Key highlights on UNION BUDGET 2019

After interim budget in February, 2019, Hon’ble Finance minister Nirmala Sitharaman presented her first union budget, 2019 on 5^th July, 2019. While presenting budget, Hon’ble FM focused around promoting investment in infrastructure, higher surcharge for super riches, reduction in corporate tax rate, reduction in taxes of electric vehicles etc. Budget also focused on promotion of digital transactions by way of reduction in charges for digital payments, TDS on cash withdrawal etc.

Finance Bill, 2019 proposed various amendments in Income Tax Act, 1961, Central Goods and Service Tax Act, 2017 etc.

Gamut of various changes proposed is as follows:

1. Central Goods and Service Tax Act, 2017

Following changes are proposed in Central Goods and Service Tax Act, 2017 (“CGST Act, 2017”) through Finance Bill, 2019:

1. While computing “Aggregate turnover” for the purpose of composition scheme levy, value of exempted supply of service provided by way of extending deposits, loans and advances is so far as the consideration is represented by way of interest or discount shall not be considered.
2. Benefit of composition scheme shall not be available to casual taxable person or non-resident taxable person.
3. Threshold limit for exemption from obtaining registration under GST has been increased from INR 20 Lacs to INR 40 Lacs for the suppliers exclusively engaged in supply of goods. Such extended limit has already been implemented vide notification no. Notification No. 10/2019-Central Tax dated 7^th March, 2019
4. Possession of Aadhar Number or any other alternate means of identification shall be mandatory for holding valid GST registration.
5. A class of registered person prescribed by Government shall provide prescribed modes of electronic payment to the recipient of supply of goods or services or both and such recipient will be required to make payment accordingly.
6. Facility to transfer any amount of tax, interest, penalty, fee or any other amount available in electronic cash ledger from one head (IGST/CGST/SGST) to another head (IGST/CGST/SGST) would be available.
7. Interest under section 50 of CGST Act, 2017 would be payable on tax paid through electronic cash ledger instead of gross liability.
8. Government shall, in consultation with recommendations of council, constitute a National Appellate Authority for Advance Ruling from date to be notified.
9. National Appellate Authority for Advance Ruling will look in conflicting advance ruling given by appellate authority of two or more states or union territories.

2. Service Tax

Following changes are proposed in Chapter V of Finance Act, 1994:

1. No service
   tax shall be levied in respect of taxable service provided or agreed to be
   provided by the State Government by way of grant of liquor licence, against
   consideration in the form of licence fee or application fee during the period of
   1^st April, 2016 to 30^th Jue, 2017.
2. No service
   tax shall be levied or collected for the period of 1^st April, 2003
   to 31^st March, 2016, in respect of taxable services provided or
   agreed to be provided by the Indian Institutes of Management to the students as
   per the guidelines of the Central Government, by way of the following
   educational programmes, except Executive Development Programme, namely:—
   • two year
     full time Post Graduate Programmes in Management for the Post Graduate Diploma
     in Management, to which admissions are made on the basis of Common Admission
     Test conducted by the Indian Institute of Management;
   • fellow
     programme in Management;
   • five year
     integrated programme in Management.
3. No service tax shall be levied or collected on upfront amount, called as premium, salami, cost, price, development charges or by any other name, payable in respect of service of granting long term lease of 30 years or more of plots for development of infrastructure for financial business, provided or agreed to be provided by the State Government Industrial Development Corporations or Undertakings or by any other entity for the period of 1st October, 2013 to 30th June, 2017.
4. Refund shall
   be granted of service tax paid for such period.

1. This scheme shall be applicable in respect of following acts namely and certain other enactments:
   • the Central Excise Act, 1944 or
   • the Central Excise Tariff Act, 1985 or
   • Chapter V of the Finance Act, 1994 and the rules made thereunder;
2. This scheme
   provides for settlement of appeal or show cause notice or any enquiry or
   investigation or audit on fast track basis pending as on 30^th June,
   2019 under Central Excise Act, 1944 or Chapter V of Finance Act, 1994 through
   partial payment of taxes.

3. SABKA VISHWAS (LEGACY DISPUTE RESOLUTION) SCHEME, 2019

1. This scheme shall be applicable in respect of following acts namely and certain other enactments:
   • the Central Excise Act, 1944 or
   • the Central Excise Tariff Act, 1985 or
   • Chapter V of the Finance Act, 1994 and the rules made thereunder;
2. This scheme
   provides for settlement of appeal or show cause notice or any enquiry or
   investigation or audit on fast track basis pending as on 30^th June,
   2019 under Central Excise Act, 1944 or Chapter V of Finance Act, 1994 through
   partial payment of taxes.

