Review of Fiscal Developments02CHAPTER

2.1 The firm footing afforded by theGovernment to unleash tax reforms in thecurrent year could be perused from the Charts

Sound public financial management has been one of the pillars of India’s macro-economic stability in the last three years. Based on this firm footing, the Government, in partnership with the States, ushered in the long-awaited GST era. The GST was unveiled after comprehensive preparations, calculations and multi-stage consultations, yet the sheer magnitude of change meant that it needed to be carefully managed. The Government is navigating the change and challenges, including the possibility that a substantial portion of the last-month GST collections may spill over to the next year. Meanwhile, direct tax collections are expected to meet targets. And spending plans are broadly on track.

below. Most fiscal indicators-revenue buoyancy,expenditure quality, devolution and deficits-improved discernibly in the last three years. A

Figure 1 (a to c) : Fiscal indicators as percentage of GDP

Source: Controller General of Accounts (CGA), Government of IndiaNote: GTR=gross tax revenue; RE=revenue expenditure; CE=capital expenditure; DEV=tax devolution to States; IP=interest payments; Sub=subsidies; RD=revenue deficit; FD=fiscal deficit; PD=primary deficit; PA=provisional actuals; BE=budget estimates

detailed discussion of the trends in receipts,expenditureanddevolutionbytheCentreandthefinancial position of the General GovernmenttillBE2017-18was presented in theVolume 2of the Economic Survey 2016-17 and henceis largely avoided in the ensuing sections. Thetrends discussed here relate largely to the firsteight months of the current financial year.

10.1

11.3

12.2

10.9

1.71.8

2.8

4.0

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

6.0

7.0

8.0

9.0

10.0

11.0

12.0

13.0

2013-14 2014-15 2015-16 2016-17 PA 2017-18 BE

GTR RE CE (RHS) DEV (RHS)

1.0

1.5

2.0

2.5

3.0

3.5

2013-14 2014-15 2015-16 2016-17 PA 2017-18 BE

IP Sub

0.00.51.01.52.02.53.03.54.04.55.0

2013-14 2014-15 2015-16 2016-17 PA 2017-18 BE

RD FD PD

RECEIPTS AND EXPENDITURE OF THE CENTRAL GOVERNMENT

A. Receipts

2.2 ThedataonCentralGovernmentfinancesare available till November 2017 from theController General of Accounts (CGA). Thereare three distinct patterns on the revenue fronttill November 2017 (Table 1), the confluenceof which is reflected in the trends in non-debtreceipts of the Centre. First, the gross taxcollections are reasonably on track. Second, thenon-tax revenues have visibly under-performed.Third,non-debtcapitalreceipts,mainlyproceedsfromdisinvestment,aredoingwell.Asagainstlastyear’s achievement of Rs. 46,247 crore realizedfrom16transactionsof disinvestment,thebudgetestimatefor2017-18wassetatRs.72,500crore,

takenfor investmentmanagement inCPSEsareatAppendix1.

2.3 The trends indicated in Table 1 areconfirmedinTable2.Thedifferencebetweenthegross tax revenueandnet tax revenue ismainlythe tax devolution to the States. The share of Statesintaxesgrewby25.2percentduringApril-November 2017, much higher than the growthin net tax revenue (to centre), which is whattheCentrehas at its disposal to spend from itsown taxes.Disinvestmentproceeds andnon-taxrevenueshaveshowncontrastinggrowthpatterns,theformerreinforcing therevenuepositionandthelatterdampeningit.

2.4 Thegrowthindirecttaxcollectionsof theCentrekeptpacewiththepreviousyear(Figure3).

split into Rs. 46,500 crore from disinvestmentof Central Public Sector Enterprises (CPSEs), Rs. 15,000 crore from strategic disinvestmentand Rs. 11,000 crore from listing of insurancecompanies. An amount of about Rs. 52,378.2crore has been realized duringApril-November2017, that includes Rs.30,867.0 crore throughminority stake sale inCPSEs,Rs.4,153.6 crorethrough disinvestment of strategic holdings inSUUTIandRs.17,357.5crorethroughlistingof insurance companies. This realization generatesoptimism regarding disinvestment proceeds vis-à-vis the ambitious budgetary targets.Measures

2015-16 2016-17 2017-18 2015-16 2016-17 2017-18

(Rs. in lakh crore) Per cent of BE (for full year)

Grosstaxrevenue 7.68 9.33 10.87 53.0 57.2 56.9

Nettaxrevenue(tocentre) 4.65 6.21 6.99 50.5 58.9 57.0

Non-taxrevenue 1.73 1.75 1.05 78.1 54.2 36.5

Revenuereceipts 6.38 7.96 8.05 55.9 57.8 53.1

Non-debtcapitalreceipts 0.21 0.33 0.62 25.8 48.5 73.3

Nondebtreceipts 6.59 8.29 8.67 53.9 57.4 54.2

Table 1 : Central Government’s Receipts during April-November

Source: CGA, Government of India

Considering that more than half of the directtax collections are normally realized during thelast four months of the financial year (Figure2), the budget targets for the current year arestillnotoutof sight(Figure3).Theindirecttaxcollectionsintheprevioustwoyearswerebuoyedbymobilization of additional resources (ARM),prudently apportioning the petroleum priceadvantage into pass-through to the consumersand raising of development funds. ConsideringthattherearenosignificantARMmeasuresinthecurrentyear,thepaceof growthinindirecttaxes

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30 |EconomicSurvey2017-18Volume2

duringthefirsteightmonthsiscomforting.Thebudgeted growth for indirect taxes for the fullyearof 2017-18isonly7.6percent;thegrowthso far is 18.3 per cent. The eventual outcomein indirect taxesduring thisyearwilldependonthe final settlement of GST accounts betweentheCentreandtheStatesandthelikelihoodthatonlytaxesforelevenmonths(excludingIGSTonimports)willberealized.

Table 2 : Growth in Items of Receipts (per cent)

2014-15 2015-16 2016-17 2017-18

April-November

GrossTaxRevenue 6.5 20.8 21.5 16.5

Nettaxrevenue 4.3 12.5 33.6 12.6

Non-taxrevenue 20.5 34.9 1.0 -39.7

Totalrevenuereceipts 7.8 17.8 24.8 1.1

Non-debtcapitalreceipts -17.3 180.3 57.1 89.9

Nondebtreceipts 7.3 20 25.8 4.6

Source: CGA, Government of India

Source: CGA, Government of India* Note: Direct taxes discussed here include only personal income tax and corporate income taxes

Figure 3 : Growth in Central taxes (per cent)

Figure 2 : Monthly share in collection of direct taxes* (in per cent): average 2014-15 to 2016-17

Source: CGA, Government of India* Note: Direct taxes discussed here include only personal income tax and corporate income taxes

2.6 2.5

9.0

4.3 4.1

17.8

4.83.5

17.1

3.7 4.6

25.8

0.0

5.0

10.0

15.0

20.0

25.0

30.0

0

5

10

15

20

25

30

Direct taxes* Indirect taxes

2016-17 (April Nov) 2017-18 (April Nov) 2017-18 BE (full year)

Reviewof FiscalDevelopments| 31

B. Expenditure and Deficits

2.5 Central Government expenditureprogressed at a robust pace during April-November 2017 (Tables 3 & 4). One of themajorfiscal reforms in thecurrentyearwas theadvancingof thebudgetcycleandprocessesbyalmost amonth. This gave considerable leewaytothespendingagenciestoplaninadvanceandstartimplementationearlyinthefinancialyear.Inthissense, theexpenditure trends in thecurrentyear at any midpoint—both as percentage of budget estimates and in terms of their growthrates—become not comparable with those of previousyears(Tables3&4).Thishasalsopartlycontributedtogreaterdeficitsinthecurrentyearsofar,comparedtocorrespondingperiodsinthe

previousyears(Table5).

