Interim Budget 2024 – Picture Abhi Baaki Hai

Rohan Bhandare analyses the Interim Budget that emphasises the government’s commitment to growth and fiscal prudence

Despite populist demands, the Finance Minister Nirmala Sitharaman has delivered a short and crisp Interim Budget that has reiterated the government’s commitment to infrastructure-led growth and fiscal prudence. While there were no changes to the direct and indirect tax rates, the continuity of policies along with the economic strategy for Kartavya Kaal has set the stage for steady growth.

Theme and Fiscal Report
The summation of the work done over a decade and the policy measures for the focus groups of Garib (Poor), Yuva (Youth), Mahila (Women) and Kisaan (Farmer) was the flavour of the Budget. The fiscal deficit has been brought down to 5.8%, and the government has continued on its prudence policy by setting an even lower fiscal deficit of 5.1% in FY 2024-25 despite being an election year. The debt to GDP ratio at 82% is high, but steady fiscal consolidation and growth seem to be the go-to solutions to the legacy and covid induced borrowings.

The government has been heavily betting on infrastructure to be an economic multiplier. The outlay for the next year is increased by 11.1% to 11.11 lakh crore, which is a staggering amount considering there was already an increase of 33.4% in the past year. The emphasis on three new significant economic railway corridor programs including energy, mineral and high traffic density corridors aims to eliminate bottlenecks and enhance logistics efficiency and enable multi-modal connectivity. Goa has been a prime beneficiary with its improved air, rail, and road connectivity, and will certainly need the funds to work towards the Prime Minister’s vision of transforming Goa into a logistics hub.

The thrust on boosting and promoting spiritual tourism provides Goa a strategic opportunity to project itself beyond its beaches. With the Goa Budget around the corner, the state should be the first mover to identify the iconic tourist centres and receive the long duration interest free finance from the Government to develop and market them internationally. The tax collected at source proposal for the tourism industry was only an alignment with the earlier circular issued by the Central Board of Direct Taxes in June 2023, and hence the lowering of the rates to 5% irrespective of thresholds was not on the cards.

Real Estate
In a boost to the real estate sector, the Government has proposed to construct two crore, more houses under the PM Awas Yojna in the next five years to meet the increased demand for housing. The Government is also set to launch a scheme to help deserving sections of the middle class living in rented houses, or slums to buy or build their own houses. A tax incentive for increasing the deduction limit on home loans for these home buyers would have sweetened this proposal.

The ‘Pradhan Mantri Matsya Sampada Yojana’ will be stepped up to double the exports, enhance aquaculture productivity to 5 tons per hectare and generate employment. The Budget has also proposed setting up of five integrated aqua parks, which not only provide an opportunity for fish farming and processing, but also entices tourists with its diverse fish breeds.

Micro, Small and Medium Enterprises (MSMEs)
The Finance Minister has expressed that orienting the regulatory environment to facilitate the growth of Micro, Small and Medium Enterprises (MSME) will be an important element of this policy mix, and the MSMEs will hope that lowering of the tax rates for partnerships and LLPs as well as implementing a single portal for multiple statutory registrations would be part of this agenda in the next full budget.

New Age Technologies
Focus on technology and research is necessary for atmanirbharta, and the corpus of rupees one lakh crore will definitely spur private sector research in sunrise domains. The fifty-year interest free loan with long tenors and low to zero interest rates will play a crucial role in driving innovation. The Finance Minister has also proposed a new scheme for strengthening deep-tech technologies for defence purposes, giving the nascent sector a shot in the arm.

Direct Taxation
The tax reforms over the years such as introduction of Annual Information Statement, effective use of technology and lowering of corporate taxation have seen improved tax collections and compliance. While there were no changes in direct tax rates, the salaried class, who are perennially dealing with job market uncertainties and higher costs of living, would have loved to see an increase in the standard deduction. While the proposal to waive off direct tax demands upto `25,000 to the period up to FY 2009-10 and upto `10,000 for F.Y. 2010-11 to F.Y. 2014-15 will help a lot of small taxpayers. A similar proposal in GST was immensely missed.
The time periods for tax benefits available to start-ups were extended for another year up to 31st March 2025. However, it seemed that a similar sunset clause for promoting new manufacturing domestic companies which is also expiring on 31st March 2024 was skipped to be implemented. Considering the vision to make India the manufacturing capital of the world, it was imperative to extend this benefit to encourage those who want to make/manufacture in India.

Indirect Taxation
It is heartening to note that the introduction of GST has resulted in widening of tax base, reduction in compliance burden and buoyant monthly tax collections averaging `1.66 lakh crores. Given this, and the significant improvements in the GST-IT infrastructure, it was the perfect time to provide an ease of filing to the taxpayers by announcing a facility to revise GST returns to rectify unintentional mistakes without penal consequences. Further, a one time opportunity to avail lapsed input tax credit not claimed in earlier years would have eased the working capital for the industry. Now, the next full budget which could coincide with the 7th Anniversary of GST looks to be the perfect stage for such reforms.

Closing Remarks
There is a theory in film writing by Russian author Anton Chekhov, known as the ‘Chekhov’s Gun’. It simply means, if there is a gun introduced in the first act of the film, it must be fired in the subsequent acts of the film so that the audience gets to join the dots before the final reveal. It seems that the Minister has quietly placed the Chekhov’s gun in the Interim Budget for us to connect the dots for the big bangs in the next full Union Budget. Picture abhi baki hai

The writer is a practicing Chartered Accountant and Chairman of GCCI’s Taxation Committee.


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