Super-rich tax withdrawn; home, auto loans to be cheaper: FM Sitharaman

New Delhi: Amid fears of a slowdown in the economy, the government on Friday offered a slew of measures such as a rollback of the surcharge on foreign portfolio investors (FPIs), simplifying more on taxation, strict labour laws, easy environment clearance, relief to banks, non-banking financial companies (NBFCs), MSMEs, the auto and realty sectors and the “ease of doing business”, among others.

The government’s move came after huge criticism over the slowdown in economy in the country. In order to allay fears among people, the finance ministry is learnt to have been forced to take such steps after reviewing the demands of representatives of different sectors of industry who met finance minister Nirmala Sitharaman separately to raise these demands in her sectoral meetings early this month.

Announcing the 32-point economy booster dose, Ms Sitharaman rejected all talk about an economic slowdown in the country, saying that India’s economy was growing at a faster rate than any major world economy. “Reform is a continuous process for the government and it tops the agenda. Global GDP growth may be revised downwards from the current estimate of 3.2 per cent,” she said, adding that global demand was going to be weak.

Ms Sitharaman announced the government had withdrawn the surcharge on long and short-term capital gains on foreign portfolio investors levied in Budget 2019, both for foreign and domestic investors. “The pre-Budget position is restored,” the minister said, adding it was being done to encourage investment in the capital market.

It is, however, estimated that the surcharge affected FPIs adversely and they have withdrawn Rs 23,000 crores from domestic markets after the Budget. The Budget announcement of a surcharge on higher tax-income groups reportedly affected 40 per cent of FPIs.

“The Budget announcement of the surcharge had pushed the effective income-tax rate for individuals with taxable income of Rs 2-5 crores up to 39 per cent from 35.88 per cent and for those above Rs 5 crores to 42.7 per cent,” Ms Sitharaman said.

On the financial health of the banking sector, she also announced an upfront capital infusion of Rs 70,000 crores into public sector banks in order to boost their lending and improving liquidity situation. “The move is expected to generate an additional lending and liquidity in the financial system to the tune of Rs 5 lakh crores,” she said.

As banks have decided to pass on the RBI rate cut benefits to borrowers through MCLR reductions, she said: “Banks will launch repo rate and external benchmark-linked loan products that will lead to reduced easy monthly instalments for housing, vehicle and other retail loans. Working capital loans for the industry will also become cheaper.”

On micro, small and medium enterprises (MSMEs), the finance minister said all the pending GST refunds of this sector will be paid within 30 days. “Also, in future, all GST refunds of MSMEs will be paid within 60 days from the date of application,” she added.

For the auto sector, she said the government has also lifted the ban on purchase of vehicles by government departments, and allowing additional 15 per cent depreciation on vehicles acquired from now till March 2020. “Also, BS-IV vehicles purchased up to March 2020 will remain operational for the entire period of their registration,” Ms Sitharaman said.

“The Centre will lift the ban on purchase of new vehicles for replacing all old vehicles by government departments, and consider various measures including scrappage policy to boost demand,” she said, adding that both electric vehicles and internal combustion vehicles will continue to be registered.

On the loan front, she said the measures would ensure that loans for home, vehicles and consumption goods would become cheaper and widely available through banking and non-banking finance companies, which were bleeding for years due to low credit off-take.

“Banks will pass on the RBI rate cut benefits to borrowers through MCLR reduction and they will launch repo rate and external benchmark-linked loan products that will lead to reduced easy monthly instalments for housing, vehicle and other retail loans,” she said, adding that an additional liquidity support of Rs 20,000 crores would be given to HFCs by the National Housing Bank, thereby increasing the total support to Rs 30,000 crores.

Ms Sitharaman also announced a booster investment of Rs 100 lakh crores on building modern infrastructure over the next five years. “An inter-ministerial task force will be formed to push infrastructure projects which the government hopes will boost growth and create jobs,” she said.

On the tax front, allaying concerns over harassment by tax department personnel, she said all tax notices would be issued from the centralised system to end the harassment of taxpayers. “All old tax notices will be decided by October 1 or will be uploaded again through the centralised system,” she said, adding it will have a computer-generated unique Document Identification Number (DIN).

Ms Sitharaman also declared corporate social responsibility (CSR) as a civil offence, not a criminal one. “With regard to non-compliance of CSR, the violations of CSR norms under the companies law will not be a criminal offence. It will be treated only as a civil liability,” she said.