Budget 2018: Ease of doing business is a major talked about issue in the industry circle in India. Private players expecting an announcement from the Modi government in the upcoming budget especially after India had jumped 30 places to rank 100th in the World Bank's 'ease of doing business' ranking.
Budget 2018: Ease of doing business is a major talked about issue in the industry circle in India. Private players expecting an announcement from the Modi government in the upcoming budget especially after India had jumped 30 places to rank 100th in the World Bank’s ‘ease of doing business’ ranking. The budget will be presented on February 1 and Finance Minister Arun Jaitley should take steps to check excess deduction and deposit of tax, disputes with the vendor and unnecessary burden posed on the payer in carrying extensive reconciliations, FICCI says. “Year-end provisions are made by assessees to follow accrual system of accounting. Very often provision for expenses at the year-end are made based on best estimates available with the assessee even if the supporting invoice is received at the subsequent date. As per the current tax regime, tax is required to be deducted on such provisions which often leads to excess deduction and deposit of tax, disputes with the vendor and unnecessary burden posed on the payer in carrying extensive reconciliations,” the industry body said.
Notably, most of the companies record provision entries towards various expenditures on a monthly basis to report performance to their parent entities. These entries are reversed in the subsequent month. These accruals are made on very broad estimates. The tax officers have been insisting that tax be deducted on these provisional entries, FICCI says.
Watch this video
FICCI has recommended that relief from deduction of tax at source should be given on payments that are accrued but are not due to the payee and for which the payees are not identifiable and represents only a provision made on a month end and year end basis on estimated basis for reporting purpose and are reversed subsequently. “There are various tribunal judgements also to support this position. This will also go a long way towards ease of doing business and in reducing the litigation,” it said.
Following the improvement in the ease of doing business ranking, the central government had vowed to continue reforms that will help the country break into top 50 in coming years. India, which was ranked 142nd when the Narendra Modi government took office in 2014 and 130th last year, is the only large country this year to have achieved such a significant shift on the back of reforms in taxation, construction permits, investor protection and bankruptcy resolution. The World Bank had said it is “one of the top 10 improvers in this year’s assessment, having implemented reforms in 8 out of 10 ‘doing business’ indicators.” This is the first time India has broken into top 100 nations.
Watch this video
Reacting to the development, Prime Minister Narendra Modi had then said the government is determined to further improve the rankings and scale greater economic growth with the mantra of ‘reform, perform and transform’. He had also hailed as “historic” the jump in India’s ranking in ‘ease of doing business’ and said it was a result of “all-round & multi-sectoral reform push”.