The Union Budget 2017-18 will be presented amidst the background of unexpected global developments of 2016 that have created an environment of uncertainties. On the domestic front too, while the big-bang move of de-legalising the high value currency notes is a laudable step with long-term benefits, it has caused short-term disruption and jolted the deep-rooted cash-based system to gear towards a modern less-cash economy. Undoubtedly, the forthcoming budget is being looked upon with a hope that it will offer the ‘feel good’ New Year treat that will pep-up the confidence of one and all.
As we move towards a corruption-free India, the momentum created for reducing a parallel economy needs to be continued by way of more policy actions to discourage tax evasion and generation of black money. The tax net needs to be widened by lowering tax rates for both corporates and individuals, and by taxing sectors that are currently outside the scope of the tax net despite higher levels of income. Lowering of tax rates will also improve compliance. Additionally, there is a need to make data analytics of tax administration more robust.
Simultaneously, mainstreaming of the informal economy requires incentivising entry into a formal structure. Unorganised small setups can be encouraged to make this shift by offering them ease of registration, minimal regulatory and procedural compliances, easy exit combined with lower taxes and subsidies / incentives such as social security benefits, skill development opportunities, access to finance at lower rates, and preferential treatment in government procurement. The government should also encourage and engage newly registered MSMEs for its own procurement.
Second, the move towards a less-cash society in an economy where an overwhelmingly large proportion of transactions are cash-based requires a nation-wide massive drive to educate people on the use of digital means for payments. Banks should be encouraged to lead this effort and strongly promote digital channels for payments just as the way they did for the Jan Dhan accounts.
The government has recently announced some incentives for digital payments and we hope that the Union budget will unfold many more promotional schemes in this regard. A mission mode approach is also required to enable creation of digital architecture wide and deep across the country, especially through speeding up implementation of National Optic Fibre Network (NOFN). Connectivity is the key for us to go digital.
Thirdly, the series of tax reforms (legislative as well as administrative) introduced over the past few years need to be carried forward in true spirit. Tax aggression should be done away with, and appropriate safeguards need to be put up to protect the taxpayers from abuse of powers by investigating tax authorities. The performance of tax officers should not be based on targets rather it should be based on the traits of competence, judiciousness and fair play in their assessment orders.
As regards the Goods and Services Tax, we look forward to its implementation in the coming fiscal year. Industry, specifically MSMEs should be well prepared for the adoption of the new tax regime and we hope that adequate measures will be introduced for tax authorities as well as taxpayers to ensure smooth transition, including advocacy workshops, setting up of grievance cells and expert committees on legal and operational issues, and easy compliance procedures to facilitate ease of doing business. The earlier the GST is introduced the better it is.
Another important point in this context is the need to lower stamp duty rates for land and real estate transactions.
Fourth, the budget must include a slew of measures to drive consumption. The government should particularly work with banks to lower lending rates and provide easy finance to sectors like affordable housing. Additionally, the budget should consider rationalising personal income tax rates, raising basic tax exemption limits and widening the tax slabs.
Fifth, to push growth and create jobs, the public thrust on infrastructure should continue. The government may consider launching funds similar to the National Investment and Infrastructure Fund (NIIF) with other countries as co-investors. Such funds could be managed by professional fund managers and leveraged multiple times by providing equity for large projects across sectors. The government could also encourage States to sign ‘State Support Agreements’ for large projects to aid timely implementation of such projects.
Last but not the least, there is a need to push the innovation culture. Just like the ‘Make in India’ initiative that gave a greater fillip to our manufacturing economy, India must have an overarching theme to contribute to the global innovation economy. A special emphasis on innovation that can spur new opportunities across industries, processes and business models that will catapult us to the next level is the need of the hour. Can Budget 2017 jumpstart initiatives that bring innovation to the forefront? Can we Innovate India to Grow India?
(The writer is FICCI president and CMD, Zydus Cadila Ltd)
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Updated Date: Jan 27, 2017 15:03 PM