2.6 Thetrendsinfiscalandrevenuedeficits,seenintable5,arethecombinedeffectof thepatternsinnon-debtreceipts(shownintable1and2)andexpenditure. Apart from the early progressionof expenditure, the fiscal deficit overshootingthe budgetary target during April-November2017 has also been due to the front-loading of someexpenditure,undertakenaspartof prudentexpendituremanagement.Notwithstanding this,what table5 suggests is that therewaspressureonbothrevenueandfiscaldeficitsduringthefirsteightmonthsof thecurrentyearandthatmarkedefforts will be required to meet the budgetedtargetsforthefullyear.

Table 3 : Central Government’s Expenditure during April-November

2015-16 2016-17 2017-18 2015-16 2016-17 2017-18

(Rs. in lakh crore) Per cent of BE

TotalExpenditure 11.42 12.87 14.79 64.3 65.0 68.9

RevenueExpenditure 9.83 11.44 12.95 64.0 66.1 70.5

CapitalExpenditure 1.59 1.42 1.84 65.8 57.7 59.5

Source: CGA, Government of India

Table 4 : Growth in Items of Expenditure (per cent)

2014-15 2015-16 2016-17 2017-18

April-November

Totalexpenditure 5.2 6.3 12.6 14.9

Revenueexpenditure 6.4 3.2 16.4 13.1

Capitalexpenditure -3.2 30.8 -10.4 29.3

Source: CGA, Government of India

Table 5 : Central Government’s Deficit Indicators during April-November

2015-16 2016-17 2017-18 2015-16 2016-17 2017-18

(Rs. in lakh crore) Per cent of BE

RevenueDeficit 3.45 3.48 4.90 87.5 98.6 152.2

FiscalDeficit 4.84 4.58 6.12 87.0 85.8 112.0

Source: CGA, Government of India

32 |EconomicSurvey2017-18Volume2

2.7 Movementsinrevenueexpenditurecanbemajorlyexplainedbychangesininterestpaymentliabilitiesandsubsidypayments(Table6).Interestpayment liabilities have firmed up moderatelyduring April-November 2017, possibly dueto outgo on account of servicing the marketstabilization bonds issued to reduce excessliquidity, post demonetization.With the loss of price advantage in petroleum products in theinternationalmarket, the petroleum subsidy hasfirmed up. On the whole subsidies seem to be

Table 6 : Some Major Components of Revenue Expenditure

  2015-16 2016-17 2017-18 2015-16 2016-17 2017-18

  April-November (per cent of BE) April-November (percentage growth)

Interestpayment 55.4 54.1 59.2 8.6 5.6 16.2

Foodsubsidy 81.4 91.3 93.1 11.1 21.6 9.9

Fertilizersubsidy 85.4 79.7 70.5 7.6 -10.5 -11.5

Petroleumsubsidy 82.6 65.2 85.7 -46.6 -23.8 13.3

Majorsubsidies 82.9 85.3 85.7 -3.6 5.0 4.2

Salariesandpensions 52.9 52.5 61.6 3.2 28.5 22.5

Source: CGA, Government of India

withincontrolandtarget.Theoutgoonpensionsgrew strongly during the first eight monthsreflectingenhancedpaymentsundertheSeventhPayCommission.

STATE AND GENERAL GOVERNMENT

2.8 Figure 4 and table 7 show that Statestargeted toconsolidate in thecurrentyear, aftertheUDAY-ledaberration in theirfiscalbalancesfor the previous two years. UDAY bonds hadan impact of 0.5 and 0.6 percentage pointsof GDPon the deficits of the 26 States underconsiderationin2015-16and2016-17respectively.

2.9 The position of 21 State Governmentsthat account for about 86 per cent of the

total GSDP of all states and for whichcomparable data are available shows thattheir revenue receipts have kept pace withthe previous year in terms of growth and inrelationtothecorrespondingbudgetestimatesfor the full year (Figure 5). Further, data on23 States shows that both revenue and fiscaldeficits as percentage of the correspondingbudget estimates (Figure 6) is lower in thecurrent year, compared to the previous year.

2.10 The net market borrowings by the StateGovernments,asreportedbytheReserveBankof India (RBI), duringApril-December of thecurrent andprevious years stood atRs. 2493.0billionandRs.2351.6billionrespectively.AspertheRBI (PressRelease dated January 5, 2018),thequantumof totalmarketborrowingsbythe

Figure 4 : Fiscal deficits of States (*) as per cent of GDP

Source: Reserve Bank of India* Note: Data relating to deficit pertain to only 26 States: RE=Revised Estimate; BE=Budget Estimate

1.0

1.5

2.0

2.5

3.0

2015-16 2016-17 (RE) 2017-18 (BE)

Gross Fiscal Deficit of States

Reviewof FiscalDevelopments| 33

StateGovernmentsandtheUnionTerritoryof Puducherry for the fourth quarter is expectedto be in the range of Rs. 1,26,2.0 billion toRs. 1,38,2.0 billion. This, combined with theadvanceestimatesof GDPfor2017-18,meansthatalltheStatestakentogetherwouldpossiblybe able to meet their targeted level of fiscaldeficit(Figure4),if theborrowingplanforthefourth quarter is adhered to and if no othersignificant means of financing is resorted to.

2.11 Coupled with the Central Government’stargetforreducingfiscaldeficitby0.3percentagepointsof GDP,theStatefiscaltargetsfor2017-18(Figure4)meantthattheGeneralGovernmenttargeted to achieve an overall improvement intheirfiscalposition in thecurrent year,boostedby a compression in revenue expenditure anda modest improvement in capital expenditure(Figure7andTable8).

Table 7 : Receipts and Disbursements of State Governments (as percent of GDP)

Item 2015-16 2016-17 (RE) 2017-18 (BE)

TaxReceipts 8.3 8.6 8.9

States’OwnTaxRevenue 5.3 5.5 5.6

NonTaxReceipts 2.9 3.7 3.7

TotalDisbursements 14.3 15.9 16.0

Revenue 11.3 12.6 12.5

Capital(*) 3.0 3.3 3.5

Source: Reserve Bank of India and Union Budget 2017-18

Note: RE : Revised Estimates BE : Budget Estimates; Data are provisional and pertain to budgets of 26 states; (*) Capital disbursements are exclusive of public accounts, but inclusive of loans and advances.

