Decode Budget 2024
After the general elections, Indians are brimming with anticipation as the Government gears up for the Union Budget in its third consecutive term in power. The upcoming Budget is expected to focus on enhancing investment in manufacturing, improving infrastructure, boosting job creation, supporting the agricultural sector, providing a stable, dispute-free tax environment, and fostering innovation and entrepreneurship.
Budget bytes
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Pratik jain
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Sambitosh Mohapatra
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Ranen Banerjee
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Dr. Rana Mehta
Blueprint for progress: #First100Days of the government
Anticipated key reforms and measures by the PwC leaders
Vivek Prasad, Markets Leader, PwC India, shares his insights on harnessing technology for equitable education and upskilling, and utilising CSR funds to foster growth and development at the grassroots level. Hear his suggestions in the full video.
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Blueprint for progress: #First100Days of the government
Webcast
Join PwC India’s webinar on 23 July 2024, where our panel of specialists will decode the Union Budget 2024 and provide insights into the key policy announcements which can impact the economy, direct and indirect tax provisions and other sectors.
Date: 23 July 2024
Time: 6 - 7pm
Sanjeev Krishan,
Chairperson, PwC In India
Sanjay Tolia,
Partner, Price Waterhouse & Co LLP
Akhilesh Ranjan,
Advisor, Price Waterhouse & Co LLP and Former member of CBDT
PwC’s webcast on Union Budget 2024
What should Budget 2024 prioritise?
Impetus for manufacturing/Make in India initiatives
- The Government should consider extending the lower 15% corporate tax rates for new manufacturing units.
- An extension of this window, say for further 3 to 5 years, could help in attracting new investments in manufacturing, boost production, and stimulate capital inflow and expenditure in accordance with the Government’s broad policy objectives around ‘Make in India’, as India moves towards establishing itself as a global manufacturing hub.
- Incentivising focus sectors like renewable energy, electronics, healthcare, capital goods and electronics should also be a priority.
A boost for services and innovation
- The Budget could also consider supporting the setting up of GCCs in India, to help move India up the value chain from mere offshore support services to centres of excellence.
- The Government may consider offering targeted tax breaks to GCCs in the form of a reduced corporate tax rate or profit linked incentive for a certain period which could provide a compelling incentive for global companies to establish or expand their operations in India.
Employment generation
- Benefits of reduced rate and increased manufacturing activity in addition to a boost to GCCs could have a ripple effect leading to job creation in the related industries and support services.
- The benefit of such reduced rates from large employment generators like logistics and infrastructure and facilitating the setting up of GCCs would not only stimulate significant employment growth but also foster skill development and knowledge transfer within India's workforce.
Tax certainty and reducing litigation
- The move to BAR from the erstwhile quasi-judicial Authority for Advance Rulings (‘AAR’) has also significantly impacted foreign investors who are seeking certainty in regard to their tax positions.
- BAR should be made a more robust mechanism to resolve disputes in a timely manner.
- The Government must consider introducing monetary thresholds for appeals by the Revenue department before the Tribunal and beyond, keeping in mind its low success rate before these forums over the years.
Impetus for manufacturing/Make in India initiatives
The Government should consider extending the lower 15% corporate tax rates for new manufacturing units for further 3 to 5 years. This could help in attracting new investments in manufacturing, boost production and stimulate capital inflow and expenditure in accordance with the Government’s broad policy objectives around ‘Make in India’, as India moves towards establishing itself as a global manufacturing hub. Incentivising focus sectors like renewable energy, electronics, healthcare, capital goods and electronics should also be a priority.
A boost for services and innovation
The Budget could also consider supporting the setting up of Bonded Logistics Parks (BLPs) similar to China to enable efficient manufacturing, assembly and re-exports by large MNCs as a part of their China plus one strategy and help in making India a part of their global value chains. It could also consider promoting the setting up of global capability centres (GCCs) in India, to help move India up the value chain from being mere offshore support services to becoming centres of excellence. The Government may consider offering targeted tax breaks to such BLPs and GCCs in the form of a reduced corporate tax rate or profit linked incentive for a certain period which could provide a compelling incentive for global companies to establish or expand their operations in India.
