India today is considered a rising star amidst a global economic slowdown. Considering the gross domestic product (GDP) expectation of 7.5 percent for FY2015-16 and FDI inflows of USD 22.65 million until September 2015, has pushed Budget expectations upwards, says Girish Vanvari, Partner and Head - Tax, KPMG India.
For the upcoming Budget 2016, any movement on taxation will be closely watched.
Vanvari says two points that must be kept in mind. Firstly, reduction in tax rates and withdrawal of tax exemptions should be done with parity.
Other thing would be “appropriate grandfather provisions should be put in place to help ensure that the currently availed tax benefits are allowed to run their course,” he says.
The government could also look at reducing burden of Minimum Alternate Tax (MAT), which currently stands at 18.5 percent.
“The need of the hour is to recognise the stressed and needy sectors such as agriculture, banking, commodity manufacturing and infrastructure, etc.,” says Sachin Menon, Partner and Head - Indirect Tax, COO - Tax at KPMG.
The government should also look at developing “a comprehensive plan to boost public spending to convert the adversities plaguing these sectors into opportunities,” he says.
One of the positives could be passage of the GST Constitution amendment Bill, which is expected to boost GDP and growth of the economy. “With the rising expectation of GST being introduced in 2016, the government could also reduce the Central Sales Tax rate to 1 per cent, which is the expected road map for GST,” Menon says.
“The Budget is also likely to get a thumbs up if the various cesses (such as national calamity contingent duty, clean energy cess and the recently levied Swachh Bharat Cess, etc.) are abolished and subsumed within the existing applicable taxes,” he adds.
Parizad Sirwalla, Head - Global Mobility Services, KPMG says the common man will be expecting tax sops from the upcoming Budget on February 29.
One of the key expectations will be increase in the minimum threshold of income limit to Rs 3,00,000 per annum that will lead to rise in income and purchasing power of the individual. The government may also look at greater deductions on taxable income, she says.