Rationalization of input tax credit restriction: Input Credit for the expenses incurred for businesses should be allowed irrespective of the nature of expense whether it is on food, beverages, insurance or cab expenses. If the particular supply is being used in the course or furtherance of business, the taxpayers should have opportunity to avail benefit of input credit on such supply.
RCM on purchases form Unregistered persons:
Although government has postponed the RCM provisions till March 2018, it would be in the interest of taxpayers to remove these provisions or postpone them till people get enough understanding about provisions of law.
Input Credit against CGST on pan India basis:
The Input credit of CGST should not be restricted to the state where the taxpayer is registered. In the past, it was available across the country on pan-India basis; there was no link to State. Under GST, if a person is not registered in a particular state, input credit of taxes paid in such state is not allowed even if it is on account of CGST. Since CGST is being paid on account of Central Government, taxpayers should get benefit of input credit against CGST paid, irrespective of whether taxpayer is registered in a particular state or not.
Reduce GST on products which are likely to benefit the economy:
GST on products which will benefit from the overall development of the economy should be reduced or exempted. One such example is insurance products. Currently, life insurance penetration in India is at 3-4%. In the absence of a comprehensive social security mechanism, insurance provides the first layer of financial security and the current tax rate of 18% is making insurance costlier.
Talk points for direct tax
Increase in basic tax free income: Basic tax free income, which is at present Rs. 2.50 Lacs per annum should be increased
Relief to Salaried Class: Till year 2005, a standard deduction was available to salary class people. If this can be re-introduced, it will have a positive impact on this category of taxpayers. Apart from this an increase in medical allowance will help salaried class people. Medical is one of the necessity and cost of medical facilities have increased, therefore cap of exempt medical allowance may be increased
Increase in deduction for NPS Contribution: To make NPS more popular and lessen the dependency on social security schemes, amount of deduction for contribution to NPS should be increased.
Make tax return filing automatic for individuals: Every year, processes are going to be more and more automized. In line to this, the government can take a step further by sending pre-populated return forms to taxpayers with information from their Form 26AS and other financial transactions linked to their Aadhaar and PAN. The taxpayer should have the option of review and modify before filing. This will save time of taxpayers in filling the form.
Boost to Research and Development: Though we are align with the intention of government to reduce corporate tax rate and eliminate all exemptions and deductions. But Research and Development (R&D) is a single area where India needs more and more innovation. An additional deduction for R & D, may continue for at least next 5 years. This will create more opportunities for make in India.
Growth for Housing Sector: An increase in amount of interest deduction u/s 23 for self-occupied property (SOP) and an additional deduction to the real estate industry, may give boost to the new projects, especially low cost projects.
Benefits to Start-ups: Start-ups are required to be more incentivized. Hope Budget may give more focus on this
The author is chief financial officer of Tally Solutions