Considering the economic disruption caused by the COVID-19 pandemic, collection of taxes in the financial year 2020-21 is estimated to fall short of the proposed target. So, Finance Minister Nirmala Sitharaman is expected to focus heavily on boosting economic growth and providing relief to those impacted by the coronavirus-led downturn while unveiling the Union Budget for financial year 2021-22 on February 1.
The taxpayer, including individuals and businesses, is expecting government to not impose any new or additional tax, or cess for businesses in the upcoming Budget as the pandemic has already adversely affected all businesses, whether it is big or small.
According to accounting major KPMG, the Union Budget 2021 has got plenty to ponder upon on the indirect tax front such as tax on dividend income; tax collected at source (TCS) on securities and commodities traded on domestic bourses; equalisation levy applicable to online goods and services; taxes related to COVID; GST on petroleum products and natural gas, among others.
"The government's focus on domestic manufacturing has been evident with increase in customs duty rates in key sectors. This trend can be expected to continue with customs duty rates being increased on additional products in focus sectors to promote domestic manufacturing," Dimri said.
On the direct tax front, the government has already curtailed corporate tax rate and introduced changes in personal income tax slabs. There are expectations of further relief measures for both corporates and individuals to spur investment and spending, says Rajeev Dimri, National Head of Tax, KPMG in India. According to him, FM Sitharaman may announce specific COVID-19 related relaxations like the deduction for COVID-19 treatment costs, relaxation for residency tests for stranded employees, etc.
As per KPMG report, the budget may introduce new non-tariff barriers to protect domestic industry and may introduce incentives to attract investment, relax some of the indirect tax provisions which hamper India as an attractive investment destination. The budget is not expected to bring in major amendments to the GST law from a compliance or rate standpoint, however, with the increasing number of reported fraudulent claims of input tax credit, one can expect more powers being given to field officers to address the issues concerning revenue leakages, it added.