Finance Minister Press Conference Updates: Enhanced Surcharge On Equity Capital Gains Rolled Back 

Finance Minister Nirmala Sitharaman has announced a slew of measures to boost the economy growth which is at a five-year low.

Here are the top 10 takeaways from the press conference:

1. No enhanced surcharge on equity capital gains for foreign and domestic investors.
2. Several measures to boost auto industry.
3. Will release Rs 70,000 crore upfront for PSU bank recapitalisation.
4. Banks to pass on interest rate cuts; move to external benchmarking of rates to repo rate.
5. NHB's additional liquidity support for HFCs raised by Rs 10,000 crore to Rs 30,000 crore.
6. All pending GST refunds due to MSMEs to be paid within 30 days; future refunds in 60 days.
7. Delayed payments from government/CPSEs to be monitored.
8. CSR violations to be treated as civil offence not criminal offence.
9. Will work to resolve issues of home buyers.
10. More measures to be announced in the next few weeks.

The full presentation can be accessed here:

RC Bhargava, chairman of India's largest carmaker Maruti Suzuki Ltd., said it was heartening to see the finance minister respond to the industry's suggestions so quickly.

“There have been some positive things which were within the scope of what the government could do. They have done what was possible,” Bhargava told BloombergQuint.

“A couple of things very important need to be looked at. The sentiment for auto purchases is a very important thing. And the announcements from the finance minister have made it clear that internal combustion vehicles are not going out or something,” he said.

Puneet Anand, group market head of Hyundai India praised the interim measures too. “It will augur well for the industry. While this will soften the market and will build the momentum. But more needs to be done.”

Vinkesh Gulati, , vice president of the Federation Of Automobile Dealers Associations, said that the announcements may not give much of a boost but it will build confidence. “Besides increase in depreciation rate, there is nothing much for the industry and nor for individual buyers,” he said adding that government hasn’t offered anything that could boost the sales. “There could just be 3-4 percent impact in sales.”

The volatility in the rupee will help India’s exports, SItharaman said. “That itself would help the economy because exporters can look to reach greater markets across the world.”

Higher surcharge will continue to apply for high networth individuals. The government will review it by 2022.

The removal of enhanced surcharge for FPIs will be effective from this year, Pandey said.

The approximate revenue impact from removing the enhanced surcharge on capital gains would be Rs 1,400 crore, Revenue Secretary Ajay Bhushan Pandey said.

Finance Minister said that based on her consultations with tax officials she "did not get the feeling that they will have to stretch themselves to far to achieve the targets."

"In UP and Karnataka trends are already showing comfortable levels of revenue collection," she noted.

“I am not getting any feeling to worry or suspect that my targets won't be achieved,” she said. “This will happen without any overreach or harassment by the tax officials.”

Her comments come after India's tax revenue collection growth till April-June fell to a 10 year low.

The government will make another set of announcements by the middle of next week. A third set of announcements will be made subsequently.

Finance Minister Nirmala Sitharman addressed the worst auto slowdown in a decade with a slew of announcements.

• BS IV vehicles purchased till March 2020 will remain operational for entire period of registration. "It was a big issue," Sitharaman said. "It's not as if from 2020 they're off the road. They are allowed till their registration is done."
• Revision of one-time registration fee is being deferred it till June 2020.
• All vehicles acquired from now till March 31, 2020 will benefit from an additional 15 percent depreciation. This will take the depreciation to 30 percent.
• Both electric vehicles and internal combustion vehicles will continue to be registered.
• Government will lift the ban to purchase new vehicles by government department to boost demand. These vehicles should be replacing older vehicles.
• A new scrappage policy will be introduced soon.

An inter ministerial task force will be formed to review the pipeline of infrastructure projects.

Delayed payments from government and CPSEs will be monitored by the Department of Expenditure and their performance will be reviewed by the Cabinet Secretariat.

All dues under litigation will be cleared, she said.

The finance ministry and RBI are working on bringing offshore rupee market on domestic exchanges and to permit trading of the U.S dollar-Rupee derivatives through GIFT City.

Sitharaman announced that Aadhaar-based KYC will be allowed for opening demat accounts and investing in mutual funds. This will improve participation from domestic retail investors, she said.

The Depository Receipt Scheme 2014 is expected to be operationalised soon by the SEBI. This will give Indian companies increased access to foreign funds through ADRs and GDRs.

The finance minister has proposed to establish an organisation to provide credit enhancement for infrastructure and housing projects. The name will be notified soon.

The government will amend the MSME Act to have a single definition for MSMEs. The changes in the act will be taken up by the Cabinet soon.

New definition for MSMEs will not necessarily be on turnover but also on things like plant machinery.

The government will make all pending GST refunds to MSMEs within 30 days. “In the future, all GST refunds shall be paid within 60 days from the date of application,” Sitharaman said.

Partial credit guarantee scheme for purchase of pooled assets of NBFCs and HFCs to be monitored at the highest levels in each of the banks, Sitharman said.

