Self Employment and Talent Utilization (SETU) to be Established:
Government has announced the setting up of a Self- Employment and Talent Utilization (SETU) mechanism.
What is it?
- It will be a Techno-Financial, Incubation and Facilitation Programme to support all aspects of start up businesses, and other self-employment activities, particularly in technology-driven areas.
- An amount of Rs.1000 crore is being set up initially in NITI Aayog for SETU.
ATAL Innovation Mission (AIM) to be Set up:
What is it?
- AIM will be an Innovation Promotion Platform involving academics, entrepreneurs and researchers and draw upon national and international experiences to foster a culture of innovation, R&D and scientific research in India.
- The platform will also promote a network of world-class innovation hubs and Grand Challenges for India. Initially a sum of Rs.150 crore will be earmarked for this purpose.
Corporate Tax to be Reduced:
The Finance Minister has said that the Corporate Tax Rate is proposed to be reduced from the current 30% to 25% over the next 4 years.
- This is expected to lead to higher level of investment, higher growth and more jobs.
- The reduction will be accompanied by rationalization and removal of various kinds of exemptions and incentives which is leading to a large number of tax disputes. The effective collection of Corporate Tax today is about 23%. Corporate tax rate is a tax collected from companies.
- Its amount is based on the net income companies obtain while exercising their business activity, normally during one business year. Revenues from the Corporate Tax Rate are an important source of income for the government of India.
- It is a Direct tax.
GST to be Implemented:
- The Finance Minister has said that his government is moving forward on various fronts to implement Goods and
Services Tax (GST) from the next year. GST, on which his government introduced a Bill in the last session of the
parliament, is expected to play a trans-formative role in the way our economy functions.
- It will add buoyancy to our economy by developing a common Indian market and reducing the cascading effect on the cost of goods and services, Shri Jaitley added.
- The Finance Minister said that as a part of the movement towards GST the Education Cess and the Secondary and Higher Education Cess are to be subsumed in the Central Excise Duty.
- The goods and services tax (GST) is a comprehensive value-added tax (VAT) on goods and services. It is an indirect tax levy on manufacture, sale and consumption of goods as well as services at a national level.
- Through a tax credit mechanism, this tax is collected on value-added goods and services at each stage of sale or purchase in the supply chain.
- The system allows the set-off of GST paid on the procurement of goods and services against the GST which is payable on the supply of goods or services. However, the end consumer bears this tax as he is the last person in the supply chain.
- Experts say that GST is likely to improve tax collections and boost India’s economic development by breaking tax barriers between States and integrating India through a uniform tax rate.
What are the benefits of GST?
- Under GST, the taxation burden will be divided equitably between manufacturing and services, through a lower tax rate by increasing the tax base and minimizing exemptions.
- It is expected to help build a transparent and corruption-free tax administration. GST will be is levied only at the destination point, and not at various points (from manufacturing to retail outlets).
- Currently, a manufacturer needs to pay tax when a finished product moves out from a factory, and it is again taxed at the retail outlet when sold.
How will it benefit the Centre and the States?
- It is estimated that India will gain $15 billion a year by implementing the Goods and Services Tax as it would promote exports, raise employment and boost growth. It will divide the tax burden equitably between manufacturing and services.
What are the benefits of GST for individuals and companies?
- In the GST system, both Central and State taxes will be collected at the point of sale. Both components (the Central and State GST) will be charged on the manufacturing cost. This will benefit individuals as prices are likely to come down. Lower prices will lead to more consumption, thereby helping companies.
Why are some States against GST; will they lose money?
- The governments of Madhya Pradesh, Chhattisgarh and Tamil Nadu say that the information technology systems and the administrative infrastructure will not be ready by April 2010 to implement GST. States have sought assurances that their existing revenues will be protected.
- The central government has offered to compensate States in case of a loss in revenues. Some States fear that if the uniform tax rate is lower than their existing rates, it will hit their tax kitty. The government believes that dual GST will lead to better revenue collection for States.
- However, backward and less-developed States could see a fall in tax collections. GST could see better revenue collection for some States as the consumption of goods and services will rise.
National Investment and Infrastructure Fund to be Set up:
The government has proposed to set up this fund. An annual flow of Rs.20,000 crore is ensured by the government for the NIIF.
What it does?
This will enable the Trust to raise debt, and in turn, invest as equity, in infrastructure finance companies such as IRFC and NHB. The infrastructure finance companies can then leverage this extra equity, manifold.
Forwards Markets Commission to be Merged with Sebi:
- The Union Finance Minister has proposed to merge the Forwards Markets Commission with SEBI. Why? To strengthen regulation of commodity forward markets and reduce wild speculation.
