Budget 2019-20 need to continue supporting the start-up sector and extend the timeline considering global competition and gestation period required to develop a winning strategy.
Union Budget 2019 India: With a clearer and stronger mandate from the citizens of the country, the newly elected government with the new finance minister is expected to bring in a fresh perspective to tax aspects. With indirect taxes out of the mix, all efforts would be in the direction of bringing certainty and stability to ever-changing facets of income taxes, which have been demanded by the taxpayers.
It is likely that the tax rates may not be changed substantially, and the amendments made in the interim budget would be kept intact. However, to be competitive as a jurisdiction competing to invite investments, it is expected that the government could revise the peak tax rate for all businesses and entities to 25% or even lower.
In order to increase the income tax collections, it is important to expand the taxpayer base. With this in view, it is also possible that some compliances could be made easier, with the introduction of presumptive taxation measures.
Certain steps have been taken by CBDT to reduce litigation, it is also important that a new settlement scheme for disputes may be conceptualised, to put to rest pending litigations. This scheme should be opened for taxpayers to ascertain pending taxes and settle the disputes through a settlement process.
Encouraging the start-up sector has been an important area considered by the government. They should continue supporting the sector and extend the timeline considering global competition and gestation period required to develop a winning strategy.
Transactions always offer a unique opportunity to businesses to move to the next level. However, the anti-avoidance provisions, in terms of deemed valuation of shares, is playing a spoilsport in deal-making. It is therefore important that provisions dealing with taxation of deemed value should be rationalised to provide adequate protection to independent transactions driven by commercial rationale. Valuation rules dealing with real estate assets need to factor factual aspects and provide for adequate discount to achieve commercial valuation.
In addition to the above, certain areas like interpretation aspects or sector-specific relief, still need to be addressed. With the revision to tax laws around the corner, one could expect certain changes that may provide an indication to the philosophy which may be adopted. It is therefore important to see how the government now unleashes this box of possibilities on 05 July 2019.
(Pranay Bhatia, Partner/ Tax and Regulatory Services, BDO India)