Taxpayers in India don't expect any drastic amendments from the upcoming budget

08 July 2019 3 min. read
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As the NDA administration in India begins its second term in power, Big Four accounting and advisory firm KPMG has conducted a survey amongst taxpayers in India to gauge the expectations vis-à-vis the new budget that is expected in July this year. The survey broadly reflects an optimistic outlook.

Much has changed in India’s tax environment under the NDA administration. The much talked about Goods and Services Tax (GST) was introduced in 2017, which helped streamline the entire taxation system and bring the wide variety of administrative procedures under a single window.

The new regime sent the business environment in India into a flurry, as a number of firms looked to restructure their operations to comply with the new regulations. Now, the administration is in the initial stages of its new term, and has announced the launch of a Union Budget for 2019-2020.

Expected changes in direct tax

Big Four accounting and advisory firm KPMG has conducted a pre-budget survey to determine the sentiment amongst taxpayers as they anticipate the new budget. Respondents to the survey hailed from a wide variety of sectors across India, although the largest share belong to the technology segment.

A number of respondents also hailed from the financial services, building & construction and the consumer retail sectors. Among the respondents, most expect a degree of restraint from the new government, anticipating that the budget will lack any drastic changes or amendments to the tax policy.

This sedate expectation stems primarily from the fact that the government is currently in the process of developing a Direct Tax Code (DTC) that is likely to bring reforms to the direct tax regime that are similar in scale and efficiency to those brought about by the GST to the indirect tax regime.

Limits on non-taxable income

While this code is being prepared, however, the government is unlikely to make changes of any grand scale to direct tax policies. Related tax segments such as the Minimum Alternate Tax, Dividend Distribution Tax, Surcharge and Cess are also unlikely to undergo any significant changes for similar reasons.

Other expectations include general agreement that a significant reduction in the corporate tax rate is unlikely in the current scenario, as well as the anticipation of an increase in the basic tax exemption limit of Rs. 250,000. Similar sentiments were recorded when it comes to the indirect tax regime.

The report states that “the responses received indicate that a large section of the respondents are equally divided on the possibility of GST rate reduction in the upcoming budget, although one factor that most agree on is an extended mandate for the National Anti-Profiteering Authority.

Limits on non-taxable income

This expectation has already come true to some extent, following a recent decision by the GST Council to extend the tenure of the National Anti-Profiteering Authority by two years. Another area where reforms are expected is in the concessions for the special economic zones.

With intentions of bolstering the Make in India campaign, respondents believe that the government is likely to extend the tax holiday for exports available to units operating under special economic zones. Research and Development is another segment that is likely to gain significant tax concessions.