On 16 March, Finance Minister Pranab
Mukherjee will decide what the Indian economy's immediate trajectory will be.
But
just days before Budget 2012, a detailed survey of the top bosses of India Inc
shows that Corporate India expects a thrust on infrastructure, agriculture and
education in this year's budget, to put the economy back on a firm growth
track.
In its
Budget Expectations Survey 2012, consulting firm Grant Thornton surveyed
participants from over 300 corporate houses across various sectors with the
objective of gauging the pulse of India Inc on the expectations from the
ensuing Budget.
Among
the key findings are that while the Direct Tax Code (DTC) and Goods and
Services Tax (GST) are not awaited in this budget, India Inc does expect the FM
to take necessary steps to bring existing laws one step closer to both.
Interestingly, with the Vodafone decision going against the income tax
department, there is also a likelihood that Pranab Mukherjee may bring relevant
changes to existing tax laws in order to ensure that Vodafone-like transactions
are brought into the tax net.
Despite
the drubbing the Congress has received in the recent state elections, India Inc
is still hopeful that Mukherjee will push through some key long-awaited reform
measures, or at least signal the government's intent in this direction. To
cater to the next level of reforms, India Inc is anxiously awaiting the opening
up of FDI in multi-brand retail and insurance sector, as well as encouraging
qualified foreign investors (QFIs) to invest in the Indian debt market.
One of
the more significant changes which the Indian corporate sector expects is on
the service tax front. With a view to widening the ambit of service tax, India
Inc expects the government to levy a service tax on all services and introduce
a negative list, exempting only the limited services mentioned in such a
negative list.
India
Inc does not envisage any major changes in the corporate tax rate, but there is
a general view that the budget will announce relaxations on the personal
taxation front. There is also the expectation of an increase in the limits of
tax-saving investments from the present Rs 1 lakh and deduction of interest
rates on home loans to provide relief to the common man, given the higher costs
of living and the spike in borrowing costs.
With
India Inc itself getting more serious on the corporate social responsibility
(CSR) front, there is a view among most respondents to the survey that the
government will amend tax laws to recognise corporate investments in CSR, with
67 percent of respondents of the view that the government will announce a
scheme to promote investments in CSR. However, Corporate India is rather
divided on the possibility of whether an amnesty scheme will be introduced in
this budget to bring in unaccounted money.
Research
and development (R&D) being the driver of the growth of any economy, India
Inc also expects the benefit of the weighted deduction of 200 percent on
in-house R&D to be extended.
Respondents
are also divided over how the stockmarket will behave on budget day. While 42
percent feel the market will go up, 32 percent feel it will fall, while 28
percent say it will remain flat.
Among
sector-specific expectations are the following:
Healthcare & Pharma: This sector expects
incentives to boost hospital infrastructure development and medical device
manufacturing industry as well as a policy to promote medical tourism.
Technology: The technology sector has been
struggling with the issue of taxability of software payments, with views being
expressed on both sides. This sector expects clarity regarding double taxation
of software as well as withholding tax related issues in relation to software
payments.
Real Estate and infrastructure: The real estate and
infrastructure sector has been bearing the brunt of the economic slowdown,
rising interest rates and other capital costs. This sector is eagerly looking
at fiscal incentives to stimulate the supply of affordable housing and
infrastructure. The real estate industry expects the FDI regime to be liberalised
and incentives for affordable housing to be introduced, However, it does not
expect the government to remove service tax on construction contracts. 64
percent of the respondents expect extension of tax holiday for power generating
units that commence power generation beyond March 2012.
Insurance Services: The insurance
sector seems to expect clarity with respect to non-applicability of MAT
provisions to insurance companies.
Financial Services: The financial
services sector expects a commodities transaction tax (CTT) on commodity trades
to be introduced and extension of the tax regime to QFIs. However, they do not
expect "passthrough status" to be accorded to all investments by
venture capital funds (VCFs) and full tax deduction to banks in respect of
provision for bad loans.
Firstpost.com
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