Budget: Reduction in direct corporate tax expected

The Budget 2016 is proposed to be presented by Finance Minister Arun Jaitley amidst global slowdown, steep reduction in oil prices, uncertainty in global financial industry and positive expectations on India’s growth.

In the last two years, this government has announced major inititaives like Make in India and Start-up India to revive the economy, and is expected to announce reforms to push the infra sector. The increase in FDI investment and increased domestic consumption creates strong positive indication that the growth rate of 7 per cent is achievable.

Therefore, there is a strong expectation that this Budget will accelerate India’s growth and should be considered as “a Budget that stimulates India’s growth amidst global slowdown”.

Direct Tax Expectations

Reduction in Corporate Tax: In the last Budget, the Finance Minister made a proposal to reduce Corporate Tax and also phase out incentives over a period of 3-4 years. Certainly, there is an expectation that the government will roll out an approach paper on this, and will also reduce the rate of tax to more reasonable levels from existing base rate of 30 per cent plus surcharge.

Tax Administration Reforms: In the recent past, the government has indicated its willingness to accept and implement some of the recommendations of the Tax Administrative Reforms Commission (TARC).

In my view, the government should detail the implementation plan of the TARC report, as failure in doing so will prove to be a major hurdle for ensuring transparent tax administration, which is a major commitment by government to the honest tax payers. The government should also accept the recommendations of Justice Eashwar Committee.

Incentives for Manufacturing: Thogh the government is looking to remove profit-based incentives, it should try to retain some incentives to incentivise the manufacturing sector, which may lead to accelerate the growth of the capital goods sector.

Certainly the acceleration in growth of the capital goods sector, along with reforms in the infrastructure sector will lead to greater push in indian economy.

(Author is the Partner, Deloitte Haskins & Sells LLP)