Employment generation
Benefits of reduced rate, increased manufacturing and assembly activities to give a boost to GCCs could have a ripple effect leading to job creation in the related industries and support services. The benefit of such reduced rates from large employment generators like logistics and infrastructure would not only stimulate significant employment growth but also foster skill development and knowledge transfer within India's workforce.
Tax certainty and reducing litigation
The move to BAR from the erstwhile quasi-judicial Authority for Advance Rulings (‘AAR’) has also significantly impacted foreign investors who are seeking certainty about their tax positions. BAR should be equipped with a more robust mechanism to resolve disputes in a timely manner. BAR should also be restructured with independent retired judges from the High Court or the Tribunal.
Impetus for manufacturing/Make in India initiatives
The Government should consider extending the lower 15% corporate tax rates for new manufacturing units. An extension of this window, say for further 3 to 5 years, could help in attracting new investments in manufacturing, boost production, and stimulate capital inflow and expenditure in accordance with the Government’s broad policy objectives around ‘Make in India’, as India moves towards establishing itself as a global manufacturing hub. Incentivising focus sectors like renewable energy, electronics, healthcare, capital goods and electronics should also be a priority.
A boost for services and innovation
The Budget could also consider supporting the setting up of GCCs in India, to help move India up the value chain from mere offshore support services to centres of excellence. The Government may consider offering targeted tax breaks to GCCs in the form of a reduced corporate tax rate or profit linked incentive for a certain period which could provide a compelling incentive for global companies to establish or expand their operations in India.
Employment generation
Benefits of reduced rate and increased manufacturing activity in addition to a boost to GCCs could have a ripple effect leading to job creation in the related industries and support services. The benefit of such reduced rates from large employment generators like logistics and infrastructure and facilitating the setting up of GCCs would not only stimulate significant employment growth but also foster skill development and knowledge transfer within India's workforce.
Tax certainty and reducing litigation
The move to BAR from the erstwhile quasi-judicial Authority for Advance Rulings (‘AAR’) has also significantly impacted foreign investors who are seeking certainty in regard to their tax positions. BAR should be made a more robust mechanism to resolve disputes in a timely manner. The Government must consider introducing monetary thresholds for appeals by the Revenue department before the Tribunal and beyond, keeping in mind its low success rate before these forums over the years.
Impetus for manufacturing/Make in India initiatives
The Government should consider extending the lower 15% corporate tax rates for new manufacturing units. An extension of this window, say for further 3 to 5 years, could help in attracting new investments in manufacturing, boost production, and stimulate capital inflow and expenditure in accordance with the Government’s broad policy objectives around ‘Make in India’, as India moves towards establishing itself as a global manufacturing hub. Incentivising focus sectors like renewable energy, electronics, healthcare, capital goods and electronics should also be a priority.
A boost for services and innovation
The Budget could also consider supporting the setting up of GCCs in India, to help move India up the value chain from mere offshore support services to centres of excellence. The Government may consider offering targeted tax breaks to GCCs in the form of a reduced corporate tax rate or profit linked incentive for a certain period which could provide a compelling incentive for global companies to establish or expand their operations in India.
Employment generation
Benefits of reduced rate and increased manufacturing activity in addition to a boost to GCCs could have a ripple effect leading to job creation in the related industries and support services. The benefit of such reduced rates from large employment generators like logistics and infrastructure and facilitating the setting up of GCCs would not only stimulate significant employment growth but also foster skill development and knowledge transfer within India's workforce.
Tax certainty and reducing litigation
The move to BAR from the erstwhile quasi-judicial Authority for Advance Rulings (‘AAR’) has also significantly impacted foreign investors who are seeking certainty in regard to their tax positions. BAR should be made a more robust mechanism to resolve disputes in a timely manner. The Government must consider introducing monetary thresholds for appeals by the Revenue department before the Tribunal and beyond, keeping in mind its low success rate before these forums over the years.
