Budget expectations reach fever pitch

| Updated on February 10, 2013

The Government may also consider reintroducing investment allowance to revive the capital goods sector.   -  Business Line

With Budget 2013 less than a month away, discussion and debate has reached fever pitch. The Budget is expected to have something for all segments — be it the small investor, the corporate sector or other industry segments. There is also speculation about taxing the “super-rich” — and it remains to be seen how this could be defined or implemented. Other significant issues include the Finance Minister’s acceptance of the Shome Committee recommendations on tax anti-avoidance regulations and the Central Board of Direct Taxes’ circular on the eligibility of software industry for tax incentives.

Budget 2013 must focus on ways to revive — and stimulate — the Indian economy and augment global investor confidence in India. Here are a few areas of interest:

Reintroduce investment allowance

The manufacturing sector has considerable potential to support India’s growth story. Through industry-specific benefits, manufacturing could be turned into a priority sector. Tax incentives that support revival of the manufacturing and capital goods sectors should be introduced. The Government may also consider reintroducing investment allowance to revive the capital goods sector. The tax incentives spelt out in the Draft Manufacturing Policy tabled last year should be accepted.

More teeth for dispute resolution

The dispute resolution process has not proved successful. Litigation in India is time-consuming and increases the hidden cost for global companies operating here. The Government should consider ways to streamline and strengthen the process. The object should be to resolve disputes with a fair and open mind.

Withdraw retrospective amendments

One of the significant issues global investors are concerned about is the continued uncertainty on various tax positions. Last year’s Budget brought in the proposed tax anti-avoidance GAAR and retrospective amendment. This had a significant impact on global investor sentiment. The proposed retroactive amendments created a dent in the country’s image. In this scenario, adequate safeguards should be built in, and all retrospective amendments withdrawn.

Published on February 10, 2013

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