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India Inc on Monday pitched for lower tax rates for individuals and corporates in the first Budget of the new Narendra Modi Government. The Budget is likely to be presented during the first fortnight of July.
A delegation from industry chamber Confederation of Indian Industries (CII) under the leadership of its President, Vikram Kirloskar, met Revenue Secretary Ajay Bhushan Pandey and submitted its pre-Budget memorandum. Earlier, another industry chamber, FICCI presented its pre-Budget memorandum.
The CII said the Budget should announce the direction of the taxation policy. The government must ensure consistency, certainty and continuity of taxation policies for the next five years. India currently has one of the highest corporate tax burden among comparable economies. In addition to corporate tax and dividend distribution tax, MAT (Minimum Alternative Tax) is also levied.
A lower tax rate is the need of the hour for growth and investment, the CII said.
The chamber emphasised that GST data could be leveraged to further widen the direct tax base, using big data.
Several suggestions were made on direct tax structure. It said the dividend distribution tax should be rationalised to 10 per cent and should be taxed at the hands of the recipient. Long Term Capital Gains tax on equities and MAT should be removed, it said.
FICCI advocated lowering of the corporate tax rate for all companies to 25 per cent, as had been proposed earlier. This will enable industry to remain globally competitive, especially in the wake of significant cut in corporate tax rates by countries like the US and France. It also recommended that the direct income tax slabs for individuals be revised upwards. The highest tax rate of 30 per cent should be applicable only for income above ₹20 lakh. The investment limits under Sec 80C, Sec 80D and deduction for interest paid on housing loan under Sec 24, etc must be enhanced. These measures would put more disposable income with households and boost overall consumption.
Employment
The CII President said employment creation needs a strategic boost, including from the lens of revenue generation. The key sectors to be propelled for more job generation include the tourism ecosystem, the textiles to garments value chain, and farm-to-fork supply in the agriculture and food processing sector. “End-to-end supply chains in the auto industry, construction sector and retail sector also require strong policy attention,” he said, calling for a mission mode approach to generate jobs in these sectors.
According to FICCI, creating employment should be an intrinsic factor while preparing the Budget. Greater public investments across sectors like infrastructure will create significant employment opportunities. The chamber called for greater budget allocation in these areas. “Additional fiscal incentives should be provided to sectors with potential of creating large employment opportunities such as textiles, leather, food processing, gems &jewellery, footwear, tourism, real estate, etc,” it said.
Financial sector
For revitalising the financial sector, the CII recommended allocation of sufficient resources for bank recapitalisation as this will improve banks’ capacity to lend and meet credit demand. The government stake in public sector banks should be reduced from 70 per cent to 51 per cent to enable capital infusion and promote efficiency in public sector banks.
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