India Inc seeks steps to boost job creation, consumption | The Financial Express

India Inc seeks steps to boost job creation, consumption

CII president Bajaj said the government has to broaden the tax base, with the goal to increase the tax/GDP ratio to at least 16% over the medium-term from current level of 11.7%.

India Inc seeks steps to boost job creation, consumption
Industry body CII also requested the government to stick to the fiscal deficit target of 6.4% of GDP for the current fiscal and bring it down to 6% in the next financial year by augmenting revenues, including via aggressive privatisation of state-run companies. (IE)

Corporate India has urged finance minister Nirmala Sitharaman to focus on measures to accelerate job creation, broaden the tax base and cut non-merit subsidies in the Union Budget for 2023-24. It pitched for rationalising personal income tax slabs to boost consumption and a review of the capital gains tax structure.

Industry body CII also requested the government to stick to the fiscal deficit target of 6.4% of GDP for the current fiscal and bring it down to 6% in the next financial year by augmenting revenues, including via aggressive privatisation of state-run companies.

The finance ministry on Monday kicked off the pre-Budget consultations. The Budget for 2023–24 will be presented on February 1.

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“Global uncertainty may impact the incipient revival in private capex, and hence public capex is critical to support demand and growth. The Budget should increase allocation to capital expenditure by 35%, like last year, taking the total public capex to about `10 trillion,” CII president Sanjiv Bajaj said after the pre-Budget meeting with Sitharaman and senior finance ministry officials. “The Budget must also focus on rural infrastructure, which would help create employment in rural areas and boost rural demand, which is today a concern in the domestic economy,” he said.

There is an anticipation that the pace of rise in capex in FY24 may be lower than the budgeted 27% for this fiscal to `7.5 trillion (including `1 trillion in long-term, interest-free loans to states for capex) due to the already high base and the limited capacity of departments to scale up such spending substantially year after year. The CII, however, called for increasing capital spending from 2.9% of the GDP now to 3.3-3.4% of GDP in FY24.

The industry body also demanded that the GST rate of 28% on several consumer durables be cut to spur consumption, although it is for the GST Council to decide.

The PHD Chamber of Commerce and Industry (PHDCCI) president Saket Dalmia suggested a five- pronged strategy to revitalise private investments — enhanced consumption, increased capacity utilisation in the factories, creating employment, enhancing the quality of social infrastructure and strengthening economic growth.

CII president Bajaj said the government has to broaden the tax base, with the goal to increase the tax/GDP ratio to at least 16% over the medium-term from current level of 11.7%. CII suggested rationalising personal income tax slabs and rates at the lower end to boost disposable incomes and also provide targeted relief from inflation.

According to PHDCCI president Dalmia, increasing tax rebate benefits for consumption expenditure is necessary to boost economic consumption.”Tax rebate on purchase of self-occupied house is given `200,000 only since the last many years. This needs to be enhanced with the wider scope of consumption expenditure such as purchase of more than 1 house, purchase of a car, along with other durables,” Dalmia said. Consumption expenditure rebate must be enhanced to `500,000 per annum, he added.

To bring about simplicity, consistency and rationalisation of capital gains tax regime, CII suggested the framework of long-term capital gains tax (LTCG) of 10% with a uniform holding period 12 months for equity, equity oriented mutual funds and REITs as well as debt oriented products such as bonds and mutual funds. It also suggested short term capital gains tax (STCG) on the above financial market products at a uniform rate of 15%.

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On assets other than financial assets (like immovable property), the industry body suggested 36 months holding period for LTCG at the rate of 20% with indexation. For STCG in immovable property, it suggested tax rates at applicable rate.

Currently, the holding period for LTCG is more than 12 months for listed shares/debt securities, while it is more than 24 months for unlisted shares and real estate, and 36 months for debt mutual funds and securities.

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First published on: 22-11-2022 at 02:00 IST