“NHBs have already settled some of the issues. Very clearly showing that NBFCs are receiving liquidity from the banks and they are also moving towards giving credit people. “

Additional liquidity support will be provided to HFCs by National Housing Bank—Rs 30,000 crore from Rs 10,000 crore earlier.

NBFCs will also be allowed to use Aadhaar-based KYC.

Banks will issue a one-time settlement policy to benefit small enterprises and retail borrowers to settle their loan overdues. “This would be done through check box approach and not remain pending for approval.”

All banks have agreed that they will pass on any interest rate cuts through the MCLR reduction announced by the monetary policy committee. “People were saying that the benefit of rate reductions don't reach them at all, or reaches in trickle. There was an across the board grievance.”

Banks have also decided to launch repo rate-linked loan products, the finance minister said. “This will result in reduced EMI for housing, vehicle, retail and other loans.”

The Section 56 2(B) of the Income Tax Act, related to the angel tax, will not be applicable to startups registered with the DPIIT.

A dedicated cell under the CBDT will address any income tax problems faced by startups.

The government will release Rs 70,000 crore upfront state-run banks, as announced in the budget. "This will benefit all Corporate and retail borrowers."

Government will rollback enhanced surcharge levied on long and short term gains arising from transfer of equity and shares.

The enhanced surcharge on FPIs and domestic investors has been withdrawn, Sitharaman announced. “The pre-budget situation is restored.”

From Oct. 1, issue of IT orders, notices, summons, letters etc. shall now go through a centralised computer system. It will contain computer generated document identification number.

“If there is a notice being issued at the ground level and some amount is claimed by the assessee, that cannot happen without centralised approval,” Sitharaman said.

Income tax communication issued without document identification number will be treated as non-established.

The government will not charge anyone with criminal offence if they fail to achieve their corporate social responsibility mandate, Sitharaman said. “Every doubt that was prevailing, I would want to dispel it,” she said. “CSR will only be treated as a civil liability and not a criminal matter.”

Government has changed 16 offence sections in companies law to monetary penalty, Sitharaman said. This government “at no point” wants to pursue any prosecution, she added, explaining that the government has withdrawn over 14,000 prosecutions under Companies Act.

Finance minister has assured that GST filings will be simplified with much lesser forms.

Sitharman will hold a meeting even with GST Network officials on Sunday to plug loopholes in the GST refund process.

The Narendra Modi government has kept reform at the top of the agenda, Sitharaman said. “It is not like after 2019 we have forgotten that.”

Finance Minister said that the current projected global GDP growth is about 3.2 percent and is probably going to be revised downwards. “Not just one but many organisations have come out to say that global demand will be very weak.”

“That’s one clear picture,” she said. “India’s growth line is still very much high above.”

NITI Aayog Vice Chairman Rajiv Kumar said that the government is taking bold steps to accelerate the economy and will continue to do so. "There is no need to panic or spread panic," he tweeted.

The finance minister is also likely to exempt foreign portfolio investors from a tax on super rich announced in the budget.

The Union Budget proposal to raise surcharge on individuals earning Rs 2-5 crore and above had also covered FPIs and alternative investment funds as they are registered as non-corporate entities.

This spooked investors and triggered a selloff in the market. FPIs have pulled out about Rs 12,418 crore from the equity market in July, according to data available on the National Securities Depository Ltd.’s website.

Find out more here.

India’s economy is struggling to break-free from a slowdown where sales of all consumer goods, from cars to biscuits, have fallen and inventories are piling. The slowdown in consumption serves as a double whammy to an economy that for a few years has been witnessing meager growth in investments.

The overall situation has been exacerbated by the crisis in the non-banking financial lending sector after the collapse of IL&FS, prompting more cautious lending. Stress in the agrarian sector has been an ongoing factor. Terms of trade have turned more challenging for farmers hurting rural incomes.

With inflation well within the 4 percent target rate, the Reserve Bank of India has tried to stimulate the economy by cutting interest rates four times in a row and bringing in measures to improve liquidity for NBFCs. Still, their impact is yet to be seen.

Prime Minister Narendra Modi has reviewed the state of the economy with Finance Minister Nirmala Sitharaman as his government scrambled for solutions to tackle a fast-spreading slowdown in various sectors, on Aug. 15.

Modi, after delivering his Independence Day address, went into a brainstorming session with Sitharaman and all top officials in her ministry, sources privy to the development said.

The meeting, they said, was to assess the nature of the slowdown and its long-term impact. There are expectations that the government would come out with sector-specific stimulus sometime soon.

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In her maiden budget, Finance Minister Nirmala Sitharaman had announced a one-time six-month partial credit guarantee to state-owned banks for first loss of up to 10 percent on high-rated pooled assets of NBFCs. Guidelines for these were announced yesterday. The guarantee would be provided for a total amount of Rs 1 lakh crore during the current financial year.

Measures announced to boost the economy may add to risk of a fiscal slippage, Nomura analysts Sonal Varma and Aurodeep Nandi said in a prior note. The note said that sector-specific interventions are possible, but since the government tax revenue projections are already aggressive, there isn’t much room for a large fiscal stimulus.