Vikram Doshi / Dinesh Daga

 

In view of slowing economic growth, cautious lending environment and rising unemployment in the country, there’s a need for the government to improve the credit environment, increase disposable income and give a stimulus to key employment-generating industries such as auto and infrastructure. This could help India ride the economic situation and perhaps propel its growth.

With precisely calculated tax policies and incentives in the Union Budget, Finance Minister Nirmala Sitharaman can provide corporates and individuals with the required leeway to spur investment, demand and consumption. In this context, corporate India has some key expectations from Budget 2019.

Rationalisation of tax rates : On the individual tax front, tweaking the slab rates and surcharge may provide more disposable income in the hands of consumers. Reduction of the corporate tax rate to 25 per cent across all industries would bring parity and provide a level-playing field for all taxpayers.

Many industries pay taxes under Minimum Alternate Tax (MAT) provisions and this is almost like a cost because they are unable to utilise the MAT credit for various reasons. At present, the MAT rate is almost 20 per cent. Bringing it down even marginally will give a psychological boost to industry, especially the IT and ITeS sector.

Profit-linked incentives : These are not available for Special Economic Zone (SEZ) units that will commence operations after March 31, 2020. The contribution of this segment to employment and infrastructure generation across the country and sectors has been significant. Extending this tax incentive for a few more years will further boost the segment’s growth, employment and infrastructure development agenda.

Infrastructure spending is a known multiplier. To spur investment in ‘on agenda’ infrastructure such as airports and highways, and reinstation of expired tax incentives “for developing, operating and maintaining infrastructure facilities” will provide some hope and relief to a sector plagued by many issues.

R&D-related expenses : Enhanced deduction for research and development-related expenses has been phased out in a gradual manner and is now capped at 100 per cent of expenditure incurred after March 31, 2020. And in view of the government’s focus on ‘Make in India’ and the need for investment in cutting edge R&D, this enhanced deduction needs to be around for some more time.

Certainty and rationalisation of tax provisions : There are many areas that require certainty of tax provisions — for example, taxability of premiums on shares issued to resident shareholders, rationalisation of tax provisions on applicability of section 79 in the case of reorganisation of groups, carry forward of MAT credit in the hands of an amalgamated company and the applicability of section 94B for loans from resident lenders in India on the basis of a guarantee from associated enterprises.

New DTC : All eyes are on the roadmap to the new Direct Tax Code. Comparing the GST experience, people expect the same certainty on the DTC.

There is widespread awareness that there is a need to comply with fiscal prudence. However, when the government has a clear run of five years and there is a backdrop of economic gloom and unemployment, would this not be an opportune time to be bold?

Vikram is a Partner and Leader Tax Markets, and Dinesh is a Partner Tax, PwC India. The views are personal

 

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