Pre-Budget consultation: Industry divided over revision of direct tax rates

Industry chambers appear to be divided over income-tax issues for forthcoming Union Budget of FY 2021-22.

Industry captains as a part of various industry chambers met the Finance Minister Niramala Sitharaman on Monday as part of pre-Budget consultation.

On Tuesday, Finance Minister will have pre-budget meetings with stakeholders of financial sectors and capital markets.

The Confederation of Indian Industry (CII) did not press for any significant deductions/ exemptions in terms of direct taxes, but focus on greater clarity in law, simplification of procedures and reduction of litigation. It suggested extending Vivad se Viswas scheme till December 31, 2021. Appeals pending on or before June 30, 2021 could be considered eligible for the scheme.

It also called for setting timelines for disposal of appeals by Commissioner (Appeals) on the lines of timelines set for Dispute Resolution Panel. It suggested providing option of fast-tracking appeals at Commissioner and Tribunal levels on payment of a higher fee.

For custom duty, it recommended moving towards competitive import tariffs over three years, with lowest or nil slab on inputs or raw materials (say 0-2.5 per cent), standard slab for final products (say 5-7.5 per cent) and at intermediary level (say 2.5-5 per cent).

Disinvestment in PSBs

CII President Uday Kotak suggested government should bring down its stake in PSBs to below 50 per cent through the market route, over the next 12 months, except for 3-4 large PSBs such as State Bank of India, Bank of Baroda and Union Bank.

The government should also create, government owned, professionally managed Development Finance Institutions to finance key sectors of the economy, on the lines of KfW Germany, Brazil Development Bank and Korea Development Bank.

In its submission, Assocham suggested lowering tax rates for individuals. Firms/ Limited Liability Partnerships should not be required to pay tax at higher rate than corporates as most small and medium businesses are organised as firms, LLPs and proprietorship. Also, tax rate applicable to non-resident companies should be reduced in line with the reduction of tax rates of domestic companies. The aggregate tax rate for domestic companies is 25.17 per cent, whereas those for non-resident companies it works out to 43.68 per cent, it said.

The chamber feels that Minimum Alternate Tax (MAT) has outlived its utility and creates avoidable disputes and litigation, which may go up significantly on account of transition to IND AS. Therefore, MAT should be abolished or alternatively, the rate under section 115JB of the Act should be reduced to 12 per cent, it suggested.

Assocham also feels the deduction on account of interest payment available under section 24 should be made applicable from the year in which capital was borrowed. Deduction of interest should be allowed in full, at least in respect of one house. In case this is not agreed, at least the limit of ₹ 2 lakh should be raised to ₹5 lakh for owner occupied houses.