The Union Budget for 2023–2024 was presented by Finance Minister Nirmala Sitharaman. This fiscal year’s Union Budget, like previous ones, emphasizes inclusive development (supporting ease of doing business and financial inclusion of small businesses), public-private partnerships, skilling (teaching-upskilling), and launching medium- to long-term national development initiatives. Here is a summary of the Union Budget 2023’s main points.
Key Union Budget 2023 Highlights
- Over 3,400 law requirements were made less punishable, and more than 39,000 compliances were decreased. The Jan Vishwas Bill was proposed by the government to reform 42 core legislation and advance trust-based governance at all levels. In this sense, decriminalizing crimes refers to a set of small economic infractions that were formerly punished by incarceration but are now a sanction that a governing body would impose with updated fines and penalties.
- To further the development of adaptive KYC for Digital India, the National Data Policy will permit access to anonymous data for the establishment of risk-based profiles. The Business PAN will be used by government organizations as the primary identification for evaluating and gaining access to firm data. As less than 13 separate company IDs—including EPFO, ESIC, GSTN, TIN, TAN, and PAN—would be required to file for various government. permissions, doing business will become less complicated.
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The sector of Micro, Small, and Medium-Sized Enterprises (MSMEs) was primarily the focus of the Union Budget 2023.
- The Vivad Se Vishwas plan was labeled a failure by FM Nirmala Sitharaman for failing MSMEs. Under this program, MSMEs will receive from the government 95% of the performance security in the event that contracts are not completed.
- Enabling prompt payments to MSMEs is a significant further step. Only once it has been repaid will payments made to MSMEs be eligible for a deduction.
- Increasing the ECLGS The Finance Minister announced the prolongation of ECLGS until March 2023 in order to concentrate on the hotel industry. To assist MSMEs in coping with pandemic losses, the Emergency Credit Line Guarantee Scheme (ECLGS) was established during the Covid-19 pandemic and has been extended through March 31, 2022. The ECLGS will be prolonged till March 2023 and its guarantee cover will be increased by Rs 50,000 crore to a total surface of Rs 5 lakh crore in consideration of the following factors.
- With an extra investment of $9,000,000,000, the government will revamp the Credit Guarantee Trust for Small Microenterprises Scheme (CGTMSE). It will permit guaranteed loans without any security in the amount of two lakh billion rupees. Additionally, credit fees will drop by around 1%.
Regarding the presumed taxes of freelancers and small businesses:
- The cap on small firms’ annual revenue has increased from Rs 2 crore to Rs 3 crore.
- For some professions, it has increased from Rs 50 lakh to Rs 75 lakh. Only when the value of cash receipts represents no more than 5% of the overall value of the receipts may presume taxation be employed. Small firms and professionals are relieved of the burdensome tax filing requirements since they are not required to maintain their books of account or have their accounts audited.
- The expansion of MSMEs will be aided by the reduction of customs charges on particular commodities and the exemption of iron and steel scrap from customs duty.
- The government extends the exemption from customs duties to imports of capital goods and equipment required to produce lithium-ion cells for EV batteries. This decrease in price will promote the development of electric vehicles and enable manufacturers to make them at reduced costs.
- With Entity DigiLocker, the government broadened the scope of the existing DigiLocker to support innovation in the financial sector. MSMEs, businesses, and charitable trusts will soon be able to securely store and exchange documents with authorities, regulators, banks, and other commercial organizations thanks to Entity DigiLocker.
Extended Tax holidays and a little more for StartUps
Tax breaks and several regulatory adjustments for startups were announced by the Center. The following is a list of them:
- The Tax Holiday Scheme for entrepreneurs has been extended by FM Sitharaman until March 31, 2024, meaning that businesses that incorporate no later than that date would be eligible for tax incentives. Up to March 31, 2023, startups that have already been incorporated could still use the tax holiday program. Other tax advantages include postponement of ESOP taxes under Section 192(1C), relaxation on carry-forward, and set-off of losses under Section 79, as well as angel tax exemption for qualifying start-ups formed before 1 April 2024.
