New Delhi: Encouraged by the largest ever Covid-19 vaccination drive in the world that is underway in the country, Indian industry has high hopes of an economic revival and asked the government to announce specific tax measures, particularly more concessions in personal income tax, to stimulate demand in the economy, a survey revealed.
“With the world’s largest immunization program currently underway in the country, time is ripe to further accelerate efforts to reinvigorate the economy,” said a survey conducted by industry body FICCI and Dhruva Advisors.
The industry body suggested that the upcoming Union budget must focus on creating demand, increase the infrastructure expenditure and outlays for the social sector.
These are the top three macroeconomic themes, which members of India Inc would like to see in the budget, said the survey.
The survey said with the global supply chains being disrupted, research, innovation and new digital services would be the key differentiators for the growth.
“India Inc would like the government to continue with its policy focus on strengthening the manufacturing ecosystem, promoting research and development, and incentivizing futuristic technologies in the upcoming Budget,” it said.
The survey said though the economy is looking up but the revival of demand is limited to a few sectors and a continuous government support will be required to revive the demand in the economy in a more sustained manner.
According to the survey, nearly 40% of the participants feel that ‘personal income tax relief’ should be the key theme of direct tax proposals in this year’s budget.
Nearly half of the respondents expected the government to widen the tax slabs.
In addition to seeking tax relief for the middle class as it is the key to economic revival, three-fourth of the survey participants asked the government to also provide tax relief to the companies to promote employment generation as it was a key driver for demand growth.
More than half of the companies sought tax relief for innovation and exports.
Industry seeks reform of tax administration
While talking about the problems faced by the industry and businesses, more than half the respondents sought timely refund from the tax authorities while 49% participants said they faced problems due to tax compliance and 43% participants said they had faced problems due to tax litigation.
In order to reduce the litigation, Prime Minister Narendra Modi’s government has launched two tax dispute resolution schemes, Sabka Vishwas for indirect taxpayers such as GST, Customs and Excise Duty payers and another scheme, Vivad Se Vishwas, for direct taxpayers such as personal income tax and corporation taxpayers.
In 2014, Prime Minister Narendra Modi had promised a stable and predictable tax policy that will end the tax terrorism and he launched a taxpayer charter and faceless assessment last year to secure the rights of taxpayers.
However, more than 85% respondents sought consistency at the ground level in tax administration to achieve these objectives.
Economic activity key to GST buoyancy
Survey participants also expressed apprehension over sustaining the GST revenue collection which touched an all time high in December 2020.
GST revenue collection touched an all time high of over Rs 1.15 lakh crore last month but industry feels that sustaining it at that level remains a challenge for the tax officials.
Ninety per cent survey participants suggested the government should focus on reviving the economic activity in the country by boosting the consumption, which will lead to a buoyant GST collection.
However, in contrast with this, just 56% companies supported stringent enforcement such as action against the use of fake GST invoices to improve the collection.
In November, GST intelligence officials launched a pan-India crackdown against the use of fake GST bills by bogus companies and GST dealers and arrested more than 200 people including five chartered accountants and several masterminds as the government sought to plug the leakage in the GST system.
Employment key to boosting growth
FICCI President Uday Shankar said the government’s top priority should be to pull the nation through the final phase of the global pandemic and enable swift economic recovery to the pre-COVID levels of growth.
“Results of the survey show that the need for continuous handholding of the economy remains the top priority and Industry expects the Union Budget to include the next set of stimulus measures to spur demand,” Uday Shankar said in a statement sent to ETV Bharat.
Uday Shankar said the budget must prioritise growth-oriented measures over fiscal considerations.
In her budget estimates, Finance Minister Nirmala Sitharaman estimated fiscal deficit to be 3.5% in FY 2020-21. However, the Covid-19 global pandemic has completely changed the fiscal path as predicted by the government in the fiscal responsibility and budget management act. Economists believe that the fiscal deficit for the current fiscal (April-March 2021 period) could be in the range of 6-7%.
Uday Sankar said the government must focus on employment generation and on putting more money in the hands of consumers, the twin engines that will boost demand and drive growth.
Dinesh Kanabar, CEO of Dhruva Advisors, said improving the ease of doing business, including ease of administration of the tax regime are key industry expectations to promote India as a global manufacturing hub.
“The Budget proposals will not only impact the near future but could also potentially shape India’s long-term growth trajectory,” he added.
(Article by Krishnanand Tripathi)