From lower tax rates to incentives and duty exemptions, representatives of different sectors of the economy and industry bodies have submitted their wish lists to finance minister Arun Jaitley in pre-budget consultations held so far. BloombergQuint provides a snapshot of what they want from budget 2017-18.
Micro and small enterprises: Laghu Udyog Bharati, an RSS affiliate associated with small-scale industries, has sought a 50 per cent exemption in the Goods and Services Tax rate for the sector once the new indirect tax regime kicks in. Paying half the GST rate will balance out the excise exemption benefit currently available to manufacturing companies with an annual turnover up to Rs1.5 crore, Om Prakash Mittal, national president of the group, told Bloomberg.
Mittal said the body has asked the finance minister to club three monthly returns under GST into one, bringing it in line with the MSME Act. Currently, such small companies file quarterly VAT returns and one annual VAT return. The GST regime mandates three returns in a month along with an annual return.
Laghu Udyog Bharati has also demanded a national fund to refinance banks for providing credit to the sector at a rate charged for farm loans, Mittal said.
Automotive: The Society of Indian Automobile Manufacturers has asked the finance minister to retain the current rate of customs duty on automotive vehicles, its deputy director general Sugato Sen said.
SIAM, representing vehicle and engine makers in the country, has also sought removal of tax collected at source (TCS) for commercial vehicles priced above Rs10 lakh as a large number of these are bought by state transport undertakings, which refuse to pay the tax saying they are government-owned vehicles, Sen said. Government departments and public sector undertakings do not have to pay TCS.
Sen said SIAM has also asked the government to incentivise the Voluntary Vehicle Fleet Modernisation Programme (V-VMP), which aims to scrap heavy vehicles that are more than 15 years old, in phases.
Information technology: Software developers and service providers have sought weighted tax deduction on research and development expenses, R Chandrashekhar, President of Nasscom, told BloombergQuint.
Chandrashekhar said the sector has sought clarity on Place of Effective Management (PoEM) rules. ''It's (PoEM) already applicable from 1 April 2016 ... rules should be made simple and clear, and implementation should be made prospective, not retrospective,'' Chandrashekhar said.
PoEM deals with where the global income of an entity will be taxed. There is ambiguity about what factors will be taken into account to make companies pay tax either in India or some other country, he said.
According to PoEM rules, a company will be believed to be actively engaged in business outside India only if its income from royalty, capital gains, dividend, interest and rents in the country is not more than 50 per cent of its total income. The company's assets in India should be less than 50 per cent of its total assets and it should have fewer than 50 per cent of its employees in the country.
Startups, which Chandrashekhar said are the engine of growth and innovation, should be exempted from paying the minimum alternate tax (MAT).
In the 2016-17 budget, the finance minister had announced that any startup established after 1 April 2016 could avail a three-year tax holiday, but profits could be taxed at around 20 per cent under MAT.
To help mobilise domestic investments in startups, the industry group has also urged the finance minister to bring long-term capital gains tax on Indian residents selling shares of unlisted firms on a par with international investors at 10 per cent. India residents are taxed at 20 per cent.
Power: The legacy contracts signed by the state-owned power distribution companies - Power Purchase Agreements - need to be renegotiated, and in some cases, exited, the Independent Power Producers Association of India has said in a letter to the finance minister.
''The power sector needs a boost in terms of financial incentives and be treated as a critical part of India's economic development. The consumer in the power sector needs economic electricity; therefore, the leakages and losses in the system need to be fixed,'' said Harry Dhual, director-general Of IPPAI.
The association has also sought to delink coal from PPAs. ''The linkage of coal to long-term PPAs ... is strangulating the entire power industry, resulting in a large number of stranded assets and non-performing assets (NPAs) in the power sector,'' the association said in the letter.
IPPAI said that banks should be incentivised to consider power projects as ''national assets'', and support them by renegotiating and extending the tenure of credit and other terms of loans. This will reduce the burden on banks and bring down their NPAs, it said.
Steel: The sector wants import duties on raw materials like coking coal, used widely by steelmakers, to go, Sanak Mishra, secretary-general of Indian Steel Association, said.
The current railway freight rate in the country is among the highest in the world. ''We would like a reduction'' in the freight rate, ''particularly for transportation of raw material to the plants'', Mishra said.
Real estate: The realty sector wants GST waived on all affordable housing projects, which are currently exempt from service tax, industry sources said.
The industry has also demanded an interest subvention of 2 per cent for the first five years to a buyer of an affordable housing unit, which it said will push demand for real estate and housing finance.
Industry bodies: The Confederation of Indian Industry has demanded a lower corporate tax rate. ''The effective rate of corporate tax today is 20 per cent, once you take all the concessions and deductions into account,'' CII president Naushad Forbes had told reporters on 26 November.
''We recommend moving to a corporate tax rate of 18 per cent, removing all deductions and concessions, and don't grandfather existing concessions and deductions,'' he said.
In his budget speech for 2016-17, the finance minister had announced that the corporate income tax rate will be reduced to 25 per cent over a period of four years.
Assocham, another industry association, wants income tax to be rationalised for fuelling consumption, as the government's demonetization drive has brought down economic activity ''drastically''. The body has pitched for raising the income tax exemption limit to Rs5 lakh. It has demanded a 10 per cent rate of tax on income of Rs5 lakh to Rs25 lakh, 20 per cent on income of Rs25 lakh to Rs1 crore and 25 per cent on income over Rs1 crore, Assocham said in a press statement.
Currently, there is no tax on income up to Rs2,50,000. Anything above it is taxed at 10 per cent (Rs2.5-5 lakh), 20 per cent (Rs5-10 lakh) and 30 per cent (over Rs10 lakh).