- Enabling legislation, amending the Government Securities Act and the RBI Act is proposed in the Finance Bill, 2015.
- Forward Markets Commission (FMC) is a regulatory authority for commodity futures market in India. It is a statutory body set up under Forward Contracts (Regulation) Act 1952.
- The Commission functions under the administrative control of the Ministry of Finance, Department of Economic Affairs, Government of India.
- The Act provides that the Commission shall consist of not less than two but not exceeding four members appointed by the Central Government, out of them one being nominated by the Central Government to be the Chairman of the Commission.
The functions of the Forward Markets Commission are as follows:
- To advise the Central Government in respect of the recognition or the withdrawal of recognition from any association or in respect of any other matter arising out of the administration of the Forward Contracts (Regulation) Act 1952.
- To keep forward markets under observation and to take such action in relation to them, as it may consider necessary, in exercise of the powers assigned to it by or under the Act.
- To collect and whenever the Commission thinks it necessary, to publish information regarding the trading conditions in respect of goods to which any of the provisions of the Act is made applicable, including information regarding supply, demand and prices, and to submit to the Central Government, periodical reports on the working of forward markets relating to such goods;
- To make recommendations generally with a view to improving the organization and working of forward markets;
- To undertake the inspection of the accounts and other documents of any recognized association or registered association or any member of such association whenever it considers it necessary.
Gold Monetisation Scheme:
- The Finance Minister has proposed to introduce Gold Monetisation Scheme, which will replace both the present Gold Deposit and Gold metal Loan Schemes.
- The new scheme will allow the depositors of gold to earn interest in their metal accounts and the jewellers to obtain loans in their metal account.
- Banks/ other dealers would also be able to monetize this gold.
- It was also announced that the Government shall commence work on developing an Indian Gold Coin, which will carry the Ashok Chakra on its face. Such an Indian Gold Coin would help reduce the demand for coins minted outside Indian and also help to recycle the gold available in the country.
‘Act East’ Policy of the Government:
- The Unin Finance Minister has announced setting-up of manufacturing hubs in CMLV countries, namely, Combodia, Myanmar, Laos and Vietnam.
- This ‘Act East’ policy of the Government endeavours to cultivate extensive economic and strategic relations in South-East Asia.
- In order to catalyse investments from the Indian private sector in this region, a project development company will set-up the manufacturing hubs in CMLV countries through separate Special Purpose Vehicles (SPVs).
Micro Units Development Refinance Agency (MUDRA) Bank:
- The Finance Minister has proposed to create a Micro Units Development Refinance Agency (MUDRA) Bank, with
a corpus of Rs. 20,000 crore, and credit guarantee corpus of Rs. 3,000 crore.
What it does?
- MUDRA Bank will refinance Micro-Finance Institutions through a Pradhan Mantri Mudra Yojana.
- In lending, priority will be given to SC/ST enterprises.
- These measures will greatly increase the confidence of young, educated or skilled workers who would now be able to aspire to become first generation entrepreneurs.
- Existing small businesses, too, will be able to expand their activities.
- By floating MUDRA bank, the Centre has ensured credit flow to SMEs sector and has also identified NBFCs as a good fit to reach out to them.
- People will now be able to get refinance at subsidised rate and it would be passed on to the SMEs. Moreover, it would enable SMEs to expand their activities
Paramparagat Krishi Vikas Yojna and Pradhan Mantri Gram Sinchai Yojna to be Fully Supported:
- Reinforcing the government’s commitment to farmers, Union Finance Minister has flagged the Pradhan Mantri Gram Sinchai Yojna aimed at ‘per drop more crop’ and Paramparagat Krishi Vikas Yojna (organic farming) as the two most important progammes in the farm sector to enhance productivity and production.
- Paramparagat Krishi Vikas Yojna: It has been formulated to promote Organic Farming. The objective is to promote eco-friendly concept of cultivation reducing the dependency on agro-chemicals and fertilizers and to optimally utilize the locally available natural resources for input production.
- Pradhanmantri Gram Sinchai Yojana is aimed at irrigating the field of every farmer and improving water use efficiently to provide ‘Per Drop More Crop’.
Tourist Visa on Arrival Scheme to be Extended to 150 Countries Gradually:
The Finance Minister has announced to extend Visa on Arrival Facility (VOA) to 150 countries in stages from the current 43.
“TOURIST VISA ON ARRIVAL” SCHEME:
It was introduced on January 1, 2010. It was initially trialed for citizens of five countries. Now, the Citizens of 43 countries can avail this facility.
