union budget 2018-19 - assets.kpmg€¦ · of indirect taxpayers adding almost 3.4 million new...

Union Budget 2018-19

#Budget2018 | #KPMGBudgetLive

kpmg.com/in/UnionBudget18

Swiss - Indian Chamber of Commerce

April, 2018

2© 2018 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

ContentsIndia and the World

Watch out For…5

Budget highlights and tax proposals3

Other considerations4

Overview of Indian Corporation Tax Regime 2

1

India and the World


Around the Globe and India Outlook

— Demonetization and GST: Induced supply shocks have eased down considerably — FDI increasing manifold

U.S.A – China Trade War

Brexit –European

Union?

North & South Korea Summit

talks

Trump’s Tax Reforms

Globalisation Vs Protectionism

German/EU push for talks on FTA

with India

Automatic EOI between India and Switzerland (from

Jan 1, 2018)


Indian Economy: Indicators

```

GST Introduced(50% increase in number

of indirect taxpayers adding almost 3.4 million new indirect tax payers)

GDP growth (%)6.5% in FY 2017-18

7.0 to 7.5 per cent growth projected in the coming

years

Bank Recapitalization(Addressing NPA issue and increasing credit

growth)

Fiscal deficit (%) of GDPFY 2016-17: 3.5%;FY 2017-18: 3.5%

(Fiscal deficit slippage from target of 3.2%)

Consumer price index inflation (%)

FY17-18: 3.3%Declining trend At Six Year Low

Demonetisationimpact :

Taxpayer base increased (1.8 Million additional

taxpayers)

Disinvestment Strategy and IBC

introduced

Forex reserves FY18 : € 343 bn

($ 425 bn) Forex reserves increased at 14.1% (Crude

Oil Watch)

`


Ease of Doing Business: India ShiningIndia in top 100*

Countries ranked

190

India’s rise

Source: Doing business 2018 Reforming to create jobs; World bank

53.93

Year

2015134

56.05

Overall rank

2017130

60.76

DTF score

2018100

Reforms for Further Improving the ranking

1. Reducing Tax litigation

2. Early Redressal of Pending Appeals

3. Abolition of FIPB

4. Enhanced focus on Infrastructure sector (budget allocation increased by 25% with focus on completion of existing projects)

5. Expanding R&D in India

6. Streamlining Labour Laws


0.59 0.69 1.10 1.12 1.78 1.07 0.98 0.97 0.82

14.67

24.80

34.7632.16

19.3122.13

19.3 17.25 16.19

0.0

10.0

20.0

30.0

40.0

2009-10

2010-11

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

2017-18

Exports Imports

India’s journey with Switzerland

* GDP benchmark for 2015 shiftedd from factor costs to market price to bring in line with most of the countries and the base year for calculation of GDP changed from 2004-05 to 2011-12

0.10

0.89

0.23

0.30 0.34 0.340.24

0.51

0.34

0.00

0.20

0.40

0.60

0.80

1.00

2009-10

2010-11

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

Dec-17

Source: Ministry of Commerce & Industry website Source: RBI & DIPP

4.3%

7.0%

9.6%

6.7%

8.4%

6.6%

5.1%

6.9% 7.2% 7.6% 7.1%6.5%

7.4%

2001 2005 2007 2009 2011 2012 2013 2014 2015 2016 2017 2018 2019expected

Annual GDP growth (%)… along with increasing foreign investmentMarked acceleration in growth over the past two decades

FDI inflows from Switzerland (USD Billion)

Recessionary PlungeQuick Recovery Recovery

$22.80

$41.90 $34.80

$46.80

$36.80 $36.40

$44.88

$53.43 $59.41

$48.14

2006-07 2008-09 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 Dec-17

Foreign direct investment (USD billion)

India’s Trade with Switzerland (USD Billion)

Overview of the Indian Corporation Tax Regime


Overview on Indian corporate tax regime

MAT / AMT

Leviable where book profits / adjusted taxable income exceeds the total income computer under normal provisions.

MAT - 18.5% of book profits (specific adjustments)

Tax Treaties

Extensive tax treaty network (90+ countries) India Active participant to BEPS Project

Comprehensive Dispute Resolution

Effective ruling practices -Advance Pricing Agreements, Advance Authority of Ruling, Safe Harbour Rules

Statutory Rate of Tax

Domestic Company - 34.944%Foreign Company – 43.68%; LLP / Firms – 34.944% Dividend Distribution Tax @ 20.56% (Cess 4%) (not leviable on LLP’s). Exempt in the hands of shareholders

Withholding tax

Withholding tax mechanism prescribed for payments to resident or non-residents For Royalty / Fees for Technical Services – Indian domestic law and the India-Swiss tax treaty provide a tax rate of 10%

Goods andService Tax