- By extending the advantage of carrying forward losses on a change in startup stock from seven to 10 years, the Budget 2023 helped startups. If all of the company’s owners continue to own those shares, the requirement of continuity of a minimum of 51% shareholding to offset carried-forward losses is waived for qualified startups.
- The government is extending the application of the angel tax to non-resident investors. Private enterprises that issue shares for compensation that is greater than fair market value are subject to the angel tax.
- According to the cited provision, inhabitants were the only ones who were now subject to these angel taxes.
- To broaden the scope of taxation in the hands of startups to include investment from non-residents, the budget proposes to remove the word “resident” from the aforementioned clause with effect from April 1, 2024.
- The government has established an Agriculture Accelerator Fund to support businesses and new ideas in the sector and to provide a forum for farmers to share knowledge.
- Due to the growing importance of digital payments, the government recommended investing INR 2516 crores under the Digital Agriculture Infrastructure Scheme to digitalize 63,000 main agricultural credit societies.
- A serious issue that has impacted 35% of agricultural yield overall is disease infestation. With a budget of Rs 2200 crore, the Atma Nirbhar Clean Plant Program would give farmers access to disease-free planting materials and other amenities.
- To encourage startups in the nation, the government has taken a number of actions. The Fund of Funds for Startups (FFS) scheme, Startup India Seed Fund Scheme (SISFS), and Credit Guarantee Scheme for Startups (CGSS) are implemented as part of the Startup India program to offer funding at different phases of a startup’s business cycle.
- The 2023 Union Budget placed a priority on green energy. The government is especially interested in encouraging individuals to avoid using non-green energy sources through promoting solutions. The National Green Hydrogen Mission, which has been allocated Rs. 19,700 crores and Rs. 35,000 crores for the energy transition, is one of several initiatives the government has proposed to encourage less destructive alternatives.
- Few technological developments have been as significant as AI. The government will establish three AI research institutes and implement a National Data Governance Policy that will permit access to anonymized data in recognition of the immense value that more AI integration may offer to the economy.
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Indirect Taxes and Custom Duties were relaxed
The cost of production and daily life is significantly impacted by indirect taxes like GST and Customs, which account for a sizeable portion of the government’s income. The alterations listed below were included in the Union Budget 2023:
Goods and Services Tax: When it comes to products or services utilized for CSR-related activities, ITC will not be accessible.
Customs duty: Other than textile and agricultural products, the BCD, SWS, and AIDC rates on a number of commodities will be lowered to 13% from 21% as part of the rate rationalization of the customs tax rate structure. The list of products covered by the 13% slab is pending details.
- In the future, prices will drop for some things including polished diamonds, chemicals used to make petroleum products, camera lenses for cell phones, and steel waste.
- Other items that will decrease in price include compounded rubber, denatured ethyl alcohol used in the chemical sector, and pieces of open cells from TV panels.
- The concessional duty on lithium-ion cells for batteries and the decreased to zero customs duty on camera lenses and their inputs or parts used in the production of cellular mobile phone camera modules were both extended by FM for a further year.
Increase in CAPEX to boost Indian Infra
Any economy’s foundation is its infrastructure. The government has massively boosted the capital expenditure budget to Rs. 10 lakh crore, a 33% increase, in order to make sure that India is as sturdy as feasible. Businesses and industries in India that rely heavily on logistics would gain greatly from it, and it will make transportation less difficult for Indian company owners. The much-needed boost to business in Tier 2 and Tier 3 cities will come from lower logistical costs.
Stepping into the future
The government has promoted financial inclusion and the digitization of money across industries, as shown in the Union Budget 2023. The FM increased financial assistance to enterprises, digitalized the agricultural sector, loosened numerous corporate restrictions to draw FDI, and increased capital investment to stimulate business growth in this Union Budget. In conclusion, the budget is both aspirational and realistic, with a strategy for achieving sustained growth and turning India into an economic giant.