Flagging off pre-budget expectations in lieu of the Union Budget 2018-19, the Federation of Indian Chambers of Commerce and Industry (FICCI) on Wednesday stressed on the need for tax rate cuts across the board for individuals and businesses to spur domestic investment and demand, and retain India's global competitiveness.
FICCI President Pankaj Patel, in a letter to Finance Minister Arun Jaitley, noted that although a roadmap for bringing corporate tax down to 25 percent was chalked out in the earlier budget, nothing was implemented across the board.
It further shed light on the impact of the Dividend Distribution and Buyback Tax, which, along with the basic corporate tax, would push India's overall tax rate for companies above 40 percent, which is quite high. The FICCI, in this light, has recommended that the tax rates be brought down across the board.
On the Goods and Services Tax (GST) front, the FICCI noted that going forward; convergence of tax slabs into three or four rates is needed, which will include all excluded items under its ambit. It also stated that the tax should not be applicable on intra-entity transfer of services, as this would lead to taxing artificial transactions rather than real economic ones.
Patel further highlighted the need for clarity on anti-profiteering provisions under the GST, especially its relevancy on product or entity level, applicability on product stock prior to the GST, examination at the central or state governmental level, and so on. Clarity, the FICCI says, is necessary to avoid penal consequences on non-compliant taxpayers.
The industry body in its letter also highlighted the significance of enactment of the Insolvency and Bankruptcy Code (IBC), 2016, adding that tax considerations are crucial for efficiency of the same.
"The enactment of Insolvency and Bankruptcy Code, 2016 (IBC) is significant. Tax considerations are important for successful implementation of insolvency schemes and tax provisions should not be a deterrent in achieving the policy objectives of IBC. In this regard, there is a need to exempt levy of Minimum Alternate Tax (MAT) on write back of notional income pursuant to approved plan of IBC," it noted.
Among other recommendations, the FICCI suggested establishing around two to three regulation free zones for relaxing regulatory requirements. It also lauded the recent bank recapitalisation plan announced by the Centre, adding that it needs to be coupled with reforms in the banking sector.
"The recapitalisation plan for Public Sector Banks is welcome. This needs to be accompanied with banking sector reforms. Government should consider further consolidation and even privatisation of some of the public sector banks, having at the most 5-6 large public sector banks," it noted.
The FICCI also recommended continued focus on productive expenditure (infrastructure capon), adding that if this requires relaxation of fiscal deficit target, it should be considered.
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