The Indian economy has started showing signs of recovery with the return of consumer confidence, robust financial markets and an uptick in manufacturing. This special edition of our podcast brings you a pre-Budget analysis covering what could be in store for MSMEs, start-ups, individual taxpayers and the Corporate India.
Will the budget live up to everyone’s expectations? What will the government’s focus be – enhance ease of doing business or generate more employment?
To know this and much more, tune into our exclusive podcast with National Managing Partner, Tax, Vikas Vasal.
Sneha: Hello, everyone, welcome to Grant Thornton Bharat podcast. A week from now finance minister Nirmala sitharaman will be presenting her third budget. It will be the first time since independence that the budget will be paperless due to COVID-19 protocols. This special edition of our podcast brings you a pre-budget analysis covering what could be in store for MSMEs. startups, individual taxpayers and the corporate India. Will the budget live up to everyone's expectations? To answer this and much more, we are joined by our national managing partner for tax Mr. Vikas Vasal, thank you so much vikas for joining us.
Vikas Vasal: Thanks Sneha for having me on the podcast.
Question: So Vikas to begin with, I would like to ask you the most common question that everyone has, in their mind, given the market sentiments, according to you what could be the focus of this budget?
Vikas Vasal: Clearly the difficult situation that the economy is passing through, and as mentioned by the finance minister, that this will be a budget like never before, pinned in a lot of hope. On the budget 2021. The clear focus of the budget will be on three things, one, to boost investments into infrastructure, manufacturing and other sectors including the healthcare. Second will be to revive consumption, because unless a consumption revives, the supply side will face its own constraints. And last but not the least, I think there should be some bold policy Miers to generate more employment opportunities in the country. Because we have seen a lot of job losses in the country during the pandemic. Investment, consumption and employment generation - this should be the focus of this budget
Question: True Vikas, that I guess sums up everything that we are looking at, you know, from the budget, and I think that should be everything for everyone in it. Moving on to our next question, keeping in mind the fiscal deficit, Vikas do you think it is realistic to expect reduction in tax rates for both corporate as well as individuals,
Vikas Vasal: while the expectations like every year on all time high right now, in terms of the tax relief of benefit for the corporates as well as the individual households. However, to my mind, keeping in view the huge fiscal deficit and the shortfall in the revenue collections, I think the government hands are tied in order to do any kind of tax reduction. Rather, there is a view being propagated in the press, that probably we will see some increase in the tax rates in the form of COVID cess or some surcharge, it will be fair to expect a status quo in the tax rates and the surcharge it says which effectively means neither the tax rates go up nor a decrease this year. If that happens, I think that will provide a big relief to both the corporates and the individual households. So maintain the status quo. I think that is what our asked is.
Question: I absolutely agree with you, Vikas. Maintaining the status quo is what should be the focus as well. Vikas what do you think are the key expectations of the corporate India
Vikas Vasal: Corporate India is not expecting any tax relief this year. However, what they are looking at is support. Okay, and support in the form of first maintaining the status quo on the taxes that we just discussed. Second, providing some impetus to the sectors which have actually borne the brunt, for example, hospitality, travel, tourism, and certain other sectors. Third, to make it more meaningful policy to support 'Make in India' wherein big corporates actually see good incentives coming their way to boost the investment into the manufacturing sector. And last but not the least, to ease the administrative burden in their day to day compliances. If a combination of this is done in this year's budget, I think to my mind that will meet the demands of the corporate India.
Question: Do you think the individual taxpayers also stand a chance to expect some tax benefits?
Vikas Vasal: it's very difficult for the government as we discussed to provide any kind of tax relief this year. What what the government can do is government can take certain steps which achieve couple of objectives. For example, if the deduction is increased under 80C For certain specific long term investments into infrastructure bonds, and similar other large projects that helps government garner larger resources as well as provide some relief to the individual taxpayers. Similarly, in order to boost consumption, what the government can do is they can allow a specific deduction for the expenditure incurred by individuals and households on travel and tourism or any goods which are manufactured in India on their purchase. So that achieve twin objectives in terms of demand as well as supply side. I think these could be done by the government this year. But any blanket tax relief is unlikely.
Question: What do you think further can be done to improve ease of doing business in these testing times?
Vikas Vasal: In terms of compliances, I think there is a complete relook required, and that has also been propagated by the earlier tax committees with the government have formed over the last few years. For example, if we take the case of TDS provisions, which is tax deducted at source, there are different tax rates, which leads to unnecessary disputes and litigation. Now, most of these provisions and the tax rate could be rationalised to say 1% or 2% so that is one thing. Similarly, there is a lot of unnecessary litigation which goes on in terms of linking the TDS credit vis-a-vis a particular financial year. Now our passport format could be introduced for the TDS credits, which will again benefit the corporate side. Similarly, there are new provisions which have been introduced on the equalisation Levy, which require certain clarification. Therefore, if a administrative reforms are introduced, which have been done in the past, but more pushes required this year. Similarly, certain clarificatory provisions are introduced either in the budget or outside the budget. These steps will go a long way in terms of helping ease of doing business in India.
Question: Vikas our firm and you have been quite vocal in creating viable ecosystems for startups. What do you think can the government further do to help benefit the startups.
Vikas Vasal: Very apt question in the present scenario where we are not only looking at employment generation, but also avenues for employment generators, and startups in India, are generating a lot of employment opportunities and coming out with innovative products and ideas to solve the larger problems in the society. Indeed, the government has taken a lot of good policy initiatives in the recent past to build up the ecosystem. But I think there is some amount of further reloop which is required, for example, creating a vibrant ecosystem in terms of providing investment opportunities into the startups. Recently, the Honourable Prime Minister has also announced a fund, I think more funds need to be allocated for the startups. Second in context of the tax holiday, maybe the period should be extended for them in terms of the number of years. Third, many a times investors and startups face a lot of challenges in terms of the valuation norms. Because all said and done, valuations are done based on the discussions across the table between the investors and the promoters. So I think those norms need to be eased out in order to help the startup and the investors, vis-a-vis the valuations. If these steps are taken, I think it will create a lot of opportunity for the startups to bring out unique ideas and generate more employment in the country. And in the longer run, create a lot of wealth for the society as well.
Question: Let's hope there is something considered by the government regarding this. Vikas, you know, contrary to earlier predictions, the economy's finally showing some signs of recovery. Do you think the budget 2021 will be a stepping stone to government's USD 5 trillion GDP dream?
Vikas Vasal: I think there's a lot of expectations they have this year that there should be some bold policy reform initiatives in and around the budget. When I say in and around the budget. What I mean is further liberalisation on the foreign direct investment, opening up our financial services market to generate our deep bond market for the corporates Going aggressive on the disinvestment in the public sector undertakings as well as reviving all the long term projects and reviewing then and speeding up those projects. So a combination of these factors, I think, should provide a lot of impetus. And this year's budget should become an important milestone in India, achieving its $5 trillion economy target in the near future.
Sneha: Indeed, Vikas, as you say, let's hope there is something for everyone in this year's budget. And, you know, we can all only hope for the best. Thank you so much Vikas for sharing your valuable insights with us, that was all from this special pre-budget edition of our podcast. For more on the union budget, follow #GTonBudget, and log on to our website, www.granththornton.in to stay updated with our dedicated budget page. Don't forget to subscribe to our podcast channels on Spotify, Google podcasts and Apple podcasts.