Figure 5 : Revenue receipts of States during April-November

Figure 6 : Deficit of States during April November as % of BE

Source: CAG

Note: Information pertains to 21 States.

Source: CAG

Note: Information pertains to 23 States.

0.0

10.0

20.0

30.0

40.0

50.0

60.0

Growth (per cent) As per cent of BE

2016-17 2017-18

0.0

50.0

100.0

150.0

200.0

250.0

Fiscal Deficit Revenue Deficit

2016-17 2017-18

34 |EconomicSurvey2017-18Volume2

Figure 7 : Gross Fiscal Deficit of the general government (*) as per cent of GDP

Source: Reserve Bank of India;

* Note: Data relating to deficit pertain to only 26 States: RE=Revised Estimate; BE=Budget Estimate

Table 8 : Combined receipts and disbursements of Central and State Governments (per cent of GDP)

Item 2015-16 2016-17 (RE) 2017-18 (BE)

Totalnon-debtreceipts 18.3 20.5 20.6

TaxRevenue 15.2 15.9 16.1

NonTaxRevenue 2.7 4.3 3.8

NondebtCapitalreceipts 0.4 0.4 0.7

TotalDisbursements 24.7 26.9 26.1

Revenue 20.5 22.5 21.7

Capital(*) 4.2 4.4 4.3

Source: Reserve Bank of India and Union Budget 2017-18

Note: RE : Revised Estimates BE : Budget Estimates; Data are provisional and pertain to budgets of 26 states; (*) Capital disbursements are exclusive of public accounts, but inclusive of loans and advances.

2.12 For the general government as a whole,withtheexpectedrevenuesfromGSTbecomingincreasingly clearer, the fiscal balance vis-à-visbudget estimates will depend on the emergingpatterns of revenue expenditure in the fourthquarter.Consideringthecomplexitiesinvolvedinrollingout theGST, thepreliminary assessmentshould be that the general government isnavigating the initial phasesof thismomentouschange reasonably. The difficulties faced byvarioussectionsof taxpayersarebeingaddressedthrough various rationalisation measures,includingsubstantiverevisionintaxrates,whicharediscussedinAnnexure1.

4.8

5.0

5.2

5.4

5.6

5.8

6.0

6.2

6.4

6.6

2015-16 2016-17 RE 2017-18 BE

Reviewof FiscalDevelopments| 35

ANNEXURE 1*

1. SALIENT MEASURES UNDER INDIRECT TAXES DURING 2017-18A. Customs duty changes to incentivize ‘Make in India’

• BasicCustomsDutywasreducedoninputsandrawmaterialslikeliquefiednaturalgas,o-Xylene,vegetabletanningextracts,nickel,mediumquality terephthalic acidandqualified terephthalic acid,hot rolledcoils foruse incertainmanufacturingprocesses,VinylPolyethyleneGlycolformanufactureof PolyCarboxylateEther,inputsorrawmaterialsformanufactureof specifiedprinters,inkcartridges,inkspraynozzle,cellularmobilephonesandbasestations,solartemperedglass for themanufactureof solar cells/panels/modules, resinandcatalyst for specifiedmanufacturingprocesses,allpartsformanufactureof LEDlightsorfixturesincludingLEDlamps,etc.

• BasicCustomsDutywasincreasedonspecifiedgoodsmanufacturedindigenouslyinsignificantquantity,including:ad-valoremComponenton298itemsof fabricsonmanmadefibres,co-polymercoatedMSsteeltape/stainlesssteeltapeformanufactureof specifiedtelecommunicationgradeopticalfibrecables,specifiedprinters,inkcartridges,inkspraynozzle,cellularmobilephonesandtheirspecifiedparts,basestations,microwaveovens,televisions,LEDlamps,specifiedlampsandlightingfittings,videorecordingorreproducingapparatus,electricitymeters,televisioncameras,digitalcamerasandvideocamerarecorders,LCD,LEDorOLEDpanelsformanufactureof television,ROmembraneelementforhouseholdtypefilters,cashewnut,etc.

• ExportDutyof 15%wasimposedonotheraluminiumores,includinglaterite.

• BasicCustomsDutywasincreasedoncrudeandrefinedpalmoilof ediblegrade,crudesunfloweroil,refinedsunfloweroilof ediblegrade,crudeandrefinedsoyabeanoil,crudeandrefinedrapeseedoilincludingcanolaoil,mustardoilandcolzaoiltoprotecttheinterestof farmersandlocalproducersof agriculturalproduct.

B. Rollout of GST

Inahistorictaxreform,thegoodsandservicestaxwasrolledouton1stJuly,2017,subsumingalmostallmajorindirecttaxeslikeCentralExciseDuty,ServiceTax,VAT,CST,entertainmenttax,Octroi,luxurytax,alargenumberof cesses/surchargesandvariousotherstateandcentralleviesongoodsandservices.

a. Addressing concerns under GST

Theconcernsraisedbythestakeholdersrelatedtobusinessprocesses(likemigration,registration,returnfilingandrefundsontheportal),GSTrates,difficultiesfacedbyMSMEsectorincomplianceandcashflowissuesof exportersonaccountof delaysinrefunds.TheGSTCouncilhadseveralmeetingsandtookspecificmeasurestoaddressconcernsexpeditiously.ToaddresstheITissues,aGOM(Groupof Ministers)wasconstitutedwhichhastakenanumberof measures.AnotherGOMlookedintotheissuesof MSMEs.ACommitteeonexportswasconstitutedtoaddresstheconcernsof exporters.TheGSTCouncilalsorecommendedsignificantrationalizationinrates.Extensiveexerciseswereundertakenforstreamliningtaxadministration,ensuringthattaxpayerhassingleinterface(witheitherCentralorStatetaxauthority).Committeesof officersexamined issues relating to lawandprocessesandsectoral issues likehandicrafts.Anumberof proceduralchangeshavebeenmadetosimplifyprocesses.Extensiveeffortsweremadefortaxpayereducationandfacilitationbywayof knowledgesharing,disseminationof informationandrepliestofrequentlyaskedquestions.TheseeffortshavesmoothenedtheGSTimplementationandfurthereffortsatsimplificationareon.

b. Facilitation measures taken in GST

i. Ease of doing business for small traders

GSThassignificantlyraisedturnoverthresholdsof Rs20lakhforanentitytobetaxableinGST.ThresholdforcompositionwasincreasedingeneraltoRs.1crore(Rs75lakhforspecialcategorystatesexceptJammu&KashmirandUttarakhand).OthermeasuresforMSMEsectorinclude:

• ServiceproviderswhoseannualaggregateturnoverislessthanRs.20lacs(Rs.10lacsinspecialcategorystatesexceptJ&K)wereexemptedfromobtainingregistrationevenif theyaremakinginter-Statetaxablesuppliesof services.Thismeasurewillsignificantlyreducethecompliancecostof smallserviceproviders.

