India’s Union Finance Minister Arun Jaitley presented the Union Budget for the financial year (FY) 2017-2018 (Budget) before the Lok Sabha today. The key highlights of the Budget are set-out below:
1. Abolition of the Foreign Investment Promotion Board (FIPB): The FIPB will be abolished in FY 2017-2018. A roadmap is likely to be introduced in relation to the same. Further liberalisation of the foreign direct investment policy is being considered by the Government of India.
2. Resolution of disputes in Infrastructure Related Contracts: The Arbitration and Conciliation Act, 1996 (Arbitration Act) will be amended to provide a mechanism within the Arbitration Act to streamline institutional arrangements for resolution of disputes in infrastructure related construction contracts, public private partnerships (PPP) and public utility contracts.
3. No cash transactions above INR 300,000: No cash transactions of more than INR 300,000 (Rupees three hundred thousand) would be permitted subject to certain exceptions, for which the Income Tax Act, 1961 (IT Act) would be amended.
4. Exemption to Category I and Category II Foreign Portfolio Investors (FPI): Due to difficulties faced by investors located abroad, it is proposed to exempt Category I and Category II FPIs from indirect transfer provisions which would now also not apply in case of redemption of shares or interests outside India as a result of or arising out of redemption or sale of investment in India which is chargeable to tax in India.
5. Extensive reach out efforts for the Goods and Services Tax to commence from April 1: Reach out efforts will strive to make trade and industry members aware of the new taxation system.
6. Cyber Security for Financial Sector: A Computer Emergency Response Team for the Financial Sector (CERT-Fin), to work closely with all financial regulators and other stakeholders, will be established to safeguard the integrity, stability and security of India’s financial sector.
7. Listing shares of Central Public Sector Enterprises (CPSE) and Railway Public Sector Enterprises (RPSE): A new mechanism is on the anvil to ensure time-bound listing of identified CPSEs on stock exchanges. RPSEs like Indian Railway Catering and Tourism Corporation, Indian Railway Finance Corporation and Ircon International Limited will be listed on stock exchanges.
8. Listing and trading of security receipts: The listing and trading of security receipts issued by a securitisation company or a reconstruction company under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 will be permitted on Securities and Exchange Board of India recognised stock exchanges.
9. Replacing the Reserve Bank of India’s (RBI) Board for Regulation and Supervision of Payment and Settlement Systems (BRSPSS): By way of amending the Payment and Settlement Systems Act, 2007, the BRSPSS will be replaced by the Payments Regulatory Board in the RBI.
10. Amendment to the Negotiable Instruments Act, 1881 (NI Act): Amendment is proposed to the NI Act to ensure that payees of dishonoured cheques are able to realise payments due to them.
11. Merging of tribunals: The Union Finance Minister noted that the number of tribunals needs to be rationalised and wherever it is appropriate, the tribunals which have overlapping functions be merged. However, more details in this regard are awaited.
12. Confiscating assets of big/ economic offenders: Legislative changes or a new law is likely to be introduced which will enable the confiscation of assets of big/ economic offenders who flee India to escape legal proceedings.
13. Amendment of the Drugs and Cosmetics Rules, 1945 (Rules): The Rules are proposed to be amended to ensure availability of drugs at reasonable prices and to promote use of generic medicines. Also, new internationally harmonised rules for medical devices are likely to be formulated which will attract foreign investment and subsequently reduce the cost of such devices.
14. Labour Law reforms: Legislative reforms are proposed to be undertaken to simplify, rationalise and amalgamate the existing labour laws in India into 4 codes on: (a) wages; (b) industrial relations; (c) social security and welfare; and (d) safety and working conditions.
15. Metro Rail Act and Policy: A new Metro Rail Policy would be announced with focus on innovative models of implementation and financing, and standardisation and indigenisation of hardware and software. Enactment of a new Metro Rail Act is also proposed.
16. PPP for Tier II cities: Select airports in Tier II cities will be taken up for operation and maintenance on PPP basis.
17. Lower tax rate for micro, small and medium enterprises (MSMEs): The income tax for MSMEs with an annual turnover of up to INR 500,000,000 (Rupees five hundred million) has been reduced to 25%.
The full text of the Budget may be accessed at the following link: