To achieve the targets of a $ 5 trillion economy, third largest economy and a developed country by 2047, India needs to continue its focus on the fast development of the industry. For the development of any nation, the growth of infrastructure is essential. Accordingly, for India to become a developed nation by 2047 and third largest economy, it needs to meet the expectations of the sector so that it may continue to grow.
“ We need a robust dispute resolution mechanism, most of the infrastructure projects bleed due to the long time taken to resolve the disputes which generally arise during the construction. There must be a central mechanism with respective independent experts who can resolve the disputes in a cost effective and timely manner. The government must allocate a budget for it,” said Parveen Arora, Partner, BTG Advaya.
Road and other accidents not only cause immense losses to families but cause huge losses to the economy. Arora feels safety mechanisms are important while the government continues to develop roads, airports, ports and other infrastructure projects, safety is not being considered as the most important factor in infrastructure. He feels the government must create a separate mechanism to include safety aspects in every infra project and allocate a budget for it.
Development of EV infrastructure is slow. Electric vehicles cannot be popularized until a robust charging infrastructure is developed. In absence of EV Infrastructure, EVs will remain as a second vehicle for families only to be used in the cities. In addition to this, attention needs to be paid on battery swapping, to bring down the costs of batteries, after life disposal of batteries. Private investment must be encouraged more for EV infrastructure.
India’s infrastructure is booming. We may shortly see a major policy change in the road sector and defense sector. It is important to make the sector more robust by having unambiguous contractual clauses and compliance of the same by the parties. “Nowadays, funding is not a major difficulty, but the sector needs effective implementation and harmonious understanding of contracts, the lack of which is hindering the progress of various projects. There is also a need to regularize and understand the funding of arbitral awards, which is a new phenomenon,” said Abhishek Kumar, partner, Singhania and Partners LLP.In the upcoming budget, the industry is expecting announcements related to AI, cloud technology, digital payments, accelerators/incubators and funding to encourage growth and incentivise Fintech companies for making better/efficient products and services. “Also, having restraints to prevent digital/fintech frauds and having standardized guidelines for certain industry specific aspects across the Fintech sector (e.g. KYC processes etc.) would be helpful,” says Mehak Khanna, partner, Khaitan and Khaitan.
Tax Relief Expected
Reliefs and simplifications under personal tax regime including but not limited to increasing the slab rates, increase in standard deduction for salaried people to Rs 1 Lakh, doubling the limit of deduction 80C. “While an increase in 80C deduction will encourage savings and boost investments, an increase in standard deduction would help bring parity between the salaried employees who otherwise do not have any allowances for expenses, and those in case of business / profession or presumptive taxation,” says Ritika Nayyar, Partner, Singhania & Co.
Nayyar feels that there is a much needed uniformity in taxation of capital gains, where there are various rates for different types/ classes of assets , varying in period of holding etc. Some standardisations would help in easing the complexities surrounding the taxation of capital gains. Further it is also hoped that the capped deduction under Sections 54 and 54F for capital gains, which was limited to Rs 10 crore in Budget 2023 is reconsidered since this is not in line with restricting the highest rate of tax to 39%.
To encourage start ups and help them hire and retain good talent, ESOPs are issued to employees, however their tax treatment is heavy since it is taxed doubly. To incentivise the same, the government should consider to tax the same only on the capital gains when they are sold.
With tremendous importance to ESG and ESG related practices, focus on tax incentives is highly relevant in encouraging corporate sustainable efforts and for adoption of ESG practices. India Inc would expect more elaborate, categorical and direct investment linked income tax incentives in various domains of ESG such as , GHG emissions , air/water pollution, promoting employees welfare/ diversity , use of sustainable resources/ renewable energy etc.
The interest deduction allowability on housing loans has been capped at Rs 2 lakh for a few years, an increase in this cap to say Rs 3 lakh would be a very welcome move for individuals. Also, it would be more beneficial if this deduction is provided separately and not clubbed with 80C.
The current budget is going to be an interim budget as the full budget is usually presented after the government is elected to power. In the interim budget, the Government usually refrains from making big announcements which may have a consequential impact. However, we can expect to see tinkering of the provisions to remove inconsistencies.
One of the key changes experts want to see is the reduction of the Tax Collected at Source (TCS) rate on foreign remittances from 20% to 1%. The tourism industry would also want the rate of TCS on overseas packages to be reduced to 1%. The current rate of TCS is punitively high. Keeping this high rate incentivises an individual to avoid taxes and would allow an infrastructure of money laundering to come up defeating the complete purpose of TCS.
“I would also want to see changes on the personal taxation front. Individual taxpayers have not had significant relief with the focus of the Government being on increasing the taxbase. However, the costs of individuals have significantly increased. Even with the current slab rates, the government should consider giving exemptions for the following expenses incurred commonly today,” says – Ankit Jain, Partner, Ved Jain & Associates.
This interim budget brings with it certain hopes for the country. While actual changes to the GST would require the approval of the GST Council, businesses would welcome a clear direction regarding the thought process for the next phase of GST reforms. An amnesty scheme for settlement of disputes pertaining to early years of GST is the need of the hour.
Other important issues that are likely to be addressed are the rationalization of tax slabs and the inclusion of petroleum products under the GST ambit. “The Government can also decide about the following tax structure: lower rate for essentials, a standard rate for most goods, and a high rate for luxury and other goods. The healthcare industry anticipates a reconsideration of the GST levied on hospital room rents exceeding Rs. 5,000/-, as it significantly increases the cost of the healthcare for patients, coupled with a substantial amount of record keeping requirements for the hospitals. Rohit Arora Advocate specializing in GST,” said Rohit Arora, Advocate, Uttarakhand High Court
Kishore Kunal, Advocate on Record, Supreme Court of India puts it as follows the expectations on Direct and Indirect Tax from Budget 2024:
a) Customs: Amnesty Scheme under the Customs law should be introduced to reduce the pendency of existing litigation. b) The cases relating to provisional assessment of goods at the stage of import are heavily litigated especially in view of administrative circulars which impose heavy bank guarantee requirements. Appropriate changes are required to be made to the statute to ease the imports.
c) GST: Payment of pre-deposit while filing an appeal before the appellate authorities through Electronic Credit Ledger (ECRL) is being disputed by the Department despite Circulars issued by the Central Board of Indirect Taxes and Customs. This issue needs to be amply clarified in the CGST Act itself.
d) Revising GSTR-3B: Several Writ Petitions are filed across the Country challenging the policy of the government of not granting revision option of GSTR-3B. Revising the return on account of genuine errors is an elementary right which should be made available. This will also reduce the ongoing litigation across the Country.
e) 1% TCS: The 1% TCS on e-commerce transactions results in a working capital blockage for the merchants registered on the platforms. This aspect requires some rationalization.
a) TDS and TCS provisions: Currently, sellers are placed with compliance burdens by requiring them to collect TCS on sale of goods. This system needs to be altered.
One sector looking for relief from the government shall be the NGO/NPO sector. Non governmental organizations have been facing an uphill battle trying to keep up with ever increasing and stringent tax and regulatory norms. On one hand they have to contend with strict FCRA guidelines and on the other there are extreme measures such as the provisions of section 115TD which impose immense tax costs on even procedural lapses. “Compliance requirements have gone up significantly in the guise of expanded 10B and 10BB forms which require voluminous disclosures and heavy penalties for even small non-compliances. Given most charities do not have the wherewithal to comply, some respite is most definitely needed,” said Pallav Pradyumn Narang, Partner, CNK.