• SmallandmediumbusinesseswithannualaggregateturnoveruptoRs.1.5croreswouldberequiredtofilequarterlyreturn(monthlyforothertaxpayers)

*ThetaxmeasuresandratechangesgiveninthisAnnexureareonlymeantforgeneralreadersandwillnotserveasreferencepointsfortaxpayers.

36 |EconomicSurvey2017-18Volume2

• Thereversechargemechanismundersub-section(4)of section9of theCGSTAct,2017andundersub-section(4)of section5of theIGSTAct,2017hasbeensuspendedtill31.03.2018.

• TherequirementtopayGSTonadvancesreceivedwasprovingtobeburdensomeforsmalldealersandmanufacturers.Inordertomitigatetheirinconvenienceonthisaccount,itwasbeendecidedthattaxpayershavingannualaggregateturnoveruptoRs.1.5croresshallnotberequiredtopayGSTatthetimeof receiptof advancesonaccountof supplyof goods.

ii. Rationalization of GST rate structure for goods

Afterimplementationof GST,rateswererationalizedtoaddressconcernsof tradeandconsumers.ThemajordecisionstakenbytheGSTSCCouncilinitsmeetingon10thNovember,2017aregivenbelow.

28% to 18%: Thelistof 28%GSTratedgoodswasprunedsubstantiallyfrom228tariff headings[about18.5%of totaltariff headingsat4-digit]toonly50tariff headingsincluding4headingswhichwerepartiallyreducedto18%[about4%of totaltariff headingsat4-digit].Themajoritemswhosedutywasreducedare;wire,cables,insulatedconductors,electricalinsulators,electricalplugs,switches,sockets,fuses,relays,electricalconnectors;electricalboards,panels,consoles,cabinetsetcforelectriccontrolordistribution;particle/fibreboardsandplywood.Articleof wood,woodenframe,pavingblock;furniture,mattress,beddingandsimilarfurnishing;trunk,suitcase,vanitycases,brief cases,travellingbagsandotherhandbags,cases;detergents,washingandcleaningpreparations;liquidorcreamforwashingtheskin;shampoos;haircream,hairdyes(natural,herbalorsynthetic)andsimilarothergoods;hennapowderorpaste,notmixedwithanyotheringredient;pre-shave,shavingorafter-shavepreparations,personaldeodorants,bathpreparations,perfumery,cosmeticor toiletpreparations,roomdeodorisers;perfumesandtoiletwaters;beautyormake-uppreparations;fans,pumps,compressors;lampandlightfitting;primarycellandprimarybatteries;sanitarywareandpartsthereof of allkinds;articlesof plastic,floorcovering,baths,shower,sinks,washbasins,seats,sanitarywareof plastic;slabsof marblesandgranite;goodsof marbleandgranitesuchastiles;ceramictilesof allkinds;chocolates,chewinggum/bubblegum

18% to 12%: GSTrateswererationalisedtominimiseclassificationdisputes,onthefollowinggoods:Condensedmilk;refinedsugarandsugarcubes;pasta;currypaste,mayonnaiseandsaladdressings,mixedcondimentsandmixedseasoning;diabeticfood;medicinalgradeoxygen;printing ink;handbagsandshoppingbagsof juteandcotton;hats(knittedorcrocheted);partsof specifiedagricultural,horticultural,forestry,harvestingorthreshingmachinery;specifiedpartsof sewingmachine;spectaclesframes;furniturewhollymadeof bambooorcane

18% to 5%: Puffedricechikki,peanutchikki,sesamechikki,revdi,tilrevdi,khaza,kazuali,groundnutsweetsgatta,kuliya;flourof potatoesputupinunitcontainerbearingabrandname;chutneypowder;flyash;sulphurrecoveredinrefiningof crude;flyashaggregatewith90%ormoreflyashcontent

12% to 5%: Desiccatedcoconut;narrowwovenfabricincludingcottonnewar[withnorefundof unutilisedinputtaxcredit];idli,dosabatter;finishedleather,chamoisandcompositionleather;coircordageandropes,jutetwine,coirproducts;fishingnetandfishinghooks;wornclothing;flyashbrick

5% to nil: Guarmeal;hopcone(otherthangrounded,powderedorinpelletform);certaindriedvegetablessuchassweetpotatoes;unworkedcoconutshell;fishfrozenordried(notputupinunitcontainerbearingabrandname);khandsarisugar

Other significant rationalisation measures in GST rates: reductionof GSTrateondhoopbatti,dhoop,sambhraniandothersimilaritemsfrom12%to5%;reductionof GSTrateonKhadifabric,soldthroughKhadiandVillageIndustriesCommission’soutletsandother similar items from5%toNil; reductionof GSTrateonhandicrafts from28%to12%;reductionof GSTrateonsyntheticyarnsfrom18%to12%;reductionof GSTrateonplastic,glass,paperorrubberscrapfrom18%to5%;reductionof GSTrateonE-wastefrom18%to5%.

iii. Rationalization of GST rate structure for services

Reduction from 18% to 12%:

• Compositesupplyof workscontractservices:

(a)suppliedtotheCentralGovernment,StateGovernment,Unionterritory,alocalauthority,aGovernmentalAuthorityoraGovernmentEntitybywayof construction,erection,commissioning,installation,completion,fittingout,repair,maintenance, renovation, or alteration of; (b) a historical monument, archaeological site or remains of nationalimportance,archaeologicalexcavation,orantiquityspecifiedundertheAncientMonumentsandArchaeologicalSitesandRemainsAct,1958(24of 1958);(c)canal,damorotherirrigationworks;(d)pipeline,conduitorplantfor(i)watersupply(ii)watertreatment,or(iii)seweragetreatmentordisposal;(e)acivilstructureoranyotheroriginalworksmeantpredominantlyforuseotherthanforcommerce,industry,oranyotherbusinessorprofession;(f)astructure

Reviewof FiscalDevelopments| 37

meantpredominantlyforuseasaneducational,clinical,orartorculturalestablishment;(g)involvingpredominantlyearthwork(thatis,constitutingmorethan75percentof thevalueof theworkscontract)

Suppliedbywayof construction,erection,commissioning,installation,completion,fittingout,repair,maintenance,renovation,oralterationof:(a)aroad,bridge,tunnel,orterminalforroadtransportationforusebygeneralpublic;(b)apollutioncontroloreffluenttreatmentplant,exceptlocatedasapartof afactory;or(c)astructuremeantforfuneral,burialorcremationof deceased

Suppliedbywayof construction,erection,commissioning,orinstallationof originalworkspertainingto:(a)railways,excludingmonorailandmetro;(b)post-harveststorageinfrastructureforagriculturalproduceincludingacoldstorageforsuchpurposes;(c)mechanisedfoodgrainhandlingsystem,machineryorequipmentforunitsprocessingagriculturalproduceasfoodstuff excludingalcoholicbeverages.

