By Rohit Jain
Union Budget 2021: The most-spoken phrase just before Budget 2021-22– “raise resources without raising taxes” – has now develop into reality, with the Hon’ble Finance Minister’s delivery of the Union Budget proposals. The thrust of the Government’s income augmentation method has shifted from the classic bias towards tax collection to measures such as asset monetisation and disinvestment. The enhance in budgeted capital expenditure from 1.9 to 2.5% of GDP, with out a corresponding enhance in tax prices, is a credit to policymakers. The Government has laudably opted to take a huge punt on buoyancy in the economy, which it will try to attain via important infrastructure spends by asset monetisation.
In the final couple of years, the Government has been rationalising the prices of corporate tax, slashing them to 15% for new manufacturing entities, and 22% for all corporates. These prices are now amongst the lowest across the globe. In carrying out so, the Government took an critical step forward to attract investment and incentivise manufacturing in India. While this was a good move, it did not yield the investor interest in India as anticipated.
One of the probably motives for this is that India has suffered a somewhat poor reputation when it comes to the stability of its tax regime. By not tinkering with tax prices this year – no matter whether corporate tax, private revenue tax, peak prices of Customs duty or GST – the Government has sent out a sturdy signal to the bigger international neighborhood of investors that India is certainly a steady tax regime exactly where they need to be hunting to invest.
The low corporate tax price, particularly when coupled with the growing digitalisation of tax compliance and mechanisms for early dispute resolution, need to serve to strengthen investor sentiment. On this count, the Government has taken some bold actions in this Budget to usher in certainty and ease of carrying out business enterprise, such as halving the time limit for reopening of assessments, additional minimizing the deadline for completion of assessments, extending faceless proceedings to the Income Tax Appellate Tribunal and building a new Board to concern timely advance rulings on tax positions (possessing recognised that vacancies in the present Authority had resulted in important pendency).
On the Customs side, the price alterations proposed are purely to incentivise the development of domestic manufacturing in sectors such as mobile components, specific heavy capital gear and so forth., provided the stiff competitors faced by these makers from imports into India. Such enhance in tariffs is a international trend, aimed at minimizing imports to nurture the improvement of neighborhood industries. While specific actions in this path had currently been taken as aspect of the “AatmaNirbhar Bharat” initiative, such as favouring neighborhood suppliers beneath Government procurement contracts, the proposed enhance in import duties will support additional bolster manufacturing inside India and in turn help financial recovery.
The Hon’ble Finance Minister also indicated that a bigger workout of weeding out outdated customs exemptions is becoming undertaken, with 80 such situations possessing currently been eliminated, and a additional 400 exemptions to be reviewed in the course of the coming year.
Rate alterations aside, comparable digitalisation and ease-of-carrying out-business enterprise measures have been brought in beneath Customs as properly, with the introduction of a popular portal on which notices/ summons/ orders and so forth. will be e-served, and on which importers will be permitted to make specific amendments to their bills of entry themselves, with out the cumbersome method of in search of permission from Customs. In a 1st, a cap of two years from the date of initiation of audit/ search/ seizure/ summons has been fixed for Customs investigations.
While alterations in the GST price structure are not commonly consolidated about the Budget, one critical announcement is that actions will be taken to eradicate inverted duty structures beneath GST. This is a heartening improvement which will undoubtedly support strengthen cashflows for corporations. Another critical adjust is the removal of the want to provide an audited reconciliation statement along with the annual return, which was a fraught method, taking up considerably of the taxpayer’s time and work.
Overall, India’s extended-operating objective of attaining stability in tax regime and minimising disputes, seems to have been accomplished in this Budget. It is hoped that these measures pave the way for a thriving national economy in the close to future.
(Rohit Jain is a Partner at Economic Laws Practice. The views expressed by the author are his personal.)