Business Today's Sarika Malhotra spoke to Harsh Pati Singhania, Director, JK Organisation & President, ICC (India), about his expectations from the upcoming Budget and what the finance minister should do. Excerpts -
Q. Given the current challenges, what, in your opinion, would make for a good budget? What measures or proposals would you like to see?
A. The current challenges stem from both domestic as well as external factors. Since we cannot do much about external constraints such as global weakness etc, the need is to focus more on domestic constraints. My idea of a good budget is one that will be growth oriented and check the fiscal deficit. It should contain measures that enable Indian business and industry to become globally competitive.
>> There should not be any additional burden on the corporate sector in direct and indirect taxes. We are already facing a slowdown, especially in manufacturing.
>> There is a need to encourage investment. Manufacturing could be provided incentives, such as allowing 25 per cent accelerated depreciation for investment in plant and machinery for a pre-determined period of three to five years to bring forward investment.
>> Announcement of a road-map for long pending issues such as GST (Goods and Services Tax), DTC (Direct Tax Code), etc. GST is particularly important.
>> Widening tax slabs for personal income tax to put more money in the hands of consumers.
>> Revenue generation measures such as disinvestment, unlocking/collecting monies locked up in tax litigation through fast-track tribunals/courts. Generation of income from natural resources through royalty/auction with clear cut and transparent guidelines, etc.
>> Ensuring that subsidies reach the real beneficiaries through greater usage of 'Aadhar' and direct cash transfers. This will reduce leakages and help contain the subsidies.
>> Reducing subsidies on petroleum products, e.g. gradually moving towards market pricing of diesel.
>> Further thrust on instruments to raise resources for the infrastructure sector; development of a healthy corporate bond market.
>> Facilitate new savings schemes/instruments to discourage import and use of gold as an investment.
CORPORATE SPEAK:'Interest rates could be lowered to promote growth'
Q. Given the constraints the government faces in raising revenue, do you see a case to increase income tax rates on the rich?
A. Revenue generation has to come from new sources and by cutting expenditure rather than imposing more taxes on existing tax payers. Increasing tax rates on the 'rich' is unlikely to generate substantial revenue and will be counter-productive. Current data indicates that as much as 75 per cent of personal tax collection is already coming from higher tax slabs: Rs 10-20 lakh (12 per cent of total income tax collection) and above Rs 20 lakh (63 per cent). In other words, a narrow group of people contribute disproportionately to the total income tax collection.
Moreover, only a small proportion of the total Indian population (about 33 million out of a total population of 1.2 billion) comes under the tax net. It is therefore important to widen the tax base and bring sectors that are presently outside the tax net into the tax system.
CORPORATE SPEAK:'Growth will be the imperative this budget'
For example, the highest levels of agriculture can be taxed at a moderate rate. Given India's modest level of overall development, we need to create more wealth rather than tax the existing. For the same reason and some others, it would also be inappropriate to impose inheritance tax or tax dividends once again in the hands of the recipients at higher income slabs.
In the past we had seen the ill-effects of having a high tax regime, which encouraged tax evasion and the development of a parallel economy. Ever since tax rates were brought down to moderate levels revenues have grown.
Q. If the budget does not meet expectations, do you fear that business sentiment would once again dip?
A. The budget should encourage growth and keep the fiscal deficit in check. While business realises that achieving this is a challenging task, if the budget is not able to meet expectations on this front or is harsh on business, sentiments would be adversely hit.
CORPORATE SPEAK:'It will be a balanced budget'
Q. Specific to your sector, what could the current budget do to improve conditions?
A. In the pulp and paper sector, GST will reduce cascading of duties and bring down cost of movement of raw materials and finished products.
>> Paper should continue to be treated as a "merit" good and thus should attract lower GST rates than the general rate.
>> Allow duty free imports of wood logs / chips in view of increasing shortage of domestic wood.
>> Formulate and implement a suitable technology upgradation fund scheme to address the much-needed modernisation and upgradation needs of paper mills.
>> Import of capital goods required by the paper and paperboard industry for technological upgradation should be permitted at 'nil' rate of customs duty.