Associatedservices,inrespectof offshoreworkscontractrelatingtooilandgasexplorationandproduction(E&P)intheoffshoreareabeyond12nauticalmilesfromthenearestpointof theappropriatebaseline.

• Servicesbywayof jobworkinrelationtomanufactureof umbrella;printingof allgoodsfallingunderChapter48or49,whichattractCGST@6%

• Transportof passengersbyanymotorvehicledesignedtocarrypassengerswherethecostof fuelisincludedintheconsiderationchargedfromtheservicerecipient.

• Rentingof anymotorvehicledesignedtocarrypassengerswherethecostof fuelis includedintheconsiderationchargedfromtheservicerecipient.

• Transportationof naturalgasthroughpipeline.

• Servicesbygoods transportagency(GTA) inrelationto transportationof goods[thoseGTAsoptingforforwardcharge].

Reduction from effective rate of 12% to 8%

• Composite supply of works contract services involving transfer of property in land or undivided share of land

Suppliedbywayof construction,erection,commissioning,installation,completion,fittingout,repair,maintenance,renovation,oralterationof:(a)acivilstructureoranyotheroriginalworkspertainingtoaschemeunderJawaharlalNehruNational Urban RenewalMission or Rajiv AwaasYojana; (b) a civil structure or any other original workspertainingtothe“In-siturehabilitationof existingslumdwellersusinglandasaresourcethroughprivateparticipation”undertheHousingforAll (Urban)Mission/PradhanMantriAwasYojana,onlyforexistingslumdwellers; (c)acivilstructureoranyotheroriginalworkspertainingtothe“Beneficiaryledindividualhouseconstruction/enhancement”undertheHousingforAll(Urban)Mission/PradhanMantriAwasYojana;

Suppliedbywayof construction,erection,commissioning,orinstallationof originalworkspertainingto:(a)asingleresidentialunitotherwisethanasapartof aresidentialcomplex;(b)low-costhousesuptoacarpetareaof 60squaremetresperhouseinahousingprojectapprovedbycompetentauthorityempoweredunderthe'Schemeof AffordableHousinginPartnership'framedbytheMinistryof HousingandUrbanPovertyAlleviation,Governmentof India;(c)lowcosthousesuptoacarpetareaof 60squaremetresperhouseinahousingprojectapprovedbythecompetentauthorityunder-(1)the“AffordableHousinginPartnership”componentof theHousingforAll(Urban)Mission/PradhanMantriAwasYojana;(2)anyhousingschemeof aStateGovernment;

TotheCentralGovernment,StateGovernment,UnionTerritory,alocalauthority,aGovernmentalAuthorityoraGovernmentEntity byway of construction, erection, commissioning, installation, completion, fitting out, repair,maintenance,renovation,oralterationof residentialcomplexpredominantlymeantforself-useortheuseof theiremployeesorotherpersonsspecifiedinparagraph3of theScheduleIIIof theCentralGoodsandServicesTaxAct,2017.

Reduction from 18% to 5%

• Onservicesbywayof jobworkinrelationto:textilesandtextileproductsfallingunderChapter50to63intheFirstScheduletotheCTA;allproductsfallingunderChapter71intheFirstScheduletotheCTA;printingof allgoodsfallingunderChapter48or49,whichattractCGST@2.5%orNil;allfoodandfoodproductsfallingunderChapters1to22intheFirstScheduletotheCTA;allproductsfallingunderChapter23intheFirstScheduletotheCTA,exceptdogandcatfoodputupforretailsalefallingundertariff item23091000of thesaidChapter;manufactureof claybricksfallingundertariff item69010010intheFirstScheduletotheCTA;manufactureof handicraftgoods

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• Reduction from 18% with ITC to 5% without ITC: supplyof servicesbyarestaurantnotlocatedinthepremisesof ahotelhavingunitof accommodationwithdeclaredtariff aboveRs7500;transportationof naturalgasthroughpipeline.

ITC in the same line of business was allowed to: transport of passengers by anymotor vehicle designed to carrypassengerswherethecostof fuelisincludedintheconsiderationchargedfromtheservicerecipient;rentingof anymotorvehicledesignedtocarrypassengerswherethecostof fuelisincludedintheconsiderationchargedfromtheservicerecipient.

Other rationalization of GST Rates: GSTrateonLeasingof motorvehiclespurchasedandleasedpriorto1stJuly2017reducedto65percent.of therateof centraltaxasapplicableonsupplyof likegoodsinvolvingtransferof titleingoods.

Exemption from levy of GST

• ServicesprovidedbyandtoFédérationInternationaledeFootballAssociation(FIFA)anditssubsidiariesdirectlyorindirectlyrelatedtoanyof theeventsunderFIFAU-17WorldCup2017tobehostedinIndia.

• Supplyof servicesassociatedwithtransitcargotoNepalandBhutan(landlockedcountries).

• Supplyof servicebyaGovernmentEntitytoCentralGovernment,StateGovernment,Unionterritory,localauthorityor any person specified by Central Government, State Government, Union territory or local authority againstconsiderationreceivedfromCentralGovernment,StateGovernment,Unionterritoryorlocalauthority,intheformof grants.

• ServiceprovidedbyFairPriceShopstoCentralGovernment,StateGovernmentorUnionterritorybywayof saleof foodgrains,kerosene,sugar,edibleoil,etc.underPublicDistributionSystemagainstconsiderationintheformof commissionormargin.

• Servicesprovidedbyagoodstransportagencytoanunregisteredperson, includinganunregisteredcasual taxableperson,otherthanthefollowingrecipients,namely:anyfactoryregisteredunderorgovernedbytheFactoriesAct,1948(63of 1948);oranySocietyregisteredundertheSocietiesRegistrationAct,1860(21of 1860)orunderanyotherlawforthetimebeinginforceinanypartof India;oranyCo-operativeSocietyestablishedbyorunderanylawforthetimebeinginforce;oranybodycorporateestablished,byorunderanylawforthetimebeinginforce;oranypartnershipfirmwhetherregisteredornotunderanylawincludingassociationof persons;anycasualtaxablepersonregisteredundertheCentralGoodsandServicesTaxActortheIntegratedGoodsandServicesTaxActortheStateGoodsandServicesTaxActortheUnionTerritoryGoodsandServicesTaxAct.

• Servicebywayof accesstoaroadorabridgeonpaymentof annuity.

• Servicesbywayof admissiontoaprotectedmonumentsodeclaredundertheAncientMonumentsandArchaeologicalSitesandRemainsAct1958(24of 1958)oranyof theStateActs,forthetimebeinginforce.

• Servicesbywayof righttoadmissiontotheeventsorganisedunderFIFAU-17WorldCup2017.

25th Meeting of the GST Council heldon18thJanuary2018recommendedmanyrelief measuresregardingGSTratesongoodsandservicesandcertainclarificationsonissuesrelatingtoGSTratesandtaxabilityof certaingoodsandservices.

Someof theimportantchangesintherateof goodsrecommendedbytheCouncilinclude:

• From28%to18%onbusesexclusivelyrunonbiofuels.