Pre-Budget expectations
Telecom
Vinish Bawa, Partner and Leader – Telecom
India’s telecommunication industry stands at a critical juncture, poised for transformative growth. With the advent of Industry 4.0, 5G adoption, satellite communication, Gen AI and massive data consumption, it is imperative that the complete ecosystem of the telecom industry evolves in order to support this growth. As industry experts, we emphasise the need for strategic reforms that prioritise infrastructure development, spectrum management and regulatory simplification. Addressing these priorities will not only bolster connectivity across urban and rural India, but also spur innovation and digital inclusion initiatives. We look forward to a Union Budget 2024 that supports sustainable practices, enhances cybersecurity measures, and fosters a competitive landscape, thereby empowering the industry to drive India’s digital future. Some key points that would help the industry are as follows:
- Relief/significant rationalisation in cumulative taxes and levies (including GST, licence fees, USOF contribution, etc.) that telecom operators and telecom services attract, thereby freeing up capital for investment in the hands of the operators.
- More incentives for manufacturing in India, including equal opportunities for trusted vendors that have the capability, strength and necessary ecosystem to scale up as this will lead to much higher investments into India. The definition of ‘local content’ should include the large investments MNCs make in India through R&D facilities in the country. This will not only add significant value to their end products, but also enable employment opportunities for skilled technology personnel and encourage these companies to create knowledge centres and technology hubs in India.
- As India aims to lead innovation in future technologies, including 6G, there is a need for more investments from the government and stronger global partnerships.
India’s telecommunication industry stands at a critical juncture, poised for transformative growth. With the advent of Industry 4.0, 5G adoption, satellite communication, Gen AI and massive data consumption, it is imperative that the complete ecosystem of the telecom industry evolves in order to support this growth. As industry experts, we emphasise the need for strategic reforms that prioritise infrastructure development, spectrum management and regulatory simplification. Addressing these priorities will not only bolster connectivity across urban and rural India, but also spur innovation and digital inclusion initiatives. We look forward to a Union Budget 2024 that supports sustainable practices, enhances cybersecurity measures, and fosters a competitive landscape, thereby empowering the industry to drive India’s digital future. Some key points that would help the industry are as follows:
- Relief/significant rationalisation in cumulative taxes and levies (including GST, licence fees, USOF contribution, etc.) that telecom operators and telecom services attract, thereby freeing up capital for investment in the hands of the operators.
- More incentives for manufacturing in India, including equal opportunities for trusted vendors that have the capability, strength and necessary ecosystem to scale up as this will lead to much higher investments into India. The definition of ‘local content’ should include the large investments MNCs make in India through R&D facilities in the country. This will not only add significant value to their end products, but also enable employment opportunities for skilled technology personnel and encourage these companies to create knowledge centres and technology hubs in India.
- As India aims to lead innovation in future technologies, including 6G, there is a need for more investments from the government and stronger global partnerships.
Agriculture - Food - Agribusiness
Shashi Kant Singh, Partner
The Union Budget should reflect a futuristic roadmap for the agriculture sector with enhanced allocation towards R&D and an impetus for climate-smart agriculture and AgTech solutions. There should be a special emphasis on Yellow Revolution 2.0 and on self-sufficiency in oilseeds. As the country is on the path to becoming the third largest global economy, it is imperative to boost agri-exports by ensuring an enabling ecosystem, emphasis on quality, and traceability and investment in post-harvest infrastructure. We also expect continuity and further expansion of DBT initiatives and credit net for farmers. In nutshell, the budget should lay the foundation for the long-term growth and competitiveness of the sector.
Power
Sambitosh Mohapatra, , Partner and Leader – ESG, Climate and Energy, PwC India
We need to facilitate retail competition in electricity distribution. This can unleash a multiplier impact around innovation and investments, resulting in lower customer prices, improved service quality, increased consumer choice, and greater adoption of renewable energy – all of which can contribute to economic growth, job creation and environmental sustainability.
2:15
Lorem ipsum
Lorem Ipsum is simply dummy text of the printing and typesetting industry.
Lorem Ipsum has been the industry's standard dummy text ever since the 1500s, when an unknown printer took a galley of type and scrambled it to make a type specimen book.
