A majority of industries in Karnataka have urged the Finance Minister to deliver the much-awaited second generation of reforms as the next budgets are going to be election budgets.
“We have moved into a phase of high expectations created in the minds of the citizens and the inability of the government to fulfill these. Election results have a bearing on budgets and the recent ones are also likely to impact budget preparations. I believe the key lessons the government should take are on improving efficiency of its processes, rooting out waste and weeding out corruption. While tax collections are an issue the quality and efficiency of spending probably needs significant attention. We tend to focus on values in all the discourse on development e.g. size of the plan, size of spending in a sector, value of investment etc. I believe we need to focus on outcomes and results. If we can achieve more with less that is far superior to the current model where we pride ourselves on the sizes in lakhs of crores,” said H V Harish, Vice President, Bangalore Chamber of Industry and Commerce (BCIC) and Partner — India Leadership Team, Grant Thornton India, Bangalore
Corporate India is facing ever-increasing costs, constrained resources, declining economic growth and the aftershocks of the global slowdown. New political configurations emerging from the recently-concluded state elections don’t mean a stronger Centre. But the government has to put the economy back on track in order to have a good chance of winning the next election. Development is what seems to fetch votes, Harish felt.
With the Direct Taxes Code (DTC) and the Goods and Services Tax (GST) being pushed to the next fiscal year, India Inc is expecting the Union Budget 2012 to take the necessary steps to bring the existing tax laws one step closer to DTC and GST, indicates the Budget Expectations Survey conducted by Grant Thornton India.
The survey reflects the inputs from over 300 corporate houses across sectors.
The corporate houses are expecting the Finance Minister to take policy initiatives towards development of infrastructure and agriculture sectors which contribute significantly to the GDP. There is a need to rein in the fiscal deficit, creating room for the RBI to lower the interest rates and give the economy the velocity it needs. “The Finance Minister certainly has to explore a new course for generating additional revenue, look beyond disinvestment in PSUs and ensure that tax burden does not increase to an extent that affect purchasing power,” Harish detailed.
While no major change is expected in the headline corporate tax rate, elimination of surcharge is definitely high on the wish-list as per the Grant Thornton India survey. Although it looks even more difficult given the new political dispensation, India Inc is anxiously awaiting opening up of the Foreign Direct Investments in Multi-Brand Retail and Insurance sector, as well as encouraging Qualified Foreign Investors to invest in Indian debt market.
The proposed mandatory company law provisions in respect of Corporate Social Responsibility have given rise to a demand to bring necessary amendment in the tax laws so that such expenditure can be claimed as deductible. As Research & Development is the driver of the growth of any economy, India Inc expects benefit of weighted deduction of 200 per cent on in-house R&D to be extended.