The election results of 2019 have been a resounding mandate for the incumbent Government. With the hype and excitement of the result behind, the Indian corporates / industry can now focus on what they expect of the re-instated Government to do as a priority on the economic front.
There are certain areas which have been on the priority list of the previous Government. We may expect the Government in this tenure to extend its focus on these areas with renewed vigour:
1. Focus on MSMEs
MSMEs have been a key area of focus for the Government, and rightly so. As per the data maintained by the Ministry of Commerce, MSMEs contribute about 37% to the GDP and 43% of our exports. MSMEs employ a large part of our population and it is imperative that the sector receive major support from the Government to flourish. The Government has focused on improving the financial health of MSMEs. In that respect:
a. Recent amendments in the Companies Act focuses on filing return to the MCA by large corporates stating the amount of payment due to MSMEs by them and reasons for delay, if any. The Government is taking a serious view to ensure the development of the MSME sector and is mindful that they do not suffer in the hands of larger corporates by way of blocked working capital.
b. In addition, a Credit Guarantee Scheme has been introduced by the Government of India to cater to credit needs of the MSMEs at reasonable interest rates in order to enhance access of MSMEs to more capital.
• In the coming years, we may also witness:
• More focus on technological access and key upgradation on MSMEs.
• Additional technological centers to be set up for mentoring the skills required and prototyping of MSMEs, and
• Establishment of a National Traders Welfare Board and creation of National Policy for Retail Trade for the growth of retail business.
• These steps look to transform the MSME into more organized and regulated sector.
2. Cleaning Mca Records and Wiping out Shell Data
Last FY saw a number of notifications and compliances introduced to clean the regulatory system. Steps such as forms DIR3 KYC, ACTIVE INC 22A, DPT-3, etc., were undertaken to identify ghost individuals and shell companies which were created for purposes other than carrying out actual business. Forms such as ACTIVE INC-22A was a major step in identifying data filed by false Companies w.r.t. to their registered offices, which did not exist on ground. Keeping their track record in mind, we expect that such changes may be made at various intervals in upcoming years to further the Government’s aim towards transparency.
In addition, amendments in the Companies Act was one of the focus areas of the government during their election campaign manifesto which aimed at imposing civil liabilities for technical and procedural defaults of minor nature, thus unclogging the majority of the cases in the courts.
It is safe to surmise that we will be witnessing more amendments in the Companies Act and other allied corporate laws to curb hoax details by Companies. We can also hope to see amendments to facilitate ease – of- doing business, which is another focus area of the new Government (Please refer to point no 6 of this article.)
3. Rationalisation of Taxes (Direct and Indirect)
• Direct Taxes
The budget is likely to be presented in early July. In the interim budget announced by the Government, there were reliefs to the salaried class and to certain taxation brackets.
a. The rebate u/s 87A of the Income Tax Act, effectively stating nil taxes for income till INR 5 lakhs p.a. are more likely to stay for this financial year.
b. Corporate tax as per the budget was stated @ 25% for companies having turnover up to INR 50 crores and 30% for companies having turnover above INR 50 crores. If the recommendations and reviews are taken into consideration, the corporate taxes may overall drop to 25% for all companies irrespective of turnover.
• Indirect Taxes
After GST was implemented, many amendments have been made by the GST council which meets regularly to review the impact and implementation of GST and go through any further recommendation.
a. With the Government being re-elected, we can expect the GST regime to move forward in a phased manner. We expect more simplification in the GST rules. The GST tax slab rates might be merged into two main rates from the present four rates.
b. Automated GST Refunds and a single authority for processing GST Refunds are two most likely simplifications expected in the GST Regime in the upcoming months.
This has been perhaps one of the most significant steps taken by the Government. From digitizing data through Aadhar card to filing of online returns, the country has witnessed a wave of digitization in the past 5 years, we have witnessed:
a. Regulatory authorities viz. the RBI undergo a massive exercise when it introduced the Single Master Form (SMF) which captured all the data related to FDI, FC-GPR form filing etc. in one portal.
b. Listed Companies and deemed public companies were asked to dematerialize its shares by SEBI.
c. Filing of income tax returns through online portal (except for very senior citizens) has been made mandatory.
d. The Government is expected to move forward on digitization of land records, as one the target areas. The procedure followed will be on similar lines as that of Aadhar project.
Apart from the compliance point of view, the Government has always had more focus on cash-less transactions. We can expect flexibility and more encouraging steps towards electronic payments. We can expect digitization in other fields where there is still a large set of paper work and manual intervention required.
5. Start– Ups
Another major focus areas of the government has been to encourage start-ups. A new scheme is expected to be launched by the Government which will provide collateral – free credit up to INR 50 lakhs to young entrepreneurs. This is aimed at the growing youth population to encourage them to start their own ventures.
In order to facilitate start-ups, the following steps are expected to be undertaken:
a. Easing regulatory requirements for the start – ups: We expect more simplification in the process of incorporation of companies, attaining licenses and approvals from various government authorities at the time of incorporation and few months after incorporation.
b. Time spent for tax compliance: Digitization has helped in reducing time on calculation and deposition of tax, as well as filing of returns of the same. However, a lot more has to be done and is expected to be done in this area of regular compliance.
c. Angel Tax Exemption: 541 start-ups had been granted angel tax exemption till 28th May, 2019.
6. Ease of Doing Business
In the World Bank Review in 2018, India was ranked 77th amongst 190 economies as compared to 134th in 2015 out of 189 economies. To further improve India’s standing, we can expect the Government to come up with more simplified norms in near future.
The incumbent government has promised faster custom clearance of international cargo by relaxing certain clearance procedures, adopting new scanning new methods, etc. This will also facilitate and streamline imports.
7. Agriculture and Village Sector
In order to de-stress our agro-economy, more focus on technological advancement in the agricultural sector is expected. Mobile based apps will be introduced for promoting availability of agricultural machines and equipment on rental/ custom hiring basis. The Government aims to develop young agri-scientists who can make use of Artificial intelligence, machine learning, etc. to bring in technological improvement in the agricultural sector. Solar power may also be added as an additional source of earning for the farmers.
Re-instatement of the incumbent government has given rise to the expectation of the corporate world of an environment of stability and continuity. There were many initiatives which were taken by the earlier government. Few of them did not turn out to be as effective as they were expected to be, but in the second term, the government can ensure that the initiatives which were left incomplete, or which didn’t reap as good results as were expected, are reviewed, amended and made more effective. Apart from the on-going projects, various other steps for the development of the economy have been promised by the government. If these promises are fulfilled, we expect to look forward to an upward trend in the economy and may witness “acche din” in the coming days.
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