In a pre-Budget meeting with finance minister Arun Jaitley on Tuesday, banks suggested the government continue capital infusion next year, provide full tax exemption towards provisions for non performing assets and reduce tax rates for companies increasing employment, even as Jaitley asked banks to think ‘out-of-the-box’ while doing business and dealing with challenges.
“The current financial year is not a conventional year as many major reformative decisions have been taken. There is need for out of box thinking …,” Jaitley said.
Pitching for digital transaction infrastructure need to be incentivised, bankers suggested that there is need for exempting Banking Correspondents transactions from service tax. It was suggested that there is urgent need for special efforts for digitisation of Primary Agriculture Cooperative Societies, Regional Rural Banks and Co-Operative Banks to promote digital transactions.
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A new Dairy Infrastructure Development Fund for the dairy sector was also proposed. Bankers also suggested a Krishi Udyam Nidhi be created to help startups and to boost IT applications in agriculture. It was also said that NABARD needs recapitalisation worth Rs 2,500 crore. It was suggested that Finance Bill should mandate that all wages should be paid via banking channels or digital mode and Urban Local Bodies should be encouraged to collect Property Tax online.
Economists, in a separate meeting with Jaitley, suggested that government should come out with a statement in the Budget detailing costs incurred during the currency withdrawal process, including those for printing new currency and impact of exemption of toll charges.
The economists also suggested that finance ministry officials should include relevant provisions in Budget 2017-18 to ensure curbs on black money. They said that out of the withdrawn Rs.15.5 lakh crore, all the amount need not be brought back in economy again and focus should be on digital transactions to reduce dependence on cash.
They also said that there is a need to widen the tax base and to reduce the tax slabs, which will help increase compliance and reduce generation of black money.
Other suggestions included bringing in certain types of agricultural income in the tax net and fast tracking of cases of money laundering especially after the launch of Pradhan Mantri Garib Kalyan Yojana. Many economists disapproved the proposal to abolish income tax. It was suggested that ceiling for cash payments should be fixed, above which only digital mode/cheque should be used.
Economists were of the view that fiscal deficit should remain at 3 per cent and the government should not deviate much from the fiscal roadmap.
Referring to the government’s attempt to introduce EET (Exempt Exempt Tax) on EPF withdrawals this year, a decision which was later withdrawn by the government, some members suggested introduction of TEE (Tax Exempt Exempt) in the upcoming Budget.
Some economists also requested the government to launch an ‘Old Age Pension Scheme’ in which people above 65 years will be given Rs 500 per month.
Conceding that job creation is the biggest need of the time, economists suggested that huge fiscal incentives should be given to export-oriented big employers and a National Register for Employment should be created to track job numbers at the national level.