India Inc on Monday suggested that Budget 2023-24 should raise capital expenditure, strictly adhere to fiscal consolidation road map, and provide disposable income in the hands of taxpayers at the lower end to boost demand, but pleaded the government not to impose any fresh tax burden on corporates, which could dampen the investors’ sentiment, two officials aware of the development said.
Finance minister Nirmala Sitharaman, who on Monday started stakeholders’ consultation before taking a view on the Union Budget for FY24, “patiently heard” industry captains and climate crisis experts in two separate sessions, they officials said, asking not to be named.
In its submission, the Confederation of Indian Industry (CII) requested Sitharaman to maintain tax certainty. “About six years back, we started an active advocacy where we requested the government to do away with all individual exemptions and concessions and bring down the overall rate of corporate taxation. And the government has done that and more and we thank you for the same. We continue to honour our commitment and have not asked for various incentives and concessions over the last few years. Going forward, to provide tax certainty to businesses, the corporate tax rates should be maintained at the current levels,” CII said in a statement, quoting its president Sanjiv Bajaj after his interaction with Sitharaman.
The government on September 20, 2019, slashed corporate tax rates for domestic manufacturers from 30% to 22% (effectively, 25.17% inclusive of surcharge and cess), while for new manufacturing companies, the rate was reduced from 25% to 15% (effectively, 17.01%), provided they do not claim any exemptions. The tax rates were brought down to make India a globally competitive destination, but response from India Inc was not as per the expectation because of global challenges such as the Covid-19 pandemic and the Ukraine war.
The Narendra Modi government is committed to having a stable and predictable tax regime with focus on simplification of regulations, the first official said. “Its commitment has been exhibited in the past when government did not impose any fresh tax on corporates, although it was widely speculated that businesses would be asked to pay some kind of Covid-tax or cess to fund huge stimulus packages announced since March, 2020,” the official said.
“Despite unexpected headwinds such as Covid-19 pandemic and massive supply chain disruptions, mainly because of Ukraine war, the government adhered to its decision of reduced corporate tax rates as announced in 2019. But the Indian corporate sector is still shying away from investments. Instead, they want the government to boost economy through public expenditure and create demand through tax concessions,” the second official said.
In its submission to Sitharaman, the PHD Chamber of Commerce and Industry (PHDCCI) proposed a five-pronged strategy to revitalise the private investments — enhance consumption, increase capacity utilisation in the factories, create employment, enhance quality of social infrastructure and strengthen economic growth.
“To enhance the momentum in private investments, there is a need to percolate Ease of Doing Business at the factory level, rationalisation of cost of doing business, rationalisation of taxation, state of the art infrastructure, and enhanced incomes in the agriculture sector would go a long way to revitalise the private investments in the country,” PHDCCI president Saket Dalmia said.
Bajaj said the government must “broad base our domestic economy” by creating new sectors of growth and driving employment generation to boost domestic demand, inclusion, and growth. “While overall, the Indian economy has done well, it is not immune to the global context. Global uncertainties and the global growth slowdown have already started to impact our exports, after a stellar performance last fiscal,” he said.