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Nirmala Nitharaman
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Union Budget 2021-22

Important takeaways

Through the budget proposal for the financial year 2021-22, the Union government has taken several measures to protect the weaker and vulnerable sections of the society, especially during the COVID-19 pandemic. The Union Minister for Finance and Corporate Affairs, Nirmala Sitharaman said, within 48 hours of declaring a three-week-long complete lockdown, the Prime Minister announced the Pradhan Mantri Garib Kalyan Yojana (PMGKY). Valued at ₹ 2.76 trillion, the PMGKY provided free food grain to 800 million people, free cooking gas for 80 million families for months, and cash directly to over 400 million farmers, women, the elderly, the poor and the needy.

In pursuance of the measures taken for the weaker sections, the Finance Minister announced that to further facilitate credit flow under the scheme of Stand Up India for SCs, STs, and women, it is proposed to reduce the margin money requirement from 25% to 15% and to also include loans for activities allied to agriculture.

Nirmala Sitharaman has disclosed that a target of establishing 750 Eklavya Model Residential Schools in the tribal areas has been laid out. She has said that it is proposed to increase the unit cost of each such school from ₹ 20 crore to ₹38 crores, and for hilly and difficult areas, to ₹48 crores. This would help in creating robust infrastructure facilities for the tribal students.

She further said that the Post Matric Scholarship Scheme, for the welfare of Scheduled Castes, has been revamped and the Central Assistance in this regard has been enhanced. A total of ₹35,219 crores for six years till 2025-2026 is being allocated, the Minister highlighted. This will benefit 40 million SC students, she said.

The Finance Minister also said that the outlay for the MSME sector is being increased to ₹15,700 crores this year, which is more than double of current year’s budget estimate (BE).

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Measures to increase Employability of Youth

The government proposes to amend the Apprenticeship Act with a view to further enhancing apprenticeship opportunities for the youth. The Finance Minister said that the existing scheme of the National Apprenticeship Training Scheme (NATS) for providing post-education apprenticeship, training of graduates and diploma holders in engineering will be realigned with the provision of over ₹3,000 crores. 

Nirmala Sitharaman said that an initiative is underway, in partnership with the United Arab Emirates (UAE), to benchmark skill qualifications, assessment, and certification, accompanied by the deployment of a certified workforce. There is also a collaborative Training Inter Training Programme (TITP) between India and Japan to facilitate the transfer of Japanese industrial and vocational skills, techniques, and knowledge.  Such initiatives will be taken forward with many more countries, the Finance Minister disclosed.

Capital Equipment

The Finance Minister, Nirmala Sitharaman in her third Union budget speech, has said that there is immense potential in manufacturing heavy capital equipment domestically. She said that the rate structure would be comprehensively reviewed in due course. She proposed to withdraw exemptions on the tunnel boring machine. It will attract a customs duty of 7.5%; and its parts a duty of 2.5% while raising customs duty on certain auto parts to 15% to bring them on par with the general rate on auto parts.

MSME Products

The Union budget for 2021-22 proposes certain changes to benefit MSMEs which include increasing duty on steel screws, plastic builder wares and prawn feed to 15%.  It also provides for rationalizing exemption on import of duty-free items as an incentive to exporters of garments, leather and handicraft items.  It also provides for withdrawing exemption on imports of certain kinds of leathers and raising custom duty on finished synthetic gemstones.

Agriculture Products

For farmer’s benefit, the Union Finance Minister announced raising custom duty on cotton to 10% and on raw silk and silk yarn to 15%. She also announced withdrawing end-used based concessions on denatured ethyl alcohol. 

Agriculture Infrastructure and Development Cess

The Finance Minister proposed an Agriculture Infrastructure and Development Cess (AIDC) on a small number of items. She said, “While applying the cess, we have taken care not to put additional burden on consumers on most items”. On the customs side, the items covered under AIDC are gold, silver, alcohol beverages, crude palm oil, crude soya bean and sunflower oil, apples, coal, lignite and peat specified fertilizers, peas, Kabuli chana, Bengal gram, lentil and cotton overall there would be no additional burden on the consumer on most of these items.

