India Inc wants Finance Minister Arun Jaitley to slash corporate income tax rate, incentivise digital transactions, introduce radical steps to reduce litigation and strengthen dispute resolution mechanism in the forthcoming Budget to be unveiled on February 1.
The industry also wants the government to focus on infrastructure, unveil measures to widen the tax base and lower personal income tax rates to boost consumption.
"Since last year, the government has started reducing the corporate tax rate with a view to bring it down to 25 per cent by 2020. However, the progress has been a little slow, and only a few companies have been covered under the new tax regime so far. We would like this process to gain traction in the Budget.
"The lending rates should also be brought down and easy financing should be made available for sectors such as housing. These steps can prove to be a confidence booster among the business fraternity and would encourage investment demand as well," Ficci President Pankaj Patel said.
He said it was critical to reduce the individual income tax rates to boost consumer spending and encourage tax compliance, especially as the country has witnessed some amount of disruption post demonetisation.
The current corporate tax rate works out to be 30 per cent plus cess and surcharge.
"Despite the tax revenue showing smart growth despite demonetisation, the biggest challenge before the government is to revive the urban consumer demand and provide a huge stimulus to rural economy which had to bear the maximum impact of the note-ban.
"Inflation may be down, but it has to be seen in the context of glut in many crops, especially vegetables, resulting from excess output and cash withdrawal in November," Assocham said.
Industry body CII also believes that with more economic activity entering the tax net post demonetisation, government should lower corporate tax rate to 18 per cent in the Budget.
"Government has no doubt taken commendable initiatives and made fair provisions to minimize and reduce unnecessary litigation. However, much more needs to be done to further strengthen the dispute resolution mechanism in the area of both direct and indirect taxes," CII Director General Chandrajit Banerjee said.
The chamber wants the government to amend existing constitution of Dispute Resolution Panel, to include at least one member (retd.) from Income Tax Appellate Tribunal, so that the panel can make assessments or pass orders independent of the apprehensions regarding tax consequences.
Moreover, it said, government should ensure that the time limit prescribed for passing orders is adhered to by the Authority for Advance rulings (AAR), which continues to have a significant backlog of cases.
It also recommends that government may introduce a clarification in the Budget to enable taxpayers from the countries like Germany, France, Singapore and Italy to file for bilateral Advance Pricing Agreements (APAs).
Finance Minister Arun Jaitley had announced in his 2015 Budget speech that the rate of corporate tax will be reduced from 30 per cent to 25 per cent over the next four years along with corresponding phasing out of exemptions and deductions, beginning from 2016-17.