The finance minister has kicked off the exercise to formulate the next budget by seeking suggestions on changes in direct and indirect taxes from industry and trade associations.
Finance Minister Nirmala Sitharaman, who had to announce additional measures to stimulate slowing economy within a month of her maiden budget being approved by Parliament, is due to present the annual budget for the financial year 2020-21 on February 1.
While the ministry holds pre-budget consultations with representatives of different sectors and stakeholders, the Department of Revenue in the finance ministry perhaps for the first time put out circular seeking suggestions for changes in income tax rates for both individuals and corporate as well as in indirect taxes such as excise and customs duty.
The November 11 circular asked industry and trade associations to give “suggestions for changes in the duty structure, rates and broadening of tax base on both direct and indirect taxes given economic justification for the same.”
Your suggestions and views may be supplemented and justifies by relevant statistical information about the production, prices, revenue implication of the changes suggested and any other information to support your proposal,” it said.
“As regards direct taxes, while forwarding your proposals, please take into your consideration the recent initiatives of the government to reduce corporate tax rates applicable to domestic companies” provided they do not avail of any other tax rebate or concession, the order said.
“The government policy with reference to direct taxes in the medium term is to phase out tax initiatives, deductions, and exemptions while simultaneously rationalising the rates of tax. It would be also desirable that while forwarding the suggestions/recommendations, positive externalities arising out of the said recommendations and their quantification are also indicated,” it said.
With the GST Council, an umbrella body comprising of central and state ministers, the final-decision making authority on the goods and services tax, the order said that GST related requests are not examined as part of the annual budget. It however, sought suggestions related to customers and central excise duty.
Subsequent to this, there have been demands for a deduction in income tax rates for individuals as well as to put more money in the hands of the common man for a consumption-led revival of economy. India’s economic growth had slipped to a six year low of 5% in April-June quarter and the revival may take a few quarters despite announcements to boost real estate and financial sectors.
“The request for correction of inverted duty structure, if any for a commodity, should necessarily be supported by value addition at each stage of manufacturing of the commodity. It would not be feasible to examine suggestions that are either not clearly explained or which are not supported by adequate justification,” the order said.
The suggestions have been sought by November 21.