• From18%to12%on,dripirrigationsystemincludinglaterals(HSCode8424),sprinklers(HSCode8424),mechanicalsprayer(HSCode8424),12specifiedbio-pesticides(HSCode3808),bamboowoodbuildingjoinery(HSCode4418),fertilizergradephosphoricacid(HSCode2809),bio-diesel,drinkingwaterpackedin20littersbottles,(HSCode2201)

• From3%to0.25%ondiamondsandpreciousstone.Roughdiamondsandpreciousstonesarealreadyat0.25%.

• From28%GSTplusapplicablecessto12%onusedmotorvehicles[otherthanmediumandlargecarsandSUVs]onthemarginof thesupplierof suchvehicles,subjecttoconditionthatnoinputtaxcreditof centralexciseduty/ValueAddedTaxorGSTpaidonthemhasbeenavailed.

• From28%GSTplusapplicablecessto18%onusedmediumandlargecarsandSUVsonthemarginof thesupplierof suchvehicles,subjecttoconditionthatnoinputtaxcreditof centralexciseduty/ValueAddedTaxorGSTpaidonthemhasbeenavailed.

• From12%to5%withnorefundof unutilisedinputtaxcreditonvelvetfabrics(HSCode58013720)

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Someof theimportantchangesrecommendedontherateof servicesinclude;

• Reduce GST rate on construction of metro and monorail projects (construction, erection, commissioning orinstallationof originalworks)from18percentto12percent.

• ReduceGSTrateontransportationof petroleumcrudeandpetroleumproducts(MS,HSD,ATF)from18percentto5percentwithoutITCand12percentwithITC.

• Exemptreinsuranceservicesinrespectof insuranceschemesexemptedunderS.Nos.35and36of notificationNo.12/2017-CT(Rate).[It isexpectedthatthepremiumamountchargedfromthegovernment/insuredinrespectof futureinsuranceservicesisreduced.]

• ReduceGSTto12percentinrespectof miningorexplorationservicesof petroleumcrudeandnaturalgasandfordrillingservicesinrespectof thesaidgoods.

• Extendtheconcessionalrateof GSTonhousesconstructed/acquiredundertheCreditLinkedSubsidySchemeforEconomicallyWeakerSection/LowerIncomeGroup/MiddleIncomeGroup-1/MiddleIncomeGroup-2undertheHousingforAll(Urban)Mission/PradhanMantriAwasYojana(Urban)andlow-costhousesuptoacarpetareaof 60squaremetresperhouseinahousingprojectwhichhasbeengiveninfrastructurestatusunderthesameconcessionalrate.

2. SALIENT MEASURES TAKEN ON DIRECT TAXES IN THE BUDGET 2017-18 AND THEREAFTER

• Loweringof taxrateondomesticcompanieswithturnoverorgrossreceiptslessthanorequaltoRs.50CroreinFY2015-16to25percentfrom30percent.

• Loweringof taxrateonindividualsbetweenincomeof Rs.2.5lakhsandRs.5lakhsto5percentfrom10percent.

• Levyingof surchargeat10percentonindividualswithincomebetweenRs.50lakhsandRs.1crore.

• Inmovingtowardsalesscasheconomyandtoincentivisesmalltraders/businessestoproactivelyacceptpaymentsbydigitalmeans,theexistingrateof deemedprofitof 8%undersection44ADof theActwasreducedto6%foramountof totalturnoverorgrossreceiptsreceivedthroughbankingchannel/digitalmeansforthefinancialyear2016-17andsubsequentyears.

• Clarification that provisions for taxationof indirect transfers not to apply in caseof certain foreign institutionalinvestor,andthoseregisteredascategory-IorcategoryIIforeignportfolioinvestorundertheSEBI(ForeignPortfolioInvestors)Regulations,2014madeunderSEBIAct,1992.

• Clarificationthattheconditionof maintainingthemonthlyaverageof thecorpusof thefundatminimumRs.100croreprovidedinsection9Aof theIncome-taxAct,1961(‘theAct’)nottoapplytothepreviousyearinwhichthefundisbeingwoundup.

• ExemptionprovidedtoPrimeMinister’sRelief FundundertheActalsoextendedtoChief Minister'sRelief FundorLieutenantGovernor'sRelief Fund.

• Clarificationthatcorpusdonationstoexemptcharitableinstitutionsnottobetreatedasapplicationof income.

• Exemptionfromlevyof taxextendedto incomeaccruingorarising toa foreigncompanyonaccountof saleof leftoverstockof crudeoil,if any,fromafacilityinIndiaaftertheexpiryof anagreementoranarrangement,subjecttoconditionstobenotified.

• Section12Aof theActamendedtomakeitmandatoryforatrustorinstitution,whichhasbeengrantedexemptionunder theAct, to seek fresh registration on adopting or undertakingmodifications of the objects such that themodifiedobjectsdonotconformtotheconditionsof registration.

• Inrespectof exempttrustsorinstitutions,additionalconditionof furnishingreturnwithinduedatebythepersoninreceiptof theincomechargeabletoincome-taxprovided.

• Anewsafeharbourregimehasbeennotifiedforthreeyearswitheffectfrom1stApril,2017toreducetransferpricingdisputes,providecertaintytotaxpayers,alignsafeharbourmarginswithindustrystandardsandenlargethescopeof safeharbourtransactions.

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• Rulesformaintainingandfurnishingof transferpricingdocumentationbymultinationalenterprisesintheMasterFileandCountry-by-Countryreportwerenotified.

• Fairmarketvalueof theassettobethecostof acquisitionforcapitalgainspurposeif theassettakenintoaccountforcomputationof accretedincomeandtaxespaidthereon.

• Benefitof lowerrateof 5percentwithholdingtax, inrespectof interestpayabletoanon-residentbyaspecifiedcompanyonborrowingsmadebyitinforeigncurrencyfromsourcesoutsideIndiaunderaloanagreementorbywayof issueof anylong-termbondincludinglong-terminfrastructurebond,extendedtill30.06.2020.

• Appreciationof rupeetobeignoredforcapitalgainscalculationatthetimeof redemptionof rupeedenominatedbondof anIndiancompanyinrespectof secondaryholdersaswell.

• Transferof capitalasset,beingrupeedenominatedbondof IndiancompanyissuedoutsideIndia,byanon-residenttoanothernon-residentnottoberegardedastransfer.

• Benefitof lowerrateof 5percentwithholdinginrespectof interestpayabletoFIIsandQFIsontheirinvestmentsinGovernmentsecuritiesandrupeedenominatedcorporatebonds,attherateof interestnotexceedingthenotifiedrate,extendedto30.06.2020.

• Periodof holdingforcomputationof longtermcapitalgainsinthecaseof immovablepropertyreducedfrom36monthsto24monthstogivefilliptothehousingsector.

• 100percentdeductionof profithasbeenmadeavailabletoanassesseedevelopingandbuildingaffordablehousingprojectsif thehousingprojectisapprovedbythecompetentauthoritybeforethe31stMarch,2019subjecttocertainconditions.

