The minister also offered to review the income tax surcharge on those with taxable income of over Rs 2 crore by 2022 and unveiled steps to boost demand for the automobiles sector, which has seen sales slump at the fastest pace in 18 years, leaving companies with unprecedented inventory and forced job cuts.
The announcement on removal of surcharge is expected to provide the market some comfort as FPIs had withdrawn close to $3.4 billion since July. “Tax rates for FPIs will come down 4% to 7% and remove the anomaly created by Budget 2019,” said Rajesh Gandhi, a partner at Deloitte India, a consulting firm.
There were several measures to ease the flow of funds to the economy, including an upfront release of Rs 70,000 crore to public sector banks through recapitalisation bonds. This money is aimed at improving their lending capacity by an additional Rs 5 lakh crore. The minister announced that banks have agreed to lower interest rates to pass on the benefits of RBI’s rate reduction besides linking interest on home, auto and other retail loans to the central bank’s key policy rate. Several measures to support ailing non-banking finance companies (NBFCs) and provide a fresh Rs 30,000 crore refinance window for housing finance companies were also announced.
While funds have been available with banks, they have been reluctant to lend, citing fear of prosecution in case the debt turns sticky. To address this concern and get honest bankers to clear loan proposals, the government announced a new mechanism under which lenders will set up internal advisory committees to decide on cases.
The government, however, refrained from tax cuts, with Sitharaman saying that reduction in GST rates was under the domain of the GST Council. The Centre has limited fiscal space for a stimulus that was being pushed by the corporate sector.
The announcements, which came within 50 days of Sitharaman’s maiden Budget, were aimed at soothing frayed nerves in India Inc, which has been demanding tax concessions, citing weak demand apart from complaining about higher compliance burden and “tax terrorism”.
“These steps have been taken based on the demand from industry. We have not taken these steps sitting in North Block. Demand has come from sectors and we hope, the industry hopes that these measures will improve the situation. This is a responsive government. It is responding to the demands of industry… The momentum of reforms will continue,” the minister said at the start of a 100-minute press conference. Amid criticism over the government’s economic management, Sitharaman’s 32-slide presentation set the tone by reiterating that India was growing faster than all other large economies, including China.
The measures come a week before the first quarter GDP numbers are to be released, which are expected to point to a further slowdown. They are aimed at shoring up sectors such as automobiles as well as micro, small and medium enterprises, both large job generators. Addressing a key concern of India Inc, the minister unveiled a string of measures — from time-bound disposal of notices to the launch of faceless tax assessment from Dussehra — and said the government would prefer financial penalties to prosecution for violations of companies’ and labour laws. She also made it clear that the government was accepting a high-level panel’s recommendation to do away with jail terms for executives of companies that fail to spend 2% of their profits on corporate social responsibility projects.
Govt steps in to comfort investors, companies – Times of India