India Inc.’s growth story – CII’s recommendations for Union Budget 2022 – 23

17 Jan 2022

We have witnessed multiple reforms and bold initiatives by the Government to bring the Indian economy back on track. Some key interventions which stand out includes the announcement of the new PSE policy, which places the private sector at the centre stage; the privatization of Air India, which sets the ball rolling for many more such interventions; the big plans for infrastructure and manufacturing, and a host of reforms in multiple domains – factor markets, MSMEs, telecom, defense, tax including the recent withdrawal of retrospective taxes, regulatory reforms, Ease of Doing Business reforms, amongst others will pave the route for a robust recovery, along with opening up multiple growth channels for the economy.  

Union Budget 2022-23 is being presented at a time when the economy is at a turning point and recovery has already established its foothold. India’s GDP is poised to achieve 9.5 per cent growth this year which will surpass that of China, according to the IMF.

Going forward, what will be most important is sustaining demand and catalyzing private investments. Reforms, the Government’s thrust on infrastructure and capital expenditure, which ushers in private investments and interventions like the Production Linked Incentive Schemes are expected to catalyse more broad based private investments in the medium term as the uncertainties around the pandemic and global supply chain disruptions settle down. Till then the role of government expenditure will continue to be very crucial in supporting the recovery.

India Inc. looks forward to a growth-oriented budget which would rejuvenate demand, facilitate private investments, and boost job creation while not losing sight of fiscal management.

CII’s recommendations for Union Budget 2021-22 touch upon further interventions to place the economy firmly onto a higher growth trajectory.

While the Government has taken measures to address the issue of delayed payments to industry, to institutionalize the timely payments, creating a cell in the Ministry of Finance to monitor timely clearance of dues would be helpful. The Government may consider decriminalising and rationalising business facing laws ranging from the Partnership Act of 1932 to the Insolvency and Bankruptcy Code of 2016, laws related to environmental protection, consumer protection, labour interests, amongst others. 

Following the vision of the Hon’ble Prime Minister, CII proposes a set of general principles to guide the import tariff structure along with a roadmap to encourage and calibrate domestic manufacturing in alignment with global trade trends that would strengthen its manufacturing capacities and boost its export competitiveness in the next 3 years.

A graded roadmap to shift import duty slabs to a competitive level over a period of 3 years structured along the lines of – lowest or nil slab for inputs or raw materials, 2.5 to 5% for intermediates and final products in the standard slab with exception given to only few products is suggested. This will help the Indian Industry find its place in the global value chain, as well as become competitive in the world markets.

To help the Indian industry enhance its global competitiveness, all export products should be covered under the RoDTEP scheme and the RoDTEP rates should be reviewed and enhanced and should be commensurate with the actual embedded/ unrefunded taxes and duties. RoDTEP benefits should also be provided to SEZs.

A one-time dispute resolution scheme should be introduced under Customs law to settle and resolve the pending disputes. Provisions of customs law should be further simplified, and desired clarifications be issued for ease of compliance.

The new Board for Advance Ruling (BAR), introduced under the Finance Act 2021, should have adequate strength, right from inception, to ensure expeditious admission and time bound disposal of applications. BAR members should have exposure to international tax and may be given access to the technical units (created under faceless assessment scheme).

Advance Pricing Agreement (APA) teams should be augmented, with appropriate number of officers having the appropriate skills, knowledge and subject matter expertise, to bring down the pendency of cases, while providing stability of tenure to such personnel.

The anomaly between tax rate on dividend income needs to be addressed and the tax rates on dividends for residents should be brought down to maintain parity with non-resident investors.

The new dispute resolution scheme (“DRS”) introduced in the Finance Act 2021 for resolving specified disputes in relation to specified taxpayers in a faceless manner involving dynamic jurisdiction should be made available to broader category of taxpayers.

Given the importance of attracting investment in the economy, the Government should ensure a stable and predictable tax regime in order to make India a favourable tax destination.

Read the full article on the current edition of the CII Policy Watch, Focus: Pre Budget Memorandum

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