• CapitalgainsexemptionprovidedtoanindividualorHinduUndividedFamilyunderthelandpoolingschemenotifiedundertheprovisionsof AndhraPradeshCapitalRegionDevelopmentAuthorityAct,2014.

• Categoriesof bondinvestmentsundersection54ECof theAct,forthepurposeof availingcapitalgainexemption,havebeenexpanded.

• Toremovecomplexitiesinchargeabilityof taxinthecaseof JointDevelopmentAgreements,ithasbeenprovidedthatthecapitalgainshallbechargeabletoincometaxasincomeof thepreviousyearintheyearof thecompletionof project.

• Baseyearforfairmarketvalueandcostinflationindexhasbeenshiftedfrom1981to2001.

• Periodof Taxcreditavailableinrespectof MinimumAlternateTax(MAT)andAlternateMinimumTax(AMT)hasbeenincreasedfromtheexisting10yearsto15years.

• Taxneutralityhasbeenprovidedontheconversionof preferencesharesof acompanyintoequitysharesof thatcompany.

• Thecostof acquisitionof shareof anIndiancompany,receivedinataxneutraldemerger,shallbetakenasthecostof acquisitioninthehandsof resultingforeigncompany.

• Periodof claimof profit-linkeddeductionbyeligiblestart-upshasbeenincreasedfrom3outof 5yearsto3outof 7yearsandconditionsforcarryforwardof lossof suchstart-upincaseof changeinshareholdingrelaxed.

• Limitof cashdonationsunderSection80Gof theActreducedtoRs.2000fromRs.10,000.

• Self-employed individual shallbeeligible fordeductionup to20percentof hisgross total income in respectof contributionmadetoNationalPensionSystemTrust.Exemptionfromtaxationhasbeenprovidedtopartialwithdrawalmadebysubscriberof NewPensionScheme.

• Scopeof section56of theActhasbeenwidenedtoincludeanymoney,immovablepropertyorspecifiedmovablepropertyreceivedbyanypersonwithoutconsiderationorwithinadequateconsideration,subjecttocertainconditionsandexceptions.

• Section50CAof theActhasbeenamendedtoprovidedthatincaseof transferof unquotedequitysharesif theconsiderationreceivedislessthanthefairmarketvalue,thenthefairmarketvaluesodeterminedshallbethedeemedvalueof considerationforthepurposeof computationof capitalgains.

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• Theexemptionfromlongtermcapitalgainsincaseof transferof listedsharesbyprovidingthattheexemptionhasbeenrestrictedtosuchshareswheretheyhavebeenacquiredafter1stOctober,2004,subjecttocertainconditions.

• Inviewof thereduction intaxratesfor individuals inthe incomeslabuptoRs.5 lakh, theamountof rebate inincome-taxhasbeenreducedfromRs.5,000/-toRs.2,500/-andithasfurtherbeenprovidedthatrebateshallbeavailableinrespectof individualshavingincomeuptoRs.3.5lakh.

• Wheretheamountof foreigntaxcredit(FTC)allowedagainstthetaxpaidundersections115JBor115JCof theActexceedstheamountof FTCadmissibleagainstthetaxpayablebytheassesseeonhisincomeinaccordancewiththeotherprovisionsof theAct,suchexcesscreditshallbeignoredwhilecomputingtheamountof creditundersection115JAAorsection115JDof theAct.

• Theprovisionsrelatingtocomputationof bookprofitforthepurposeof levyof minimumalternatetax(MAT)havebeenamendedsoastoalignthemwiththeIndianAccountingStandards(Ind-AS).

• TheamendmentmadebytheFinanceAct,2016providingforconcessionalrateof taxfor transferof shareof aprivatelimitedcompanyshallbeapplicableretrospectivelyfromassessmentyear2013-14.

• Section10AAof theActhasbeenamendedtoprovidethattheamountof deductionreferredthereinshallbeallowedfromthetotalincomecomputedinaccordancewithprovisionsof theActbeforegivingeffecttoprovisionsof thesaidsectionandthatthedeductionshallnotexceedthetotalincome.

• Incaseof unitintheconsolidatedplanof amutualfundschemereceivedinlieuof unitintheconsolidatingplan,theactualcostandtheperiodof holdingshallbethecostandtheperiodof holdingof theunitintheconsolidatingplan.

• Section115BBDAof theActhasbeenamendedtowidenthescopeof taxabilityof dividends.

• Section40Aof theActhasbeenamendedtoprovidethattheallowablelimitforclaimingexpenditureunderthehead“IncomefromProfit&Gainsof BusinessorProfession”onrevenueexpenditureincashhasbeenreducedfromRs.20,000toRs.10,000.

• Further,tobringtransparencyinthesourceof fundingtopoliticalparties,theprovisionsof section13Aof theActhavebeenamendedtoprovideforthefollowingadditionalconditionsforavailingthebenefitof theexemptionfromincome-tax:(a)Nodonationsof Rs.2000/-ormorearereceivedotherwisethanbyanaccountpayeechequedrawnonabankoranaccountpayeebankdraftoruseof electronicclearingsystemthroughabankaccountorthroughelectoralbonds;and(b)Politicalpartyfurnishesareturnof incomeforthepreviousyearinaccordancewiththeprovisionsof sub-section(4B)of section139of theActonorbeforetheduedateundersection139of theAct.

• Theprovisionsof sections32and35ADof theActhavebeenamendedtoprovidethatanycapitalexpenditureincashexceedingrupees tenthousandshallnotbeeligibleforclaimof depreciationallowanceor investment-linkeddeductionrespectively.

• Anewsection94BhasbeeninsertedintheActtoprovidethatinterestexpensesclaimedbyanentitytoitsassociatedenterprises shall be restricted to 30 per cent of its earnings before interest, taxes, depreciation and amortization(EBITDA)orinterestpaidorpayabletoassociatedenterprise,whicheverisless.Carryforwardof disallowedinterestexpense shall be allowedup to eight assessment years immediately succeeding the assessment year forwhich thedisallowancewasfirstmadeanddeductionagainsttheincomecomputedunderthehead"IncomefromProfitsandGainsof BusinessorProfession”totheextentof maximumallowableinterestexpenditure.

• Anewsection92CEhasbeeninsertedintheActwitheffectfrom1stApril,2018toprovideforsecondaryadjustmentbyattributingincometotheexcessmoneylyinginthehandsof theassociatedenterprise,inordertomaketheactualallocationof funds consistentwith that of theprimary transfer pricing adjustment.Theprovision shall apply toprimaryadjustmentsexceedingRs.1Croremadeinrespectof AssessmentYear2017-18onwards.

• InordertostrengthenthePANmechanismanewsection206CCwasinsertedinActtoprovideforcollectionof taxatsource(TCS)athigherrateof 20percentincaseof non-quotingof PermanentAccountNumber(PAN).

