In the grand theatre of India's economic growth, the Union Budget is the anticipated overture that sets the stage for the country's continued success. As the fastest-growing large economy globally, India has become the preferred destination for international investors seeking to reconfigure their supply chains. Against this backdrop, the business community eagerly awaits Budget 2024, even though it is slated to be a vote-on-account. Amid the expectations, there is a need to strike a balance between fiscal prudence and the business community's aspirations.
A star in the business community's wishlist is the extension of the sunset clause for the concessional tax regime bestowed upon new domestic manufacturing companies. Introduced in the 2019 Budget, this regime has been instrumental in attracting investments into India's manufacturing sector. The request to extend the commencement of the operations deadline, beyond March 2024, is not just a fiscal ask but a strategic move to maintain India's allure for potential investors. With the new import policy nudging tech giants towards domestic manufacturing, this extension could be the encore needed to propel India's economic growth further.
The spotlight also shines on the revival of tax holidays and research and development (R&D) benefits. The government's initiatives such as the Atal Innovation Mission and R&D policy in the pharma sector, are commendable, but reintroducing tax incentives could be the missing key to harmonize with the Make in India campaign. While the reduction in corporate tax rates has been clear, the need for deductions to encourage exports and R&D activities, persists. A resurrected tax holiday and reinstated R&D deductions could transform India into a hub for cutting-edge R&D, aligning with global trends and strengthening our manufacturing capabilities.
In the dynamic tax landscape, SME business houses request for a change in tune regarding Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) provisions on sale/purchase transactions. Sections 194Q and 206C(1H) have become the unexpected crescendos causing compliance and cash flow concerns for small businesses. The demand for an increased threshold reflects the need to balance information collation with the practicalities of timely tax collection. A nuanced approach in this area could alleviate the compliance burden on small businesses, creating a more harmonious financial melody.
Foreign investors, often caught in a discordant tax dispute duet, yearn for a settlement scheme to resolve past tax disputes arising from differential treaty interpretations. The recent court decision, coupled with the ambiguity surrounding the 'Most Favoured Nation' clause, adds an extra layer of complexity. The call for a settlement window without interest or penalties is not just a financial request but a plea for certainty and resolution. It's time to transform the tax dispute saga into a harmonious concerto that resonates with investor confidence.
The finale of tax amendments expected leads us to the desire for ease of administration and reduced litigations. Despite initiatives to clear small disputes, the backlog of appeals remains a lingering alley of uncertainty. The business community wishes for a streamlined process, complete with timelines for appeal disposal, akin to those for the Dispute Resolution Panel. A faster resolution would be the grand crescendo that brings relief to both taxpayers and the tax administration, transforming the tax landscape into a harmonious melody.
There also seems to be a continual expectation from taxpayers revolving around a streamlined capital gains tax regime and a clear understanding of tax implications linked to repatriation, with a specific focus on buybacks.
Nonetheless, considering the interim nature of this budget, the strategic emphasis remains judiciously oriented towards initiatives that bolster Make in India and enhance the facilitation of business operations. As the curtains rise on Budget 2024, the audience – comprising investors, businesses, and the common man – awaits the unveiling of India's next economic act. Will the Budget 2024 resonate with the demands of the business community? The stage is set, let the transformative narrative unfold.
(This articles was written by Pranith P., Partner, Deloitte Haskins & Sells LLP; views expressed are of their own)