The ongoing pandemic poses many challenges to various stakeholders in the economy.
The 2022 Union budget is fast approaching and as every year, India Inc and individuals are looking forward to the announcements in the budget, especially in the tax area. To gauge market sentiment and better understand this year’s budget expectations, Grant Thornton Bharat conducted a pre-budget survey.
The survey results indicate high optimism regarding the resilience of the economy. 81% of respondents expect that the third wave of the pandemic will not cause major disruptions and that the economy will continue to grow in 2022. The research also shows that rationalizing corporate tax compliance and certain tax credits for individual taxpayers are the main questions for taxpayers in the coming budget.
A majority of respondents believe that personal income tax needs some reform in the coming budget. 57% of respondents chose personal taxation as the main area for reform, followed by customs and GST, which were 25%. Households hit by the pandemic are expecting a number of measures that would hold more cash to spark some cheer amid all the gloom.
69% of respondents expect the government to increase the basic exemption limit for individual taxpayers from the existing Rs 2.5 lakh. Furthermore, 90% of respondents believe that the government should increase the deduction limit of Section 80C or the standard deduction in the coming budget.
Companies expect rationalization of corporate tax compliance to boost ease of doing business. This is also apparent from the research results. 39% of respondents consider an overall reduction in corporate tax compliance obligations to be the most important area requiring immediate attention from a corporate tax perspective.
Furthermore, companies currently spend a lot of time and effort meeting their TDS/TCS compliance obligations, which can also be heavy at times. It is time to rethink the TDS/TCS regime in India and make the necessary changes to ensure that while protecting the interests of revenues, the burden on taxpayers is also reduced. The research result also reinforces this feeling. The majority of respondents believe that the government should comprehensively address the challenges faced by a taxpayer to rationalize and simplify the TDS/TCS scheme.
76% of respondents want the government to announce a new dispute settlement scheme to resolve pending indirect tax disputes. Given the success of the Sabka Vishwas – Legacy Dispute Resolution Scheme, 2019, it would be very helpful if the government comes up with an amnesty scheme for legacy indirect tax laws. Such an arrangement is beneficial to both the government and the taxpayer.
With regard to corporate tax, 28% of respondents believe that the reduced corporate tax rate of 15% should be extended to all sectors (including the service sector) and linked to new investment rather than to a new entity. Reducing the rate for all sectors will not only encourage further investment, but would also lead to job creation.
The ongoing pandemic poses many challenges to various stakeholders in the economy. So this year’s budget will become a tightrope for the government to manage the diverging expectations. It is best to stay focused on long-term economic growth with some short-term interventions for a few sectors.
Despite the economic pressures, no new taxes or surcharges should be introduced. Emphasis should be placed on rationalizing compliance, making alternative dispute resolution mechanisms functional and results-oriented, and accelerating the implementation of previous announcements across various initiatives.
More than 5,000 respondents participated in the survey via digital platforms.
(Disclaimer: These are the personal opinions of the author.)
