Industry chamber Assocham has asked prime minister Narendra Modi-led government to expand the tax rationalisation measures that it has taken to help big corporate entities to micro, small and medium enterprises (MSMEs) and individuals for faster growth. It called for a 25 per cent cut across all slabs of Goods and Services Tax (GST) rates over the next six months to encourage better tax compliance and a one-time debt rollover for the financial institutions and banks to help financial sector tide over liquidity crisis. The chamber opined that the $5 trillion economy objective of the government is doable, provided its suggestions are taken seriously.
In its pre-budget recommendations, Assocham suggested a set of focussed measures to revive growth in labour intensive sectors such as tourism, textiles and housing. "The government has initiated several measures to kick-start Indian economy in the recent months. However, more needs to be done if the country has to register double digit growth in the short-term," Niranjan Hiranandani, president, Assocham said. The rationalisation of taxes may result in an additional deficit of Rs 1.2 lakh crore, but government's expenditure plans should continue through deficit financing, he suggested.
According to him, education and real estate sectors will see major announcements in the forthcoming Union Budget. "Education will receive a boost and rental housing will figure in the Budget," Hiranandani said. Assocham wants partial GST exemption on outsourced services in higher education to create low cost educational institutions that offer services at primary, secondary and high education levels. It wants education loans to be made more affordable by reduction of interest rate from 12 per cent to 5 per cent and increase in repayment tenure from five to 10 years. "A scheme of the same magnitude like Ayushman Bharat should be designed for education for all. Income tax deductions for the industry for donations made for education should be increased to incentivise education oriented donations," he said.
On real estate, Hiranandani, himself a major player, wants a 10-year tax holiday for real estate developers on profits earned from rental housing. As an alternative, he suggested that income from renting of house properties must be taxed at a flat rate of 10 per cent. He wants the 30 per cent standard deduction of rental income to be raised to 50 per cent and TDS reduced to 5 per cent from the current 10 per cent to promote the sector.
For MSME sector, Assocham seeks the reduction in income tax rates announced for corporate entities to be extended to all MSMEs registered as proprietary or partnership firms. In addition, MSMEs that provide high level of employment should be given financial incentives or specific tax rebates that can be linked to new employment created by them, Hiranandani said. "In Budget 2019, investments made in start-ups out of capital gains were exempted. We want investments made in all MSMEs out of capital gain to be exempted from income tax. Special NBFCs for MSME financing should be established to exclusively finance MSME and such lending should be categorised as priority sector lending," he said.
To strengthen domestic manufacturing, Assocham wants import substituting products, which attract new investments for manufacturing in India to be kept outside the ambit of free trade agreements. To revive the telecom sector, Assocham seeks customs duty on 4G/5G network products to be brought down to nil. It also made sectoral suggestions on agriculture, road transportation and healthcare.