Cut I-T, review capital gains tax in Budget 2023-24: CII to govt

FM Nirmala Sitharaman's pre-Budget consultations from today

Ahead of the 2023 Union Budget, the Confederation of Indian Industry (CII) has proposed that the Centre rationalise personal income tax to boost consumption, continue supporting investment through higher capital expenditure, and crack the whip on non-essential expenditure. The body also said that a fresh look was needed at capital gains tax rates and holding period to remove complexities and inconsistencies.

Finance Minister Nirmala Sitharaman will begin her pre-Budget consultations with stakeholders on Monday, and the first meeting will be held with industry bodies. A part of CII’s pre-budget memorandum to the finance ministry, Sanjiv Bajaj, president, CII, said: “The government should contemplate a reduction in the rates of personal income tax in its next push for reform as this would increase disposable incomes and revive the demand cycle”.

The industry body said there is a need to revitalise investment as well as consumption demand to infuse vibrancy into the economy. “For reviving investment, the memorandum recommends raising capital spending to 3.3-3.4 per cent of GDP in FY24 from 2.9 per cent currently, with an aim to increase it further to a 3.8-3.9 per cent by FY25,” it said, and also suggested increasing outlays on green infrastructure like renewables.

The FY23 capex target of Rs 7.5 trillion is 2.9 per cent of the projected nominal GDP of Rs 258 trillion for the current year. 3.4 per cent of the same projected GDP would be around Rs 8.8 trillion.

For financing infrastructure, the industry body also recommended deepening of corporate bond markets and prioritising a package for large play of urban municipal bonds. It also said that private sector participation in PPPs should also be revived through timely payments, swift dispute resolution mechanism, and expediting the land acquisition process.

CII also suggested reducing the 28 per cent GST rate on select consumer durables, and expediting rural infrastructure projects for facilitating employment generation in the hinterland.

“On fiscal consolidation, CII suggests that a credible road map be drawn up and announced during the budget which would gradually bring down fiscal deficit to 6 per cent of GDP in FY24 and to 4.5 per cent by FY26,” the memorandum said.

 CII said there was a need to curtail non-priority expenditure by rationalising subsidies such as fuel and fertilisers, which are at unsustainable levels right now.

The two big expenditure items this year, on account of the geopolitical shocks caused by the war in Europe, are food and fertiliser subsidies. On account of multiple extensions to the Pradhan Mantri Garib Kalyan Ann Yojana  (PMGKAY), the food subsidy burden for FY23 could rise to a massive Rs 3.32 trillion, from a budgeted target of Rs 2.07 trillion, not including any savings on lower procurement costs. Meanwhile, fertiliser subsidies could rise to Rs 2.5 trillion from a budgeted Rs 1.05 trillion, on account of higher natural gas and input costs.