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All eyes are set on India’s first female full-time finance minister Nirmala Sitharaman as she will present the Union Budget 2019-20 in two weeks from now, on July 05.
This will be the first budget of second term of PM Narendra Modi’s government, and salaried as well as the corporate class are looking forward to a good budget, including reduction in tax rates and exemptions.
In order to understand Budget FY20 expectations in depth from the corporate side, PwC in association with CNBC-TV18 held an insightful discussion in its fourth episode of India Tax Talks titled ‘India Inc’s Budget Expectations’.
Top experts Prabal Banerjee, Group Finance Director, Bajaj Group; Jogendra Sethi, CFO, VIP Industries; Ramesh Swaminathan, Head- Corporate Centre, Larsen & Toubro; Neelesh Talathi, CFO, Pepperfry; and Frank D’Souza, Partner & Leader- Corporate & International Tax, PwC India, deliberated on expected tax changes, policy announcements, and more.
One of the main discussing points at the session was lowering the corporate tax.
“We are expecting some moderation in income tax rate because other countries are reducing the rate for their investment. India should not lag behind in that case. In India, we have tax rates around 34.6% and there is a DDT of around 20%, which comes on the corporates more than 40%. When we see the USA, they have reduced the rates from 35% to 21% and the BRICS countries have 20% rate. I think we should reduce the rates. It will encourage local industries also to invest more and economy will get a boost,” said Sethi.
At present, India is undergoing a tough phase. The engines of the country are down, there is a dip in exports, investments and GDP growth rates. In this scenario, the government will have to find the right balance between fiscal prudence and development.
“I think important thing for our country is to boost up the investment in infrastructure as well as non-infrastructure sector. I do expect some amount of tweaking will happen in the tax rate, but I do not see any major change,” said Banerjee.
Meanwhile, experts said it was time for the government to give impetus to e-commerce segment as well.
“With the sort of mandate this government has got, I think there are two areas that this government should focus on. First is to boost demand in the economy, and the other I rightly want the government to focus on is e-commerce market. This is again the time for the government to do something about it,” said Talathi.
In a nutshell, a need for roadmap was perceived.
“It is important if she lays out a roadmap in terms of what she will achieve and seek to achieve over the 4-5 years, just like Jaitely did. It provides certainty and builds expectation in the market in terms of where this is moving. She has to candid about what the challenges are,” said D’Souza.
Furthermore, capital gain tax and dividend distribution tax (DDT) were also discussed.
“In my mind, it is nothing but a corporate tax. It increases the tax burden on the company, on the investors and in fact, it goes and harms small tax payers, because their take home is reducing because of the fact there is DDT which is getting paid. And given the fact we have such strong compliance now, it is time to move back to the old regime of taxing dividends in the hands of the recipient and at the slab rates which they go ahead and pay tax,” said D’Souza.
Experts also focussed on the need for Long Term Capital Gains (LTCG) tax, whether it should continue or removed for benefit of the equity market.
“One should look at the total quantum of money that you are able to garner from the LTCG tax, and I suspect it is not high as one imagined it to be. It is more of an inconvenience tax and it works against sentiments also. It would be appropriate, if it is taken away by the taxation regime itself. But, having said that, there are many governments in the world where LTCG indeed taxed. We should also look at the timing of this tax,” said Swaminathan.
The experts touched upon other important subjects as well. Watch full episode of PwC presents India Tax Talks, in association with CNBC-TV18.