On the excise side, an AIDC of ₹2.5 per liter has been imposed on petrol and ₹4 per liter on diesel. However, Basic Excise Duty (BED) and Special Additional Excise Duty (SAED) rates on petrol and diesel have been reduced in the budget so that overall consumer does not bear any additional burden. Unbranded petrol and diesel will attract BED of ₹1.4 and ₹1.8 per liter respectively while SAED on them will be ₹11 and ₹8 per liter respectively.

Regarding rationalization of procedures and easing of compliance, the Finance Minister proposed certain changes in the provisions relating to ADD and CVD levies.  She also said that to complete customs investigation, definite timelines are being prescribed.  The Minister said that the Turant Custom Initiative rolled out in 2020 has helped in putting a check on misuse of FTAs.

Decriminalization of the limited liability partnership (LLP) Act, 2008

The Finance Minister proposed to take up decriminalization of the Limited Liability Partnership (LLP) Act, 2008 on similar lines of the decriminalizing of the procedural and technical compoundable offenses under the Companies Act, 2013, which is now complete.

Revision in 'Small Companies' definition

The Finance Minister proposed to revise the definition under the Companies Act, 2013 for Small Companies by increasing their thresholds for Paid-up capital from “not exceeding ₹50 lakh” to “not exceeding ₹2 crores” and turnover from “not exceeding ₹2 crores” to “not exceeding ₹20 crores”. This will benefit more than two lakh companies in easing their compliance requirements.

Proposed easing of rules in 'One Person Companies' for Start-Ups, Innovators

For the benefits of start-ups and innovators, the Finance Minister proposed to incentivize the incorporation of One Person Companies (OPCs) by allowing OPCs to grow without any restrictions on paid-up capital and turnover. The budget proposes to allow their conversion into any other type of company at any time, reducing the residency limit for an Indian citizen to set up an OPC from 182 days to 120 days and also allow non-resident Indians (NRIs) to incorporate OPCs in India.

Strengthening of NCLT framework for faster debt resolution

To ensure faster resolution of cases, the Finance Minister stated that the NCLT framework will be strengthened, the e-Courts system shall be implemented and alternate methods of debt resolution and special framework for MSMEs shall be introduced.

Launch of new MCA21 Version 3.0

During the coming fiscal 2021-22, the Finance Minister said the government would launch data analytics, artificial intelligence, machine learning-driven MCA21 Version 3.0. This Version of MCA 3.0 will have additional modules for e-scrutiny, e-Adjudication, e-Consultation and Compliance Management.

Inclusive development for Aspirational India is one of the pillars on which the Union Budget 2021-22 stands and provide the guiding light for the government to put forth proposals for unorganized workforce especially the migrant workers and labourers. 

One Nation One Ration Card

“One Nation One Ration Card plan is under implementation by 32 states and UTs, reaching about 69 crore beneficiaries – that’s a total of 86% beneficiaries covered”, the Finance Minister informed to the house while assuring the integration of remaining 4 states and UTs in coming few months. This scheme allows beneficiaries to claim their rations from anywhere in the country, especially the migrant workers,  with a partial claim from where they are stationed, while their family, in their native places, can claim the rest.

Migrant Workers & Labourers

Portal for unorganized labour force

Labour Welfare

To further extend the governments’ efforts towards the unorganized labour force with a special focus on migrant workers, Nirmala Sitharaman proposed to launch a portal that will collect relevant information on gig, building and construction workers among others. This will also help formulate Health, Housing, Skill, Insurance, Credit, and food schemes for migrant workers.

Implementation of Labour Codes

The Finance Minister said that government would conclude the implementation of the four labour codes for extending social security benefits to gig and platform workers with the application of minimum wages across all categories of workers. Coverage under the Employees State Insurance Corporation will also be extended to them. Women will be allowed to work in all categories and also in the night-shifts with adequate protection.

The provision of single registration and licensing, and online returns will also reduce the compliance burden on employers.

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