treeviewThe Centre has requested proposals from trade and industry bodies on prospective adjustments in direct and indirect taxes, with the goal of increasing the tax base while lowering rates in the next budget, which is due in three months.
The revenue department of the finance ministry has written to the various organisations, asking them to submit their proposals within 10 days.
Officials at North Block stated that they were investigating personal and corporate tax deductions. Based on the costs and advantages of the exemptions, they might be rationalised or reduced in the budget.
The capital gains tax exemption for start-up investments, which expires in March, maybe reconsidered. According to authorities, the exemptions from essential customs duty and IGST (integrated goods and services tax) for export-oriented firms are also being monitored.
The government has requested proposals on how to reduce compliance, provide tax certainty, and reduce litigation. The organizations can also make suggestions on excise and customs duties. However, no ideas regarding the goods and services tax (GST) would be considered because it is the jurisdiction of the GST Council.
The income-tax laws allow for more than 100 exemptions and deductions of various types in Budget 2020-21. “In the new streamlined regime, I have deleted around 70 of them.” “In the next years, we will examine and rationalise the remaining exemptions and deductions with the goal of further simplifying the tax system and decreasing the tax rate,” finance minister Nirmala Sitharaman said.
In terms of indirect taxes, the 2020-21 budget recommended eliminating 80 customs duty exemptions, while the 2021-22 budget proposed reviewing more than 400 exemptions through consultations beginning October 1, 2021.
The Centre has requested that trade and industry organizations support and defend their ideas with appropriate statistical data on output, pricing, the income implications of the modifications, and any other supporting material.
The revenue department also mentioned the inverted duty structure, stating that a request for rectification of an inverted duty structure — more significant duty on input and lower duty on output — for a product must be supported by value addition at each stage of manufacture.
“It would be impossible to investigate ideas that are either not properly articulated or are not supported by acceptable justification/statistics,” the agency stated.