4. Income Tax Act, 1961

Finance Bill, 2019 suggests following changes in Income Tax Act, 2019:

1. No changes
   are proposed in income tax slab rates for individual. However, Finance Bill,
   2019 has proposed to increase surcharge rate in following manner for
   individuals earning higher incomes:

Income	Existing Surcharge	Proposed Surcharge
2 Crore – 5 Crore	15%	25%
More than 5 Crores	15%	37%

2. Threshold limit of aggregate turnover/gross receipts for applicability of lower tax rate of 25% has been increased from INR 250 Crores to INR 400 Crores. Accordingly, change in the effective rate of tax for such class of company will be:

5. Amendments proposed in provisions related to TDS:

1. A new section 194M has been inserted which provides that every individual or HUF, which was not liable to tax audit during preceeding Financial year, would be required to deduct TDS @ 5% on payment made to professionals or contractors. Such provision shall apply only if aggregate payment during a year exceeds INR 50 Lacs. For the purpose of ease, TDS can be deducted by deductor based on his PAN and he will not be required to apply for TAN.

(Effective date of applicability of Section 194M: 01.09.2019)

2. For the purpose of deduction of TDS under section 194-IA (TDS on transfer of Immovable Property), consideration for immovable property (on which TDS is required to deduct) shall include following considerations also:

• Club membership fee,
• car parking fee,
• electricity and water facility fees,
• maintenance fee,
• advance fee or any other charges of similar nature

(Effective date of applicability of amendment: 01.09.2019)

3. To discourage transactions in cash, Finance Bill, 2019 has proposed to insert new section 194N requiring banks to deduct TDS @ 2%, if any account holder withdraws cash of more than INR 1 Crores during the year.

(Section 194N shall become effective from 1^st September, 2019)

4. Income accrue or arise in India shall include any gift, in form of cash or transfer of immovable property, given by a resident person to Non-resident/persons outside India on or after 5^th July, 2019. Accordingly, such income shall be taxable in hand of recipient.

5. Following persons shall be mandatorily required to file their income tax return, irrespective of their taxable income:

• Deposit in current account of more than INR 1 Crores during the year
• Expenditure of more than INR 2 Lacs for foreign travels during the year
• Expenditure of more than INR 1 Lacs for electricity consumption
• Other conditions as may be prescribed.

6. PAN Related Amendment

1. If a person intends to enter into certain transactions for which reporting of PAN is mandatory and he has not yet allotted PAN then he shall apply for PAN mandatorily.
2. Aadhar Number can be quoted where a person is legally required to quote PAN.
3. Aadhar Number shall be required to be linked with PAN on mandatory basis. In case of failure, PAN shall be considered as non-operative.
4. Person receiving information is legally assigned with responsibility of verifying correctness and authenticity of PAN or Aadhar quoted.

7. Initiatives to promote e-banking:

1. Existing provisions of income tax permits few modes of electronic payment which are account payee cheque, an account payee bank draft, electronic clearing system through a bank account. However, Finance Bill, 2019 proposed that electronic payment shall include other prescribed electronic modes of payment.
2. A new section 269SU has been inserted which requires every person carrying on business and having gross receipts/total sales of more than INR 50 crores during preceeding Financial year that he should provide facility of receiving payment through prescribed electronic mode.
3. No bank charges shall be levied on using prescribed electronic modes of payments.

8. Other Important budget updates

1. A new section 80EEB has been inserted which provides for deduction of interest upto INR 1.50 Lacs on loan taken for purchase of electric vehicle.
2. Section 80EEA has been inserted which provides for deduction of interest paid on loan taken for purchase of residential house property upto INR 1.50 lacs subject to following conditions:
   • Loan must be sanctioned by a financial institution during FY 2019-20
   • Stamp duty value of property should be less then INR 45 Lacs.
   • Assessee must not hold any residential house property on date of sanction of loan
3. Section 10 of Income Tax Act, 1961 presently exempted 40% of receipts from National Pension System (NSP) on closure of account or opting out of pension scheme. Finance Bill, 2019 has proposed to increase such exemption limit to 60%.
4. With the purpose of improving digitalization and reducing manual efforts, following processes are proposed to make online:
   • Application for lower or NIL Withholding tax certificate on payment to non-resident.
   • Filing of TDS return in respect of payment of interest to residents where no TDS has been deducted.
5. Applicability of provisions of section 115QA extended to listed companies also. Section 115QA provides for levy of additional tax @ 20% on income distributed to shareholders through buy-back of shares. Presently, such section applies to unlisted companies only.
6. As per section 201 read with Section 40(a) of Income Tax Act, 1961, if payer fails to deduct TDS on any payment made to residents on which he is required to deduct TDS and payee declares such income in his return and discharge his corresponding tax liability then deduction of such expenditure shall be allowed to payer. Earlier, such benefit was available only on payments made to residents. Finance Bill, 2019 has proposed to extend such benefit to non-residents also.