Trade Tax i.e. Goods and Service Tax (ranging between 5% to 28%) on supply of goods and services

Transfer Pricing

Transfer Pricing provisions applicable with regard to related parties transactions; Tested for Arms Length Price

Carry forward of Losses / Depreciation

Losses generally carry forward for 8 years; Unabsorbed Depreciation carried forward for unlimited period

Budget Highlights & Tax Proposals


Industry expectations

Digital industry – Greater incentive for digital transactions and fiscal measures to be introduced for e-commerce

Increased thrust on infrastructure – Measures to boost private participation

Greater leeway to Financial services sector, as most impacted by recent Government initiatives

Reduction in corporate & individual tax rates

GST regime – More liberalized reforms

Incentives for MSMEs

Budget2018-19


Key thrust areas/ policy initiativesBoost to MSMEs

Focus on employment generation andsocial security measures

Introduced world’s largest healthcare Programme for vulnerablefamilies

Increased rural outlays (MSP)

Policy for hybrid instruments for start-ups and venture capitals

Continued focus to drive infrastructure sector

Impetus to International Financial service centre


Key Corporate Tax Proposals

Long Term Capital Gain: Exemption withdrawn on LTCG on sale of equity shares or equity oriented units. 10% LTCG tax has been introduced

Concessional Tax Rate: Companies with total turnover of less than or equal to INR 250 crores (Euro 31 Million) in FY 2016-17 taxable at 25%.

Cess increased from 3% to 4%

Prosecution for failure to furnish return of income: Prosecution shall lie against companies for non-filing of return, whether or not any tax is payable.

E-assessment: Government notified a new e-assessment scheme for assessment being done in electronic mode.

The definition of “business connection” has been expanded to align with modified PE rules as per MLI and OECD BEPS Action Plans. Significant Economic Presence included (revenue based/user based tests introduced) along with including Digital presence in India


Allocation to Various Sectors

Allocation of € 1.22 Billion to create and augment telecominfrastructure

Telecom Sector

Allocation of € 0.15 Billion for world’s largest government healthcare programme

Health Industry

Allocation for the Digital India

programme doubled to € 0.38 Billion

Digital Media

Allocation of € 12.3 Billion for development

of Educational Sector in the next four years

Education


Reaction of the Indian Industry

Although India’s overall economy is growing, Mr. Modi and his governing Bharatiya Janata Party have been trying to find ways to court the population left behind

The world's largest government's funded healthcare program -National Healthcare Protection Scheme (NHPS) announced by our FM, with approximately 500 million beneficiaries, an insurance scheme of up to INR 5 lakh per family per year for secondary and tertiary care hospitalization is a welcome move not just to maintain a healthy India but this I believe will also create several lakh/s new jobs in the country

The FM has presented a Budget which is both balanced and positive. Focus on rural infrastructure, agricultural output and farmer income will help reduce the agrarian distress and boost the rural economy

The New York Times T V Narendran,

CEO & MD Tata Steel India Limited.

Anthony Jacob,CEO, Apollo Munich Healthcare Insurance

Other considerations


New direct tax legislation

Constitution of Task Force for drafting a

New Direct Tax Legislation


Combating tax avoidance

— GAAR

— MLI (India and Switzerland shall be CTAs)

— Amendments to Mauritius, Singapore Treaty


A New-Age Tax Administration

Technology led transformation and Exchange of Information


Watch out For…

General Elections 2019: Impact on Reform pace!!

Questions & Answers

Thank you

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information,there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professionaladvice after a thorough examination of the particular situation.

© 2018 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Allrights reserved.

The KPMG name and logo are registered trademarks or trademarks of KPMG International.

Gaurav MehndirattaKPMG Leader: India-Swiss CorridorPartner, International Tax & RegulatoryKPMG in IndiaT : +91 (120) 386 8707M: +91 98117 55379E: [email protected]

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