While announcing sops for the middle class in the form of benefits in the concessional income tax regime, the Budget has remained largely silent for India Inc in terms of direct tax benefits, maintaining status quo in the corporate tax regime.
A number of industry demands such as extension of the concessional corporate tax regime by at least another year did not find a mention, although finance minister Nirmala Sitharaman announced customs duty cuts for a number of items that would benefit various sectors.
In pre-Budget meetings with the finance ministry, industry chambers and groups had sought an extension in the deadline of March 31, 2024, for setting up domestic manufacturing companies to avail the concessional 15% corporate tax. Highlighting delays due to the pandemic, they had suggested an extension by at least one year. Instead, the dispensation of the lower 15% tax rate has been provided to new cooperatives that commence manufacturing activities till March 31, 2024.
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The Budget, however, has proposed some changes that may provide clarity and benefit industry. These include a change in the definition of intangible capital assets for the purpose of computing capital gains tax.
Another key expectation was the rationalisation of capital gains tax, which is also not part of the Budget proposals. The industry was also hoping for more clarity on taxation of the digital economy as well as India’s roadmap for implementing Pillar 2 solution of the Global Anti Base Erosion Rules (GloBE) of the OECD and G-20. The global framework, which seeks to levy a 15% minimum effective tax on multinational corporations in every country that they operate in, is likely to be implemented in 2023.
Experts noted that businesses were also hoping for further rationalisation of taxes. “With few invigorating tax proposals, the fine print of the Finance Bill 2023 does not atypically pulsate corporate taxpayers’ sentiments,” said Rakesh Nangia, chairman, Nangia Andersen India.
Businesses were also awaiting simplification of taxes by rationalising the wide gamut of withholding tax provisions, especially the recent ones around benefits or perquisites, e-commerce, crypto transactions and streamlining the complex capital gain regime with varying tax rates and different treatment based on holding period, he added.
With high pendency of cases, there was also an expectation on the resolution of pending tax litigation, as the industry was hoping for a better scheme of settlement, said Samir Kanabar, partner, EY India. He, however, said the government has chosen to keep the corporate tax regime stable without any major policy changes. “This will give confidence to taxpayers and investors from a long-term perspective on the tax climate,” he said.
