Upcoming Budget 2020, ASSOCHAM President Dr. Niranjan Hiranandani today said that concerted efforts by the Hon’ble Prime Minister Shri Narendra Modi himself in his outreach to wider sections of the industry and other key stakeholders, fiscal incentives and sustained public investment on infrastructure will lead to a spur in demand and will be big catalyst for reviving the growth momentum in the economy.
However, he said, that the industry has certain expectations and hopes on various fronts from the upcoming budget 2020 for it to be able to play a galvanising role in the economy and the nation’s development at its full potential and also help achieve the larger target of a $5 trillion economy in the next few years.
As per Dr. Hiranandani, Industry Inc. was looking forward to some bold measures in key areas of concerns as follows:
- Ease of Doing Business – Though India’s ranking in Ease of Doing Business has improved at the national level, many states need to catch up by addressing ground-level constraints and simplifying the approval process. India needs judicial reforms which can help in greater contract enforcement in the country. Also needed is faster allotment of land/sheds/warehouse obtained from the government (fix timeline, online tracking of application, including Surrender of land). Digitization of land records is a long pending issue and we recommend a time-bound policy for the digitization of land records.
- MSME Sector – MSMEs are the front end of the economy and reflect the picture of the overall health of our country. However, their viability has been hit on multiple ends such as High Cost of Capital, Poor Credit access, Poor infrastructure, lack of connectivity to the market etc. We should have dedicated index of MSME’s Ease of Doing Business. The reduction in income tax rates announced by the Government for corporate entities should also be extended to all MSMEs registered as Proprietary or Partnership concerns. MSMEs that provide a high level of employment should be given financial incentives or specific tax rebate which can be linked to the new employment created by them. MSMEs face problems of delayed payments from the buyers. Further, MSMEs hesitate to enforce the legal provisions available to them under the MSMED Act due to their low bargaining power. It is recommended that amendment should be made in the MSMED Act requiring all MSMEs to mandatorily upload all their invoices above a specified amount to an Information Utility. A monitoring authority should be set up to facilitate the MSMs to get their payments from such buyers. Section 54 of the Income Tax Act for granting an exemption on investment of Capital Gain should be expanded to include all investments made in industry/businesses out of any kind of Capital Gain generated. In the budget 2019, investments made in startups out of Capital Gain had exempted. We recommend that investments made in all MSMEs out of Capital Gain should be exempted from Income tax. As in the case of Infrastructure Finance Companies or Micro Finance companies, Special NBFCs for MSME financing should be established in the country to exclusively finance the MSMEs and such lending should be categorized as priority sector lending.
- Manufacturing – Import substituting products, which attract new investments for manufacturing in India, should be kept outside the ambit of the free trade agreement. Industries generating employment of 50 people & above for every 1 crore of investment, should be treated as high priority sector. Encouragement is needed for industries investing in adopting digitization of operations by giving interest or capital subsidies on systems and equipment. There is a need to recognize companies having 20% + women employment, by providing an overall tax rebate of 1%.
- Export Competitiveness – To improve export competitiveness there is a greater requirement of stability in policy for at least 3-5 years. The industry is eagerly waiting for the interaction on the new scheme- Rebate of State & Central Taxes and Levies Scheme (RoSCTL). For competitive interest rates for exporters Govt’s intervention is required, to avoid the ongoing delay in implementation. The infrastructure sector has a big role to play in achieving the target of $ 5 trillion dollar economy. Post ILFS bond market has not improved. We need to have marketed for long term bonds, where pension funds can invest.
- Telecom Sector – The Sector has been going through financial stress in the last 3 years. The recent AGR judgment has further aggravated the stress and leads to an unprecedented financial crisis. Majority of companies holding ISP/NLD/ILD/VSAT license have become the victim of this judgment because of the definition of Gross revenue in their license. While respecting the judgment of the Hon’ble Supreme Court, we urge the Government to intervene to avoid the unprecedented situation across sectors. It is absolutely imperative to address the AGR issue to ensure the continuity of business, investment in the sector and to meet the vision of ‘Digital India’. TRAI has already recommended a reduction of Universal service levy by 2% – this recommendation may kindly be accepted and implemented. The balance license fee may be brought down to 1%. Steps may also be initiated to review the definition of AGR prospectively. Request that customs duty be reviewed at brought down to NIL, or at least, the hike from 10 to 20% be rolled back.
- Agricultural Sector – Improving farmers’ income by exempting leasing services for farm equipment and machinery from GST and provision of income tax. To infuse high-end technology in farming, create the Technology Up-gradation Fund (TUF) for agriculture to provide the capital subsidy. Accord infrastructure status to the agriculture value chain to widen the spectrum of funds availability.
- Financial Sector – Most NBFCs are under a huge liquidity crunch, which has a direct impact on the economic activities resulting in financial pressure and slowing down of businesses. The Finance Minister, with support from RBI, needs to create a professional panel to address the situation on a war footing. Allow large non-banks to convert into banks. They will be able to serve their target clientele (MSMEs, informal sector etc); Promote ‘nationalist banks’ with initial ownership of even 100% to be reduced gradually n to 26% over a given period of time; Revisit Section 29A of the Insolvency & Bankruptcy Code (IBC) which prevents a promoter from bidding for his stressed company is a must.
