Eve as capacity utilisation in the various industries are around the trigger threshold for a new investment cycle, India Inc would still want higher budgetary capital expenditure for a crowding-in effect.
Industry leaders in a pre-Budget meeting with the Finance Minister on Thursday also recommended further simplification of the tax regime, as well as steps to support exports and tackle food inflation.
Both the Federation of Indian Chambers of Commerce & Industry (FICCI) and Confederation of Indian Industry (CII), recommended capex allocation in the full Budget be rasied to Rs 11.8 trillion from Rs 11.1 trillion pegged in the interim Budget, which is a 25% increase from the revised estimate of FY24.
CII mooted that the enhanced capex may be considered for deployment in rural infrastructure such as irrigation, warehousing, and cold chain.
On the tax front, India Inc suggested rationalising the TDS (tax deducted at source) structure. They asked the government to have only three rate structures (from over 10 currently) for TDS payments – TDS on salary at slab rate, TDS on lotteries/online games at maximum marginal rate and two standard rates for TDS for different categories.
“Simplification of the TDS rate structure will considerably ease the compliance burden on the taxpayers and avoid litigation due to characterization disputes,” FICCI said in a statement.
Suggestions of simplifying the capital gains tax regime were also made, along within initiating GST 2.0 reforms, which includes fewer GST tax slabs (maximum 3), inclusion of excluded sectors, and revamp of GST law to have minimal friction in achieving pass through of all input tax credits in the entire value chain.
To bring about simplicity, consistency and rationalisation of capital gains tax regime, the CII has suggested the long term capital gains on financial assets to be taxed at 10%, while others at 20% (with indexation benefits). For short term capital gains, CII says, financial assets should be taxed at 15%. Currently, the rates may go up to as high as 30%. Moreover, the industry body recommends the holding period for assets to be considered under LTCG as 12 months for financial assets, and 36 for others.
On the issue of a 15% corporate tax rate for new manufacturing units, PHD Chamber of Commerce and Industry (PHDCCI) said that it should stay. At present, such units set up after April 1, 2024, attract a corporate tax rate of 22%.
The concessional corporate tax rate, first introduced in 2019, was extended by one year in the FY24 Budget. Firms that commenced operations prior to March 31, 2024, can avail the 15% rate.
Further to boost consumption, which is lacklustre at the moment (especially in rural areas), India Inc recommended measures to put more money in the hands of people, which included lowering income brackets, upward revision in MGNREGA minimum wages, and increase in Direct Benefit Transfer amount in schemes such as PM KISAN.
Sanjay Kirloskar (CMD of Kirloskar Brothers), Arathi Krishna (MD of Sundram Fasteners), Vinod Aggarwal (President at SIAM), Neeraj Akhoury (President at Cement Mfrs Association), Sanjay Aggarwal (President at PHD Chamber), Samir Somaiya (President at IMC Chamber), Shefali Misra (Vice President at Biocon), were present in the meeting with the finance minister, and senior ministry officials.
The industry leaders also laid stress on supporting the MSME (Micro, small, and medium enterprises) sector, considered to be a backbone of the Indian economy and main employment generator.
On exports, they suggested to revise rates of duty drawback, RoDTEP to make Indian exports competitive while ensuring that the revised rate structure is WTO compliant. FICCI suggested to develop a blockchain based single portal for all trade related compliances, and increase cross-border paperless trade by implementing electronics exchange of customs declarations, electronic exchange of certificate of origin, etc.
Moreover, to mitigate food inflation, industry leaders recommended a resolute action plan backed with hard data, and by multiple stakeholders. They suggested a Food Inflation & Response Strategy Team (FIRST) to create an e-enabled, empowered coordination framework which can work with and across multiple key governmental agencies, to proactively address food inflation through logistical strategies in the short term.