In my years of watching the fiscal developments of India both as an entrepreneur and as a keen citizen of the country, few have been more controversial and also as interesting as those that took place in the last few months. We're aware of the positive effects of demonetisation. But as fresh money enters the system, both Prime Minister Narendra Modi and Finance Minister Arun Jaitley would be aware that their proclaimed battle against corruption and tax evasion isn't over. In that sense, the clock has begun to tick again. No doubt they would seek to place further measures in their fiscal policy to continue their fight. When you examine the problem at the root, it is unequal distribution of wealth that is the primary cause of hardship for the poor and middle classes alike. So a budget that is aimed carefully at financial inclusion is needed.
Rationalisation of indirect taxes and charges levied on digital payment transactions could bring a major positive impact, while staying in line with the bigger picture of transitioning into a largely cashless future. The common man is gradually learning and experiencing the benefits of going digital. Taxing him for it is likely to be counter-productive considering that the nation is expected to join the digital movement after the effects of demonetisation. Another area of significant importance is employee tax benefits. Technological disruption in this space has gained impetus but it needs support in the fiscal policy. Treating digital transactions and digital documents to be legally on par with physical instruments is something that is sorely required to complete this transition. Another area that deserves some attention is the increase of tax exemption limit. This is something we can be optimistic about, because after all the present government seems to be pro-poor and pro-middle class in its outlook. Corporate tax limits may also come under some changes in the new fiscal policy.
Corporations that are operating in the digital payments space should be encouraged with tax incentives. If mobile and digital payments are to play a positive role in the people's lives, then the benefits of regulatory support for organisations in the business will trickle down to them. Merchants must also be included in the fold of beneficiaries. If they received tax breaks on going digital, it would promote a more evenly balanced business environment. If people could swipe their cards to pay at, the reliance on ATM cash withdrawals will drop. Cash withdrawal is an expensive proposition.
Rationalising tax benefits for businesses set up in Special Economic Zone (SEZ) should ideally also be included in the mandate. Eliminating Minimum Alternate TAX (MAT) will also encourage more exports and enable more Make In India initiatives. We could expect fuel surcharges to be abolished and included in the base pricing.
The general anticipation of the Annual Budget 2017 is the consolidation of post-demonetisation effects. The fiscal policy can help people directly while wiping clean the unfortunate side effects that the note-ban had on the common honest man. No doubt that it will be friendly to poor and middle classes with some importance also given to corporations poised to drive change that's aligned with the national interest.
(The author is Co-founder and CEO of Zeta)