2:15
Lorem ipsum
Lorem Ipsum is simply dummy text of the printing and typesetting industry.
Lorem Ipsum has been the industry's standard dummy text ever since the 1500s, when an unknown printer took a galley of type and scrambled it to make a type specimen book.
Tax-related pre-Budget expectations
After the general elections which were conducted earlier this year, Indian citizens are brimming with anticipation again as the Government gears up for the Union Budget in its third consecutive term in power. India continues to be the world's fastest-growing major economy with a provisional gross domestic power (GDP) growth of 8.2% for the fiscal year 2023-24 and is on the path to becoming a USD 5 trillion economy by 2027. The upcoming Budget is expected to focus on enhancing investment in manufacturing, improving infrastructure, boosting job creation, supporting the agricultural sector, providing a stable, dispute-free tax environment, and fostering innovation and entrepreneurship.
- Boosting investments and growth for corporates in India
- Addressing the expectations of a common man - personal income tax
Boosting investments and growth for corporates in India
Over the last few years, the Government has introduced several pro-business measures including reducing corporate tax rates, pushing for manufacturing in India and the use of technology for an efficient and transparent tax administration. To build upon the growth momentum of the past several quarters, the policy measures that can be looked at by the Government are:
- Extension of the sunset clause for reduced tax rate for manufacturing companies: The concessional corporate tax rate of 15% was available to new domestic manufacturing companies under section 115BAB of the Income-tax Act, 1961, that commenced manufacturing operations before 31 March 2024. The Government should consider extending the deadline beyond 31 March 2024 and focus on critical sectors such as semiconductor chip designing or large employment generator sectors like logistics and infrastructure.
- Making India a part of global value chains: The Government could introduce a special bonded logistics park regime to enable efficient manufacturing, assembly and re-exports by large MNCs as a part of their China plus one strategy and enabling such MNCs to make India a part of their global value chains to India. This could be done by introducing various legislative amendments related to exempting storage and local delivery of goods without value addition, allowing passive ownership of capital equipment for contract manufacturing and a simplified alternative taxation regime for the discharge of personal income taxes of foreign employees/technicians visiting India.
- Rationalisation of withholding tax (TDS) provisions: TDS is an essential tool for the Government for tax collections and for gathering data insights for better compliance. However, multiple changes and categories of transactions has made compliance increasingly complex, burdensome and prone to litigation. The Government should consider clubbing all withholding tax categories into three slabs: (a) 1% for transactions for data gathering like purchase of goods, sale of property, etc. (b) a unform 5% rate for all other transactions, and (c) a penal rate of 10% or 15% for situations where there is no Permanent Account Number (PAN) available.
- Simplifying capital gain tax: Similar to withholding tax compliance, the complexity of taxing capital gains arises from the differences in asset classes, tax rates, holding periods and indexation rules. The Government should streamline the holding periods for all financial assets to 12 months and standardise tax rates for both residents and non-residents. Such reforms could improve clarity and foster a fairer and more investor-friendly tax environment.
- Alternative dispute resolution and certainty: The Board of Advance Ruling (BAR) should be restructured with independent retired judges from the High Court or the Tribunal. This will increase the confidence of the companies in a faster, fairer and independent determination of complex tax issues.
Addressing the expectations of a common man - personal income tax
Despite the introduction of a new alternative regime for personal taxation in the Union Budget 2020, the removal of customary deductions has led to a lukewarm reception, leaving individuals under the old regime burdened with high taxes without any concessions or relaxations. To address this, the following aspects need to be revisited from a personal taxation perspective:
- Revisiting the tax slabs and basic exemption limit: The Government should consider revising the basic exemption limit to INR 5,00,000 and rework the other tax slabs in order to boost consumption.
- Increasing the quantum of deduction under Section 80C: Section 80C’s limit at INR 1,50,000 was last revised in 2014. Given that this exemption provides a window for essential savings to individuals, the same should be considered for an upward revision of up to INR 2,00,000.
