HomeEconomy NewsUnion Budget 2019 has something for everyone and strikes a balance

Union Budget 2019 has something for everyone and strikes a balance

The focus of the budget was more on investment-led growth and reforms and to boost the entrepreneurial system with improved add-on reforms for the farmers and the middle class.

Profile image

By Paresh Parekh  July 8, 2019, 1:56:54 PM IST (Updated)

Union Budget 2019 has something for everyone and strikes a balance
Taking forward the vision for the decade laid down in the interim budget and aiming towards Prime Minister Narendra Modi’s dream of turning India into a $5 trillion economy by 2024, union finance minister Nirmala Sitharaman presented her maiden budget on Friday, preparing a roadmap for a New India.


The focus of the budget was more on investment-led growth and reforms and to boost the entrepreneurial system with improved add-on reforms for the farmers and the middle class.

Leading the reforms is a proposal to relax the local sourcing norms for FDI in single-brand retail trade (SBRT). Currently, the FDI regulations for SBRT provide for a 30 percent local sourcing preferably from MSMEs, village and cottage industries, artisans and craftsmen where the FDI exceeds 51 percent.

There was a lot of reluctance by the existing foreign joint venture players in the sector to increase FDI beyond 51 percent to avoid coping with the sourcing norms and by new foreign brands to enter the sector owing to the sourcing norms.

Accordingly, the budget proposal to relax the local sourcing conditions in the sector should have a big positive impact for the existing players and for the sector owing to the new FDI money which should now enter the sector.

Catering to the needs of the farmers, the government proposes to replicate the zero budget farming model nation-wide so as to help double the farmer’s income by 2022, which would also facilitate ease of doing business for farmers.

To further strengthen the vision to move towards a cashless economy, 2 percent TDS is proposed to be introduced on cash withdrawals exceeding Rs 1 crore in a year.

Also, to promote digital payments, business enterprises with an annual turnover exceeding Rs 50 crore would be required to offer low-cost electronic modes of payment without any charges or merchant discount rate imposed on customers as well as merchants and these costs would eventually be absorbed by the RBI and banks.

Something For MSMEs

The finance minister doesn’t ignore the MSMEs as well and so as to provide ease of access to credit facilities, Rs 350 crore has been allocated for FY 2019-20 for 2 percent interest subvention for all GST registered MSMEs, on fresh or incremental loans up to Rs 1 crore through a dedicated online portal.

Further, addressing one of the long-pending demands of The Confederation of All India Traders (CAIT), the budget also proposes to introduce a new scheme namely Pradhan Mantri Karam Yogi Maandhan Scheme (PMKYMS) to extend the pension benefits to roughly 3 crore retail traders and small shopkeepers, assuring them a minimum monthly pension of Rs 3,000 month after attaining the age of 60 years.

All small shopkeepers, self-employed persons and retail traders with GST turnover below Rs 1.5 crore and ages 18-40 years can enrol for this scheme based on self-declaration and no documents are required except Aadhaar and bank account.

Further, the central government will make a matching contribution to the subscriber’s account. This should surely boost the retail traders and shopkeeper’s sentiment while assuring financial security.

There are additional reforms/ relaxations for eligible start-ups around carry forward and set-off of losses, conditions for claiming capital gain exemptions on transfer for residential property for investment in start-ups, etc.

On the corporate front, the reduced tax rate of 25 percent is proposed to be applicable to all Companies having a turnover of up to Rs 400 crore as against Rs 250 crore currently.

However, the expectations around relaxing the stringent conditions in the multi-brand retail sector, reduction in the corporate tax rate for all assessees still goes unaddressed in the budget.

All-in-all, the budget does tick some of the boxes providing something for everyone and striking a balance between catering to the needs of the farmers, consumers and the middle class while maintaining the fiscal deficit.

Paresh Parekh is a partner and national tax leader, Consumer Products and Retail, EY India. With inputs from Raghavendra Vinayakvitthal, Manager, EY India.