Pre-budget consultations: Industry for tax cuts, more reforms to push investment

Reduction in direct tax rate to a maximum of 18 per cent, reducing the dividend distribution tax and reform of land and labour laws were among the suggestions made by industry ahead of the Budget.

Union Finance Minister Nirmala Sitharaman along with Minister of State Anurag Thakur holds a pre-budget meeting with representatives of industry, services and trade sector (PTI Photo/Shahbaz Khan)

In a meeting with Finance Minister Nirmala Sitharaman ahead of the presentation of the Union Budget next month, industry heads suggested various reforms and tax cuts to push investment and growth of the economy.

Reduction in direct tax rate to a maximum of 18 per cent, reducing the dividend distribution tax and reform of land and labour laws were among the suggestions made by industry ahead of the Budget. Sitharaman told industry heads during the meeting that the Central government has taken several steps make governance more efficient and effective. She argued that since 24 per cent of the country’s total work force is in industrial sector, industry should be able to accommodate more work force.

“A simplified taxation regime is pivotal for improving the revenue flows and help government stick to fiscal prudence without crowding-out private investments. For this to fructify, a timeline for a taxation regime (direct tax) needs to be announced where the highest rate should be 18 per cent, in addition to removing all exemptions and not doing grandfathering,” said Vikram S Kirloskar, president, CII. In addition, a 3-year roadmap for reducing the Income Tax Act document to 4-5 pages also needs to be stated.

ASSOCHAM president BK Goenka recommended that government should provide 100 per cent depreciation in the first year of investment for all new foreign and domestic investments. “After dismantling of FIPB, FDI proposals are dealt with by the concerned sectoral ministry. This is causing significant delays in the approval process. Therefore, it is suggested to have a similar central/ nodal agency/ single-window for such cases. A dedicated desk for Japan has been very effective. We suggest a similar country-specific desk be set up for major FDI source countries,” Goenka said.

CII also pitched for bringing down the dividend distribution tax to 10 per cent from the present 20 per cent while eliminating it at the hands of the investor.

Meanwhile, agriculture experts in their pre-Budget consultation with the Finance Minister suggested that the government take steps to boost investment in farm sector and enhance market access to farmers.

During the meeting, Sitharaman stressed on the measures to boost economic and social infrastructure of rural sector and ways to eradicate unemployment and poverty through development of agriculture and allied sectors as well as non-farm sector.

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Representatives of the agricultural and rural development sectors suggested that solar energy may be treated as third crop to augment income of farmers besides resolving GST issues related to farmers producers’ organisations, incentives for agro processing units in the border districts and enhancing investments in R&D.