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Union Finance Minister introduced measures to revive economic growth (Relevant for GS Prelims & Mains Paper III; Economics)

To revive economic growth, Union Finance Minister Nirmala Sitharaman  announced some measures:

    1. The expenditure department will review delayed payments from government and Central Public Sector Enterprises. This is expected to released nearly Rs 60,000 crore worth of payments into the economy, easing the working capital crunch in many companies.Removal of the surcharge on capital gains on shares for both foreign and domestic investors Surcharge on long and short term capital gains arising from transfer of equity shares has been withdrawn. The pre-Budget position is restored.
      Background
      The surcharge of 3 per cent and 7 per cent on those earning between Rs 2 crore and Rs 5 crore, and over Rs 5 crore respectively had been announced as part of the Budget proposals. This had led to different taxation outcomes for FPIs registered as Association of Persons or trusts and companies, even as those registered as companies were spared this surcharge.

      Ever since the Budget announcement, markets have been seeing a selloff on most trading days, largely in light of the FPI impact. Friday’s announcement reverses the levy imposed in the Budget. However, tax experts said the surcharge would continue to be levied on business income of the FPIs and unlisted shares.

      1. Rs 70,000-crore equity infusion into public sector banks to boost lending

      Sitharaman announced upfront capital infusion of Rs 70,000 crore into public sector banks, a move aimed at boosting lending and improving liquidity situation. This fund infusion was announced in the Budget, but instead of funds being infused in instalments, these will now be provided immediately to the banks, enabling them to lend up to Rs 5 lakh crore more to the economy. The government is working with the banks to ensure that lending rates are lowered in line with the reduction in policy rates by the Reserve Bank of India.

      1. Measures to push automobile sales.

      Although the government did not indicate any reduction in GST rates in the automobile sector, it deferred higher registration fee, asked government departments to replace old cars and doubled the depreciation available to 30 per cent on cars.

      The government asserted that ICE (internal combustion engine) vehicles will coexist with EVs (electric vehicles) and there will be no phasing out of ICE vehicles, a fear expressed in certain quarters of the auto industry.

      1. In another major announcement, Sitharaman said Corporate Social Responsibility (CSR) violation will be treated as a civil offence, and not a criminal offence.

      Background

      The amendment to the Companies Act, passed earlier this month, introduced harsh penalties including jail term for non-compliance on CSR by listed companies. This had been slammed by industry as a regressive move, especially because in the last five years, the total CSR spend of companies has progressively jumped from 70 per cent to over 90 per cent now.

      1. Clear pending GST refunds

      In another significant move that will provide immediate liquidity to thousands of companies, the government announced that all pending GST refunds will be paid to Micro, Small and Medium Enterprises within 30 days. In future, all GST refunds shall be paid within 60 days from the date of application.

    1. Removal of Angel Tax

    To mitigate genuine difficulties of startups and their investors, it has been decided to withdraw angel tax provisions for them. The exemption will be applicable to only those startups that are registered with the Department for Promotion of Industry and Internal Trade.

    (Source:https://indianexpress.com/article/business/economy/economy-nirmala-sitharaman-market-banking-investment-fdi-narendra-modi-5932286/)



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