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After successfully weathering global challenges, the Indian economy stood out as the fastest-growing major economy in the world. Now, on the back of an upward growth trajectory, finance minister Nirmala Sitharaman is expected to present her seventh union budget in a row in the upcoming monsoon session of the parliament. In the lead-up to the budget session, India’s oldest apex chamber, the Associated Chambers of Commerce and Industry of India (Assocham) laid out a list of recommendations for the government in its ‘pre-budget memorandum 2024-25’.
The chamber congratulated the government on tackling the economic challenges effectively, it mentioned the need for structural reforms for better productivity. Starting with monetary Policy reforms, it focused on aligning interest rate policies and exchange rate management as it is crucial in controlling inflation, stimulating economic growth, and maintaining financial stability.
On the structural reforms front, the chamber suggested enhancing the flexibility in the labor market by ensuring social protection for workers along with the reduction of bureaucratic hurdles to improve the ease of doing business. In addition to this Assocham recommended rationalising and simplifying the tax system to promote investment. Measures such as the reduction of corporate tax rates and broadening the tax base find a place in the wish list of Assocham.
As per the recommendations laid out by the chamber, easier access to credit and technological innovation for MSMEs as well as the need for strengthening the social safety net to address the needs of vulnerable populations should be the priority for promoting inclusive growth.
With a lot of debate on the employability of Indian students based on the quality of education from primary to higher education level, Assocham suggested the development of behavioral skills alongside technical expertise for higher productivity. Along with this Assocham emphasised the need for continued production-linked incentives schemes and simplified policies to boost investment and trade.
Addressing the issue of inflation, the chamber, in its report, recommended the need for prioritizing measures to increase agricultural productivity to not only ensure food security but also mitigate the impact of rising food inflation. In addition to this, the focus on fostering competition to prevent monopolistic practices remained on the radar of Assocham’s list of recommendations.
Suggestions on Direct Taxes
The chamber kept the suggestions regarding direct and indirect taxes separate from its earlier recommendations. On the direct taxes front, the chamber stressed that there is an urgent need to simplify the current TDS regime and reduce the compliance burden on taxpayers.
In addition to this, to give a boost to the manufacturing and service sectors such as companies engaged in logistics, and healthcare, a reduced tax rate similar to section 115BAB of the act should be introduced for new companies.
The imports should be expressly kept out of the purview of the Special Economic Presence (SEP). Along with this, Assocham also suggested addressing the administrative issues around the Equalisation Levy (EV) which are leading to litigation.
The chamber also shed light on the requirement of industrial undertaking to be done away with, to make sure that all mergers including those of the service sector are eligible for carry forward of losses.
Recommending to need to reconsider the member composition of boards for advance rulings (BAR), the chamber suggested that the members should be independent of the tax department.
Suggestions on Indirect Taxes
The apex chamber brought to attention the decision of the union government to withdraw incentives provided to Indian service exporters through services exports from India scheme. The chamber emphasised the need for a scheme to incentivise services sector exports from India to enable the country to remain globally competitive. Along with this, the body focused on the need for a common pricing norm that would provide a middle path of arm’s length price that is acceptable under the customs and transfer pricing laws.
