 3% of education cess by health and education cess at 4%. On the indirect taxes side, no changes have been proposed on the GST front while few amendments are proposed with respect to customs law. 

With this Budget aimed at inclusive economic development, the message is loud and clear – it is time for a forward march with consistency.