• Towidenthescopeof taxdeductionatsource,anewsection194-IBwasinsertedintheActtoprovidethatindividualsoraHinduUndividedFamily(otherthanthosecoveredundersection44ABof theAct)responsibleforpayingtoaresidentanyincomebywayof rentexceedingRs.50,000foramonthorpartof monthduringthepreviousyear,shalldeductanamountequalto5percentof suchincomeastaxthereon.

• Section143(1D)hasbeenomittedw.e.f.1.4.2017.However,toaddresstheconcernof recoveryof revenueindoubtful

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cases,anewsection241Ahasbeeninserted,whichinteraliaprovidesthatrefundshallbewithheldonlyinsomecasesinthemannerprovidedinsaidsectionandwiththepriorapprovalof thehigherauthorities.Thisshallbeapplicabletoreturnsfurnishedforassessmentyearcommencingonorafter1stApril,2017.

• AnAssesseewhodeclaresprofitsandgainsinaccordancewithpresumptivetaxationregimeprovidedundersection44ADAof theActshallnowpayadvancetaxinoneinstalmentonorbeforethe15thof March.Further,interestundersection234Cof theActshallbeleviedonsuchassessee,if theadvancetaxpaidonorbeforethe15thMarch,islessthanthetaxdueonthereturnedincome.

• If shortfallinpaymentof advancetaxisonaccountof under-estimationorfailureinestimationof incomeof thenaturereferredtoinsection115BBDAof theAct,theinterestundersection234Cof theActshallnotbeleviedsubjecttofulfilmentof conditionsspecifiedtherein.

• Section244Aof theActwasamendedtoprovidethatwhereanyrefundbecomesduetothedeductor,heshallbeentitledtoreceivesimpleinterestonsuchrefund.

• Section155of theActwasamendedtoprovidethatwherecreditforforeigntaxespaidisnotgivenfortherelevantassessmentyearonthegroundsthatthepaymentof suchforeigntaxwasindispute,theAssessingOfficershallrectifytheassessmentorderoranintimationundersection143(1)of theAct,subjecttotheconditionsspecifiedtherein.

• NecessaryamendmentshavebeenmadetoChapterXIX-Bof theActtoenablemergerof theAuthorityforAdvanceRuling(AAR)forincome-tax,centralexcise,customsdutyandservicetax.

• Inordertoexpandthescopeof section253,orderspassedbytheprescribedauthorityundersection10(23C)(iv)or(v)of theActhavealsobeenmadeappealablebeforetheAppellateTribunal.

• Inordertoreducethegenuinehardshipwhichmaybefacedbyapersonresponsiblefordeductionandcollectionof taxatsourceduetolevyof penaltyundersection271Cor271CA,areferenceof saidsectionshasbeenprovidedundersection119(2)(a),soastoempowertheCentralBoardof DirectTaxestoissuedirectionsorinstructionsinrespectof thesaidsectionsaswell.

• Provisionsof section153and153Bof theActwereamendedtoreducethetimelimitforcompletionof assessment,reassessmentandre-computationof casesmentionedtherein.Similarly,section139(5)wasamendedtoreducethetimelimitforfurnishingof revisedreturn.Theseamendmentswilltakeeffectfrom1stApril,2018andwill,applyinrelationtoassessmentyear2018-19andsubsequentyears.

• Anewsection269STwasinsertedintheActtoprohibitcashreceiptequaltoorexceedingRs.2lakh.

• Inordertoeliminatebogus/multiplePANs,anewsection139AAwasinsertedintheAct,whichinteraliamandateslinkingof AadhaarwithPANdatabase.

• Rule114andrule114Aof theIncome-taxRules,1962havebeenamendedtoenableallotmentof PANandTANthroughacommonapplicationFormpublishedinOfficialGazette.

• Income-taxreturn(ITR)Formshavebeenrationalisedtomakeitmoreobjectiveandtaxpayerfriendly.viz.aonepageITR-1(Sahaj)Formhasbeennotifiedfortheassessmentyear2017-18fortaxpayershavingincomeuptoRs.50Lakhfromsalaryandonehouseproperty.

ANNEXURE 2

POLICY INITIATIVES ON INVESTMENT MANAGEMENT IN CPSES

• Thethrustof theGovernmentispresentlydirectedtowardsefficientmanagementof itsinvestmentinCPSEs,withtheoverallfocusonhighereconomicgrowththroughconsistentlong-termpoliciesaswellasefficientandeffectiveallocationof resources.

• Basedonthisphilosophy,Budget2016-17focusedontheneedtomigratefromthe’disinvestmentbasedapproach’to‘investmentbasedapproach’forCPSEs.Accordingly,renamingtheDepartmentas‘DIPAM’withexpandedmandatedenotesaparadigmshiftinthethinkingprocessof theGovernmentonitsstrategytomanageitsinvestmentinCPSEs.

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• Asannounced,theDepartmentalsolaiddowncomprehensiveguidelineson“CapitalRestructuringof CPSEs:”inMay,2016forefficientmanagementof Government’sinvestmentinCPSEsbyaddressingvariousaspects,suchas,paymentof dividend,buybackof shares,issuesof bonussharesandsplittingof shares.

• The commitment for time-bound listing of CPSEs has been taken on-board as an integral part of the reformsinitiativesof theGovernmentbymakinganannouncement to thiseffect in theBudget2017-18.Pursuant to theannouncement, theGovernmentput inplace amechanism/procedure alongwith indicative timeless for listingof CPSEson17thFebruary,2017.AllMinistries/Departmentshavebeenrequestedtofollowthesuggestedtimeless,aimedattime-boundlistingof identifiedCPSEsaspertheextantAct,RulesandRegulations.

• Inlinewiththebudgetannouncement,theGovernmentalsoapprovedlistingof 14CPSEs(including2insurancecompanies)onthestockexchanges.Duringthecurrentfinancialyear,4IPOissuesof HousingandUrbanDevelopmentCorporation (HUDCO), Cochin Shipyard Ltd. (CSL),General InsuranceCorporation andNew IndiaAssuranceCompanyLtdhavebeensuccessfullylistedonthestockexchange.

• Postlisting,whiledisinvestmentof Government’sshareholdingthrough‘minoritystakesale(upto49%)‘inCPSEsareundertakenaspertheextantpolicy,thefocusof thestrategicdisinvestmentisonadoptingapragmaticapproachfortheGovernmenttoexitfromnon-strategicbusinesstooptimizeeconomicpotentialforbusinessenterprisesbypromotingefficiencyandprofessionalmanagementinthecompany.

• Keepinginviewitsinherentbenefits,beginningJanuary,2017theGovernmentstartedusingindexbasedETFtoofferaninvestmentopportunityinCPSEstopensionfundsandretailinvestorsinIndia.AndpursuanttotheannouncementmadeintheBudgetinthisregard,anewETF,namelyBHARAT22wasannouncedinAugust,2017.TheNewFundOfferof Bharat22launchedinthemonthof November,2017receivedanoverwhelmingresponseacrossallclassof investorsandtheGovernmentretainedaportionof theoversubscriptionbyincreasingtheissuesizeof theoffer.

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