- Road Transportation & Electric-Mobility – A single nodal agency should be authorized to deal with all issues and problems of this sector. The subsidy of INR. 22,000/- should be permissible for all Electric Two-wheelers, otherwise, the price will go high and the customer will not consider Electric vehicle as their priority. This amount of subsidy was available under FAME-I. The same should be continued for one more year so that old inventory is cleared. The consumer should be allowed to avail Income tax benefits on EMI or financing cost of E-Scooters/4 Wheelers. Retail financing for all Electric vehicles to be supported through government subsidies interest rate at PLR rate. Refunds: FAME subsidy refunds are currently made on a monthly basis. It is withholding the cash flow and expansion of the business. Therefore, refunds should be processed on a weekly basis to all OEMs which can enable better cash flow for OEMs.
- Healthcare Sector – Ensure the reach of healthcare to the masses by the expeditious roll-out of Ayushman Bharat to Universal Basic Health Coverage. Bringing health infrastructure development to the rural area by promoting PPP model. Allow refund of accumulated unutilised input tax credit related to ‘input services’ to entities manufacturing life-saving vaccines (liable to GST @ 5%) considering the working capital blockage and increase in cost. Specific relief should be granted for life-saving vaccines, provide clarity about the applicability of GST exemption accorded to local authorities in relation to functions entrusted under Article 243W / 243G of the Constitution of India, to private/public entities or charitable trusts who undertake waste management activities and preservation of the environment.
- Education – Partially exempt GST on outsourced services in Higher Education from 18% to 5% to create low-cost educational institutions that offer services at all levels – primary, secondary and higher education. Make education loans more affordable by reduction of interest rate from 12% to 5% and an increase in repayment tenure from 5 to 10 years. A scheme of the same magnitude like Ayushman Bharat should be designed for Education for All. Raise income tax deductions for the industry under section 80G for donations made for education from the current 50% to 100% to incentivize education-oriented donations. Foundations established by the industry and running their own educational institutions should also be extended this benefit to allow for greater fund availability that can be utilized for quality building. A special tax regime for teachers, professors and researchers will help incentivize the profession and attract individuals who have a genuine attitude towards teaching. Offering more technology-enabled higher education and more platforms for digital delivery of education. Re-structuring of the course curriculum in higher education institutions to facilitate multi-disciplinary and research-oriented learning.
- Direct Tax-Related Issues – The max cap of tax rates for the salaried individual should be kept at 25% keeping in mind the reduced corporate tax rates and to provide a boost in consumption by giving more money in the hands of individuals. Further, all allowances and deductions for e.g., conveyance etc. should be indexed as per cost of inflation notified for capital gains, since the date of their introduction. The benefit of lower rate of corporate tax (25%) should be allowed to newly incorporated companies based on the turnover/ gross receipts threshold in the year of incorporation/ commencement of business. Limitation of 15 years period should be removed to provide respite to companies to utilize their accumulated MAT credit. A provision should be there to provide for carrying forward of MAT credit in case of amalgamation/demerger. A chapter be incorporated to prescribe guidance on the application of the law in case of ambiguity. The chapter could also define what ambiguity means, e.g., if there are different rulings at certain levels or conflicts between rulings, a clarification to resolve this should be issued by CBDT. It is suggested that ICDS be withdrawn as it is leading to maintenance of parallel sets of Books for tax purposes over and above the prescribed Books maintained under the Company Law, thereby resulting in duplication of compliances. The 150% deduction under section 35(2AB) should be extended beyond FY 20-21 by at least 5 years.
- GST – Reduce GST rate across all slabs by 25% as it will encourage more businesses to pay tax which will lead to generating more revenue due to expansion of the tax base. Petroleum products are currently out of the ambit of GST due to which the local or inter-State taxes paid on their purchase constitute part of the operational cost of the business, as an input tax credit of such taxes is not eligible. Hence, petrol and petroleum products should be brought under the ambit of GST. Option for availing ITC to all business: The option for availing input tax credit should be available to all the businesses so that the credit chain does not get blocked. Similar to transportation services, the option of paying higher tax rate and availing input tax credit of inward supplies should be available to the restaurant sector also. Centralized GST registration for certain industries: Concept of centralized registration should be brought in for certain large service providers, like aviation and banking industry, in order to simplify GST processes for such sectors. The government should subsume “Mandi Tax, Stamp Duty, Road Tax and Vehicle tax under GST.
- Real Estate Sector – In case of stressed assets, vide circular dated June 2019, RBI permitted banks to restructure and/or roll over the loans at their option and in such cases the borrower will retain the asset classification of the restructured standard accounts as standard and the same will not be treated as NPA. However, the benefit of the said Circular has not been available to the Real Estate Sector. The banks and Financial Institutions should be given discretion to one-time restructuring and/or rollover of their existing loans to Real Estate Sector on the lines of loans to other sectors. To overcome the huge housing shortage in the country, the restriction imposed on investment of sale proceeds on acquiring two residential houses should be removed and scope of broadened to exempt capital gain tax if the sale proceeds is invested in creating three or more housing stock. Tax on notional income from house property held as stock in trade needs to be deleted. Also, Incentives be there for rental housing to meet ‘Housing for All commitment by 2022’ mission like tax holidays, etc.
These are broadly some of the requests from Industry Inc. and we are very hopeful that an empathetic Govt. of India will take heed of our burgeoning concerns. We look forward to bold fiscal measures and quick implementation which are key to success in economic development and nation-building.