New Delhi: Industry leaders expect the Union Budget for 2019-20 to lower corporate taxes and spur investments for shoring up consumption levels and reversing the slowdown in economic growth. CII Director General Chandrajit Banerjee said the corporate tax rate, which currently stands at about 35 per cent for larger companies, should be reduced to 25 per cent. It should be brought down to 18 per cent in a phased manner with simultaneous elimination of exemptions.
Secondly, he said, dividend distribution tax should be brought down from 20 per cent to 10 per cent in the Budget. Thirdly, to encourage taxpayers to invest in mutual funds and shares, the gains from the sale of such instruments should be made more tax-friendly by removing the taxability on sale of long-term capital assets. "To kick start the economy and encourage investments, the cost of equity should be reduced so that investors are encouraged to take equity risks at a time when raising the growth rate is of utmost importance," he said. Finance Minister Nirmala Sitharaman will present the first Budget of the second term of Prime Minister Narendra Modi led NDA government at the Centre on July 5.
FICCI president Sandip Somany has called for the simplification of Goods and Services Tax (GST), lowering of interest rates, addressing farm distress and the creation of an eco-system that promotes employment. The government during its previous tenure succeeded in bringing in critical reforms, including GST, Real Estate (Regulation and Development) Act, and Insolvency and Bankruptcy Code. "It is time now to not only work towards the required modifications in them but also usher in the next wave of reforms, especially in the important areas of land, labour, and judiciary," he said. Somany said the real solution to rural distress and farmers' problems lies in the creation of a strong infrastructure to support agriculture, including irrigation and warehousing facilities.
Besides, the reforms associated with agricultural marketing also need to be pushed so that farmers' cost of production and selling is reduced. "These reforms though depend on coordination with the states and the success of GST can be replicated here. Value-added products have to be produced in agriculture. Exports of agri products should be encouraged," he said. At the same time, liquidity issues with regard to non-banking financial companies are resurfacing. The government needs to take care of the concerns so that apprehensions in the credit ecosystem subsides quickly. "We are optimistic that the liquidity concerns can be managed with the help of concerted efforts," said Somany. "We also have to put in place a robust system for capturing the jobs data so that we have an accurate estimate of jobs that are being created industry-wise," he added.
In January to March, GDP growth fell to 5.8 per cent while overall growth during the entire financial year 2018-19 was 6.8 per cent. Indicators like falling industrial output and de-growth in automobile sales have stoked fears of a deeper slowdown. The Federation of Indian Export Organisations (FIEO) has urged the government to announce various measures such as employment-linked income tax benefits and set up a fund for marketing purposes to boost the country's outbound shipments in the upcoming Budget. "We would urge the government to provide income tax relief to units which provide additional employment in the export sector," it said in a statement.
Further, FIEO said the Budget should encourage domestic manufacturing with a focus on imports substitution. "On customs front, the instances of inverted duty structure need to be looked into," it said adding the corporate tax reduction may be extended to all entities," it said.