- Standard deduction to be increased: Given that salaried employees do not get any tax deduction for essential expenses like commuting, electricity or other incidentals, the standard deduction limit from the current INR 50,000 should be revised to INR 75,000.
From an indirect tax perspective, expectations for the upcoming Budget are centred around simplifying compliance frameworks, enhancing local competencies through policy measures and implementing strategies to reduce litigation. Following are the key expectations from the Budget for GST and customs:
- Giving effect to recommendations of the 53rd GST Council meeting
- Other possible changes expected in GST
- Budget expectations under customs
Giving effect to recommendations of the 53rd GST Council meeting
- GST amnesty scheme: Section 128A may be inserted which will provide for a conditional waiver of interest or penalty for demand (excluding demand of erroneous refunds) raised under section 73 of the CGST Act for FY 2017–18 to 2019–20, in case full tax demand is paid up to 31 March 2025.
- Section 11A: New section may be inserted which will empower the Government to direct authorities to not recover taxes short paid or not paid due to common trade practices.
- Reduction in the amount of pre-deposit for filing appeals: Amendments may be made to reduce the pre-deposit required to be paid for filing of appeals under GST.
- Various other recommendations of the last GST Council meeting such as common time limit for issuance of demand notices and orders irrespective of whether a case involves fraud, collusion, change in provision for computation of interest to the extent of amount lying in cash ledger may be given effect to..
Other possible changes expected in GST
- Rationalisation of input tax credit provisions to remove tax cascading
- Highlighting revised procedure for mechanism to be followed for Input Service Distributor (ISD) mechanism
- Re-formulating the concept of large taxpayers (LTU) to provide a single window clearance point for large taxpayers.
Budget expectations under customs
- Amnesty scheme under customs: One time dispute/litigation resolution/settlement scheme expected under the customs law to settle and resolve the pending disputes.
- Common norms for determining arm’s length price under customs and transfer pricing (TP)-related party transactions: There is a need for a common pricing norm that would provide a ‘middle-path’ of arm’s length price that is acceptable both under the customs and transfer pricing laws.
- Special valuation branch (SVB) timelines: Provisions for time-bound completion of proceedings under SVB for customs for administrative convenience.
- Proposed changes in MOOWR scheme such as:
- Extending drawback/Remission of Duties and Taxes on Export Products (RODTEP) benefits on goods manufactured in the Manufacturing and Other Operations in Warehouse Regulations 2019 (MOOWR) premises and exported thereof
- MOOWR regulation to be suitably amended to allow the depreciation allowance for computing import duty on capital goods when removed from the bonded premises.
- Customs advance ruling: Announcement of more offices of the customs advance ruling authority to bring certainty to the trade and reduce litigation.
- Aligning TP and customs
- Delinking TP assessments from normal tax assessments
Aligning TP and customs
- Taxpayers are required to establish arm’s length pricing of import transactions between related parties under both customs and TP regulations. The main objective under both regulations is to ensure that correct taxable values are reported on which respective taxes can be levied.
- While the intent is arm's length pricing for imports, TP and customs may have different outcomes causing undue hardships for the taxpayer. Hence, there is a need for a common pricing norm for providing a ‘middle-path’ that is acceptable under both customs and TP regulations, thereby improving the ease of doing business.
Delinking TP assessments from normal tax assessments
- The Government could explore delinking of TP assessments from normal corporate tax assessments along with a separate, parallel appellate channel.
- TP assessments could be taken up for a block of years (e.g. 3-5 years) in line with global best practices followed by many countries (e.g. the USA, Germany and Australia).
- Assessment and appellate proceedings could be kept in abeyance till ongoing advance pricing agreement (APA) is concluded, thus reducing the time and effort spent in routine representation for matters with pending APA resolution.
Ease-of-doing business and strengthening compliances
The Government's focus on ease of doing business shall continue along with an increased focus on self-governance and strengthening the compliance framework for companies registered in India. Enhanced protection to the micro, small and medium enterprises (MSME) sector and regulatory reforms for the startup ecosystem shall also be provided.
Source
- Press release of Govt. of India dated 31 May, 2024
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