From relief to foreign portfolio investors (FPIs), to the automobile sector, to boosting infrastructure, finance minister Nirmala Sitharaman on August 23 announced a slew of measures to help revive economic slowdown.
The enhanced surcharge on FPIs has been withdrawn. The government has also decided to withdraw enhanced surcharge levied on long and short-term capital gains. Enhanced surcharge on domestic investors (DIIs) goes too
“In order to encourage investment in the capital market, it has been decided to withdraw the enhanced surcharge levied by Finance (No 2) Act, 2019 on long and shot term capital gains arising from transfer of equity shares/units referred in Section 111A and 112A respectively,” the finance minister said.
She added that she would follow up with two more press conferences in the next few weeks outlining further steps to boost the economy, including specific steps for the struggling housing sector.
Since the SPI surcharge announcement was first made in the July Budget, the Sensex has lost more than 7 percent, with the overall decline in the stock market resulting in a notional loss of more than Rs 14 lakh crore to investors.
FIIs have been net sellers since Budget, pulling out more than Rs 25,000 crore though domestic institutional investors remained supportive during that period.
The approximate revenue implication due to removal of surcharge on FPIs and domestic investors will be around Rs 1,400 crore, said Revenue Secretary Ajay Bhushan Pandey, adding the government will keep that tax at pre-budget levels.
“Investors need not worry on ways surcharge for FPIs and DIIs will be removed. It will be done through executive orders,” Pandey said.
“This is a very positive development which would give a fillip to the capital markets… It remains to be seen whether the benefit will be extended to derivative income if that is treated as capital gains. Also, it seems that the increased surcharge will continue to be applied to interest income,” Rajesh H Gandhi, Partner, Deloitte India, said.
For the automobile sector too, the government announced several measures that could help in addressing the slowdown in the sector.
“BS-IV vehicles purchased till 31.03.2020 will remain operational for entire period of registration,” Sitharaman announced.
The government has also announced that the revision of one-time registration fee has bee deferred till June 2020.
“Depreciation on all vehicles acquired from now to March 2020 has been hiked to 30 percent,” Sitharaman said.
The government also decided to lift the ban on purchase of new vehicles by its departments.
“We shall buy all the vehicles we need to replace those vehicles which are with us. So money will go to the car manufacturers’ hands and therefore I hope after that the component manufacturers will also get paid for all the supplies that they made,” Sitharaman said.
To boost the infrastructure sector, the finance minister said that delayed payments from government and/or Central Public Sector Enterprises will be monitored by the department of expenditure and the performance will be reviewed by the Cabinet Secretariat.
“This is expected to clear all due payments of CPSEs. An inter-ministerial task force will be formed to review the pipeline of infrastructure projects,” Sitharaman said.
This initiative is expected to boost growth and lead to job creation, she said.
“These projects would be monitored actively to accelerate capital expenditure and investments in the economy,” the minister added.
Dues of PSUs pending to MSMEs are around Rs 60,000 crores across PSUs, including NHAI.
The government will also establish an organization to provide credit enhancement for infrastructure and housing projects, the finance minister said.
For banks, the FM said that the government would frontload the Rs 70,000 crore capital infusion announced in the Budget and that the amount would be released immediately.Subscribe to Moneycontrol Pro and gain access to curated markets data, trading recommendations, equity analysis, investment ideas, insights from market gurus and much more. Get Moneycontrol PRO for 1 year at price of 3 months at 289. Use code FREEDOM.
FM Nirmala Sitharaman rolls back FPI surcharge, announces measures to boost economy; more to follow – Moneycontrol.com