Budget 2022: Will Nirmala Sitharaman provide much-needed booster dose to economy?

As India battles the prevailing third wave of the pandemic and its resultant strain on the economy, India Inc. expects the agenda for Union Budget 2022 to be dictated by measures to boost economic recovery and growth. Such policy-level measures are also anticipated as the government strives to achieve its ambitious goal of turning India into a $5 trillion economy by 2025. The growth of the domestic industry will be an essential chapter in that story. Rationalise customs tariffs A key facet of the roadmap for imparting thrust to domestic manufacturing and growth is rationalisation of customs tariffs. Against the above backdrop, one may recall that in the previous Budget, the government had already announced its intention to relook at the customs exemptions – a result of which around 80 exemptions were withdrawn. Further rationalization of customs exemptions is expected in this Budget. In non-tariff changes, procedural relaxations are expected in Customs (Administration of Rules of Origin under Trade Agreements) Rules and Manufacture and Other Operations in Warehouse Regulations, to improve ease of doing business in India. More PLI schemes announcement likely The government’s vision of ambitious economic growth through an ‘Atmanirbhar Bharat’ needed a radical policy and Production Linked Incentive Schemes (PLI) is exactly that. It is the government’s key initiative to attract investments and boost manufacturing. And in her own words, Finance Minister Nirmala Sitharaman called PLI schemes a ‘game changer’. The FM was always bullish on it, evident from the lavish outlay of Rs 1.97 lakh crores across 13 sectors set aside for PLI schemes. Expectations are that the PLI schemes alone can trigger Rs 2.5-3.0 lakh crore of capital expenditure, generate Rs 35-40 lakh crore of incremental revenue, and add around one crore jobs in the next five years. In fact, the government estimates indicate that introduction of PLI schemes alone would help us to grow our GDP to over $ 500 billion in five years. PLI schemes have seen great participation from the industry as well. PLI schemes for IT hardware, mobile phones, drugs, and medical devices have already lured investments of over $30 billion. After seeing such a positive response to these schemes, the ambit was expanded to sectors such as automobiles, white goods, food, textile, and specialty steel. Given the success of the scheme, one can expect the announcement of PLI schemes for a few more sectors such as chemical, footwear, leather, renewable energy. Continuation of COVID relief measures expected In the past, the government has also taken other steps to aid India Inc by announcing COVID relief measures around compliances. These include a reduced interest on delayed payment of taxes, rationalisation of late fees regime, and relaxation around GST reconciliation (GST 9C). With its continued commitment and focus on ease of doing business, the industry is hopeful of additional relief measures such as allowing revision of GSTR 3B and relaxation of timeline for taking adjustments w.r.t issuance of credit notes, and availing input credit for the previous year - as per current law, the timeline for both filing of return for September. Clarity on double taxation of ocean freight The industry would also welcome clarity on some contentious issues, viz. double taxation of ocean freight - either by taxing such freight as goods (as part of Customs duty) or as a service, taxable under reverse charge under GST. Double taxation of ocean freight has been a bone of contention between industry and tax authorities, resulting in unnecessary litigation and cost to industry as well as government machinery. ITC for CSR, other expenses incurred due to COVID? Another aspect that should be clarified is on the admissibility of ITC for CSR and other expenses incurred on account of the pandemic, as the industry is of the view that such expenses are incurred in course of business and are mandated by the law. The pivotal role played by technology in tax administration, is more evident now, i.e. in life ‘after COVID-19’ than it has ever been. To further strengthen the move towards automation and ease of doing business, the government should consider measures to reduce personnel visits for assessments or audit purposes. Faceless assessments and audits under GST, like in income tax, could be one such measure. Technical improvements and changes in the indirect tax regime have necessitated reform of SEZ law, which was implemented 15 years ago. The Commerce Secretary recently stated that key revisions to SEZ policy are being examined for simplification of procedural, compliance aspects and alignment with GST law. Some of the expected measures include ease in compliances, lower custom duty on clearing goods into DTA, relaxation in NFE norms, accepting INR remittances, etc. In conclusion, the Government of India is expected to provide a booster dose to the Indian economy by announcing the much-desired policy and rational measures through the upcoming Budget. Achal Chawla is Tax Partner, EY; Divya Bhushan and Rachit Suri, senior tax professionals with EY have also contributed to this article. Views expressed are personal. Read all the Latest News , Trending News ,  Cricket News , Bollywood News , India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.