- Citizens of the identified countries can avail this facility and:
- whose sole objective of visiting India is sight-seeing, casual visit to meet friends or relatives, etc.,
- who do not have a residence or occupation in India;
- who hold passports with minimum six months validity, and a re-entry permit if that is required under the law of the country of nationality of the applicant;
- who is a person of assured financial standing (individuals must have a return ticket and sufficient money to spend during his/her stay in India);
- who is not considered an undesirable person;
Validity: It will be valid for 30 days with single entry facility.
- It shall be non-extendable and non-convertible except with the approval of the Ministry of Home Affairs in exceptional circumstances.
- The ‘Tourist Visa-on-Arrival’ will be provided only at designated international airports, namely, Bangalore,Chennai, Delhi, Hyderabad, Kochi, Kolkata, Mumbai and Trivandrum. It will not be available at any other Immigration Check Post.
- It shall be allowed for a maximum of two times in a calendar year to an applicant with a minimum gap of two months between each visit.
- It shall not be applicable to holders of Diplomatic/Official passports.
8 schemes delinked from Central support:
The government has decided to delink eight Centrally Sponsored Schemes (CSS), including
- National e- Governance Plan,
- Backward Regions Grant Funds,
- Modernisation of Police Forces and
- Rajiv Gandhi Panchayat Sashaktikaran Abhiyaan (RGPSA), from its support.
- As much as 42% of union taxes will go to States as per the recommendation of 14th Finance Commission.
- The government has decided to accept this recommendation so as to reduce its fiscal burden.
- The 8 schemes delinked from Centre’s support are:
- National e-Governance Plan,
- Backward Regions Grant Funds,
- Modernizationof Police Forces,
- Rajiv Gandhi Panchayat Sashaktikaran Abhiyaan (RGPSA),
- Scheme for Central Assistance to the States for developing export infrastructure,
- Scheme for setting up of 6000 Model Schools,
- National Mission on Food processing
- National Mission on Tourist Infrastructure.
SARFAESI Act to cover NBFCs:
- The Budget proposal to treat non-banking financial companies (NBFCs) as financial institutions under the SARFAESI Act (The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ) will be a big boost to the sector. A long-standing demand of the industry, this will allow NBFCs to enjoy the benefits that presently apply only to banks.
- It is proposed that NBFCs registered with RBI and having asset size of Rs.500 crore and above will be considered for notifications as ‘financial institution’ in terms of the SARFAESI Act, 2002.
- Currently, NBFCs are not covered under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act.
- Though the Reserve Bank of India has tightened the NPA recognition norms, it has not laid out clear guidelines either on the recovery mechanism or the provisions for NBFCs to take action against defaulters under SARFAESI Act.
- Most of the NBFCs are unable to recover bad debts. There have been lakhs of cases that are dragged to court every year by NBFCs. Hence, the working group of RBI, headed by Usha Thorat, had recommended that the Act be extended to cover the NBFCs also.
- This act allows banks and financial institutions to auction properties (residential and commercial) when borrowers fail to repay their loans. It enables banks to reduce their non-performing assets (NPAs) by adopting measures for recovery or reconstruction.
- Upon loan default, banks can seize the securities (except agricultural land) without intervention of the court. SARFAESI is effective only for secured loans where bank can enforce the underlying security. In such cases, court intervention is not necessary, unless the security is invalid or fraudulent. However, if the asset in question is an unsecured asset, the bank would have to move the court to file civil case against the defaulters.
- The SARFAESI Act also provides for the establishment of Asset Reconstruction Companies (ARCs) regulated by RBI to acquire assets from banks and financial institutions.
- The Act provides for sale of financial assets by banks and financial institutions to asset reconstruction companies (ARCs). RBI has issued guidelines to banks on the process to be followed for sales of financial assets to ARCs.
- The Act provides three alternative methods for recovery of non-performing assets, namely:
2. Asset Reconstruction
3. Enforcement of Security without the intervention of the Court
- The provisions of this Act are applicable only for NPA loans with outstanding above Rs. 1lac. NPA loan accounts where the amount is less than 20% of the principal and interest are not eligible to be dealt with under this Act.
The Act empowers the Bank:
- To issue demand notice to the defaulting borrower and guarantor, calling upon them to discharge their dues
in full within 60 days from the date of the notice.
- To give notice to any person who has acquired any of the secured assets from the borrower to surrender
the same to the Bank.
- To ask any debtor of the borrower to pay any sum due or becoming due to the borrower.
Any Security Interest created over Agricultural Land cannot be proceeded with. If the borrower fails to comply with
the notice, the Bank may take recourse to one or more of the following measures:
- Take possession of the security
- Sale or lease or assign the right over the security
- Manage the same or appoint any person to manage the same
Sources: The Hindu, PIB.