Expectations that any country would have from the Budget culminates into such a tight rope walk for the government that regardless of the demands of the taxpayers, there is always room for criticism from some sectors that do not benefit from the Budget as balancing the fiscal deficit may genuinely not permit the government to honor expectations of all the sectors.
This year’s Budget is no exception more so when the government has adopted measures not necessarily through the Budget to introduce sweeping changes like introducing the Goods and Service Tax (GST), demonetisation, RERA, etc. Another reason to look forward to the Budget 2018 is that this could be the last full term Budget before going to polls in 2019.
Amongst others, one of the most sought after expectation would be a reduction in the corporate tax rate across the board, particularly when the US has reduced the corporate tax rate from 35 percent to 21 percent. While the US has witnessed several tax reforms in its endeavor to bring back profits and jobs back to the US from foreign territories, India would also want to keep its growth momentum intact and could introduce some important measures to bring more foreign investment into the country.
One can also look forward to a reduction in the rate of Minimum Alternate Tax (MAT) in view of the elimination of exemptions and incentives spread across the sectors if not a complete abolition which has been witnessed in the US tax reform measures.
One could also expect an amendment to the overriding provisions of General Anti-Avoidance Rules (GAAR) over the bilateral tax treaties to re-align it with the Base Erosion Profit Shifting (BEPS) measures which also deal with the abusive arrangements.
Another important aspect that needs attention is with respect to elimination of exemptions and deductions. Though India has commenced with the elimination of exemptions, certain tax benefits such as R&D-related incentives for key priority industries are still the need of the hour if the Government is to fulfil the promise of its “Make in India” campaign.
In view of India’s quest to upgrade its R&D base and make India a top investment destination for the MNC’s, one may expect re-instating of the R&D related incentives and deductions for specific industries.
The next area where one could expect some changes is the Income Computation and Disclosure Standards (ICDS). Right from the time the ICDS have been introduced, there have been many issues with respect to the implementation of the ICDS particularly in the context of ICDS seeking to overcome the Supreme Court as well as High Court decisions.
Though recently, the Delhi High Court has pronounced a decision dealing with the constitutional validity of ICDS and has struck down certain provisions of respective ICDS, one may expect certain amendments in the context of overriding provisions of ICDS in the Income-tax Act, 1961 (the Act).
The standard deduction was withdrawn a few years back. Since then it is one of the long pending demands of the individual taxpayers. In many countries like Malaysia, Indonesia, Germany, France, Japan, Thailand, etc., allowance in the form of standard deduction is available to the salaried employees. In countries where the standard deduction is absent it puts the salaried taxpayers at a disadvantage particularly when the inflation is all pervasive in the economy. Thus, a standard deduction is likely to be introduced in the case of salaried taxpayers to at least address the inflationary trends in the economy in case of individual taxpayers.
The implementation of GST in India has been one of the most anticipated indirect tax development, however, there still remain certain areas such as streamlining the GST compliance and improving the GST Network IT Platform which requires immediate attention. Therefore, one may expect changes in these areas. The industry will look forward to the Budget for further simplification of the GST in the context of compliance and IT aspects of the law to make it more taxpayer friendly.
While the expectations discussed above are though just a few but are far-reaching ones and it would be interesting to see how the Government strikes a balancing act while adhering to the industry demands and at the same time maintains the growth momentum of the country.
(The writer is National Head, Tax, KPMG in India)
Updated Date: Jan 25, 2018 16:20 PM