A Usual Budget in Unusual Times
BY CA FARHAT MIYAN
The Union Budget 2021-22 was presented amidst challenging times.
The unprecedented Covid-19 pandemic coupled with slow down in
economy and ongoing tensions at borders made this financial year, as
per Mrs. Sitharaman's words, sui generis.
This year's budgetary allocation explicitly reiterated government's obsession with structural reforms along with its policy its of ‘Minimum Government Maximum Governance’ while also reflecting its electoral ambitions in upcoming state assembly elections. Budget sought to give a boost to infrastructure by creating institutional structures, asset monetisation and overall increase in capital spending by the government. There were a slew of reforms in banking, insurance and financial sectors. Initiatives like easing of stressed assets from public sectors banks, increasing permissible FDI limit in insurance sector from 49% to 74% as well as consolidation of statutes relating to capital markets into a rationalised single ‘Securities Market Code’ were an augmentation in existing array of reforms.
Expediting its strategic disinvestment policy, government proposed privatisation of 2 public
sector banks and a general insurance company and planned to carry out disinvestment of
almost all Central Public Sector Undertakings (CPSEs) in a structured manner while
maintaining only bare minimum CPSEs in 4 strategic sectors. While such privatisation
initiatives increase efficiency and improve quality of goods/services, there is always a risk of
private firms colluding and attaining market power for their benefit. Hence government will
now have to be more vigilant with stringent anti-trust regulations. An IPO of LIC during year
2021-22 was also proposed in same light.
With regard to taxation, a slew of subtle changes and reforms were proposed in both direct
and indirect tax laws. The biggest relief though, was no imposition of additional tax or cess
despite a major blow to government revenues during the first half of financial year owing to
the pandemic. The government instead sought to finance its expenditures via borrowings and
disinvestment. Whilst no changes in income tax slabs or deductions have been proposed,
steps have been taken towards easing of tax compliances on senior citizens(above 75 years of
age), comprehensive pre-filing of income tax returns and enhancing transparency by making
Income Tax Appellate Tribunal(ITAT) faceless. To incentivise digital transactions and
reduce compliance burden, tax audit exemption limit has been increased to Rs. 10 crore for
those businesses which carry out 95% of their transactions digitally. The time limit reopening
of assessment has been been reduced to 3 yeas (In case of serious tax evasion cases with
evidence of concealment of income of Rs. 50 lakh or more in a year, time limit of reopening
of assessment is still 10 years). Likewise relief has been provided to charitable trusts running
educational institutions & hospitals by raising blanket tax exemption limit to Rs. 5 crore.
Exemption pertaining to repayment of interest housing loan taken with regard to purchase of
affordable house has also been extended to one year along with extension of various
incentives to start-ups.
In GST Law, a major change has been the removal of mandatory requirement of getting
annual accounts audited and reconciliation statement submitted by specified professional.
Now such statement can be filed without certification. Mrs. Sitharaman appraised the several
measures taken by government to simplify GST law. However serious challenges remain to
be resolved under GST regime in order to enable seamless flow of credit to businesses while
at the same time curbing upon fake invoices and credits.
This budget like all previous budgets, is not a panacea of all problems. It aims to strengthen
economy structurally while at the same time does little for resolving immediate
unemployment crises and increasing private consumption. Overall budget may be viewed as
an attempt to achieve higher growth rates in upcoming years and overcoming the slump by
caused Covid Pandemic.