Prime Minister Narendra Modi’s government must use Budget 2023 as an opportunity to put a heavier emphasis on investment incentives like accelerated depreciation, and not just on tax incentives. Moreover, in order for GIFT City to actualise its potential to be India’s tax haven, the socio-cultural aspect of the city must be addressed as well, which is as crucial as the infrastructural development, said SR Patnaik, partner and head of taxation, Cyril Amarchand Mangaldas.
India is one of countries spearheading the adoption of a Global Minimum Tax regime, and the upcoming Budget should reflect its intentions to further inculcate it into the economy. A Global Minimum Tax is an international tax system which proposes a standard minimum corporate tax rate of 15% worldwide. Introduced by the Organisation for Economic Co-operation and Development (OECD) in 2021, it is projected to generate USD 150 billion globally in new revenues.
Talk of budgetary expectations for tax incentives in India is incomplete without mention of the Gujarat International Finance Tech City (GIFT City) – India’s own potential tax haven. “Rather than focusing more on infrastructure, I believe the focal point of the Budget should be improving the socio-cultural aspect of the city. If we want companies and their employees to create a base in GIFT City, we would need to build schools and recreational spaces,” noted Patnaik. Providing incentives to people to set up such avenues, therefore, becomes of essence.
According to Patnaik, most infrastructural projects in India are funded by the government and not private capital – which needs to see a shift in order to alleviate the burden on government funds. “Instead of just tax incentives, we may see a push towards investment incentives such as accelerated depreciation, which has historically proven to increase private capital investment levels.” With the future of taxation seemingly digital, Patnaik believes it is the need of the hour- “Often, tax procedures are extended due to communication barriers and delays.” A faceless, automated tax system intends to increase the efficiency of the aforementioned procedures