Budget 2016: Industry chieftains share views on tax regulation, GST

Mumbai: Several company executives—from start-ups and major organisations—have asked the government to abridge various ambiguities related to tax regulations, and pass the essential Goods and Service Tax (GST) Bill in this year's budget.

Numerous firm executives—hailing from IT, manufacturing, construction, and healthcare sectors—have shared their recommendations for this year’s budget, and one of the key concern raised by them is the lopsided taxation system in India.

Since the inception of the BJP-led NDA Government, the country has witnessed numerous campaigns such as ‘Make in India’, Skill India and Start-up India for allowing businesses to thrive, however, issues like the GST Bill dispute and irregular tax regimes have been major setbacks that have hampered swift economic growth in the country.

‘Need to set up a strong and flawless tax regime’

According to Microsoft India Chairman Bhaskar Pramanik, regulatory and tax issues are proving to be a major predicament for the IT industry.

Maintaining his stance on addressing these problems, Pramanik said, “Resolving ambiguities in taxation of software products and services and clearer guidelines on transfer pricing will give impetus to the growth of the industry. Implementation of the APA will provide the much-needed assurances to multinational companies and boost investments in India.”

He explained that a complex system of regulation and taxation has proven to be a major setback for foreign investors, which has consequently hampered the growth of start-ups and SMEs in drawing funds. “Streamlining these issues can enable innovation-driven companies to expand and prosper, driving growth for the economy,” he added.

Another industry concern pointed out by Pramanik was double taxation on software products, which have been debated time and again. “The absence of smooth credit flow embeds taxes and increases costs of companies and products. Concrete timelines on the implementation of GST will be very beneficial for the industry,” said Pramanik.

He feels that the implementation of GST will simplify levy and valuation on composite transactions by eliminating multiplicity of taxes like VAT, service tax, and entry tax.

“It is important for the government to set clear and specific proxies to determine the place of taxation of services that involve assets and people across different states coming together to service customers in a third state. This is even more important for IT service companies and cloud service providers,” he concluded.

According to a World Bank, India now ranks 130 out of 189 countries in its “ease of doing business” list. However, to drive India further ahead, there is an immediate need to set up a strong and flawless tax regime, explained Ashraf-el-Arman, MD, Xerox India.

“Implementation of GST as per the deadline will mostly result into a lower service tax rate and ease the way we do business and create grounds for innovation,” Arman said.

Redundant taxation laws

Kamal Nandi, Business Head and EVP, Godrej Appliances, said that he feels that the consumer appliances are not luxury requirements anymore and this industry should be supported through the exemption from customs levy for key parts to boost domestic manufacturing in line government’s ‘Make in India’ agenda.

Nandi said, “The issue of inverted duty structure also has to be addressed wherein raw materials attract more import duty than the final products. Tax structure needs to be streamlined so that locally manufactured products are not at a disadvantage vis-à-vis imports.”

He further suggested that it is essential to support energy efficient products through tax concessions so that such appliances can be encouraged and power consumption reduced thereby ensuring a more eco-friendly future.

“Also a forward movement on the crucial GST Bill will eliminate multiple levels of taxation while enhancing transparency which will ultimately benefit consumers,” he added.

According to Soumitra Bhattacharya, Joint Managing Director, Bosch Limited, the government has been successful in bringing back investor confidence and projecting India as a business-friendly destination. On the other hand, he said that there is an immediate need to bring GST to reality, and roll it out as early as possible.

“This will help reduce the huge stress on businesses for compliance with multiple state tax legislations. An affirmation by the Government that GST on its early roll out, along with indicative transition steps, would help reinforce positive sentiments,” said Bhattacharya.

He further said that the government should look forward to reduce corporate tax rate from 30 per cent to 25 per cent in the forthcoming budget to boost economic growth in the manufacturing sector.

Need to boost Start-up culture
Several industry leaders also discussed the vital need for GST implementation and corporate tax reduction, and direct investments to encourage the start-up culture in India, which can considerably enhance GDP and economic growth.

UCWeb India MD, Kenny Ye, explained that the current global scenario is ideal for India to emerge as one of the leading economies in the world. However, he also pointed out that the removal of angel tax, and cut in direct and indirect taxes will provide much-needed momentum for entrepreneurs, and push India to become the start-up capital of the world.

Highlighting some of the unrelenting problems faced by e-commerce sector, Ye said, “The e-commerce sector is also fraught with redundant taxation laws that need immediate overhaul.

“Tamed inflation and low oil prices have turned the tide in favour of India and Finance Minister Arun Jaitley should present a futuristic Budget to drive the growth impetus. I am hoping for a definite roadmap for GST implementation in Budget 2016,” said Ye.

Apart from the aforementioned tax dilemmas, he also said that the centre must look to enhance the technological infrastructure that will help realise these ideas, and drive IT penetration in the country.

“Increased access to internet connectivity in rural India and higher mobile internet penetration in tier III & IV cities should be a priority to fill crucial gaps in the internet ecosystem, spur domestic spending and boost economic growth,” he added.

Mehul Jobanputra, Co-founder, DesiDime.com and Zingoy.com, said that the Indian government has been considerate towards the start-up culture in the country.

Listing his outlooks from this year’s budget, Jobanputra said that the government should focus on the ease of doing business in the country; create a rational tax structure, and enhance capital or direct investments to boost start-ups.

Founder of S10 Healthcare Solutions, Sridharan Sivan, said that India’s healthcare industry has improved with the incursion of more healthcare start-ups, coupled with technology.

Speaking about his expectations from this year’s budget, he said that the government should provide healthcare infrastructure status that would help funding for specialty clinics; raise tax-exempt medical reimbursements level from Rs 15,000 to 1,00,000, and encourage e-health with tax exemption so that e-commerce healthcare companies can reach rural markets.

“The government should also work towards exempting healthcare services and products from Goods and Services Tax (GST), especially on preventive health check-up and wellness programs,” said Sivan.

Nigel Eastwood, Group CEO-New Call Telecom, said, “One of the serious issues that most start-up entrepreneurs are talking about is clarity in taxation on new businesses and start-ups. Government should definitely bring in more clarity in this budget!”