Deloitte India Survey: India Inc wants FM Jaitley to lower taxes

Deloitte Touche Tohmatsu India conducted a prebudget survey among senior finance professionals. A look at the survey, released in an exclusive knowledge partnership between ET Magazine and Deloitte.

What is your outlook on the India growth story for Jan-Dec 2018?
2017 was a year of significant structural changes, including GST and bank recapitalisation plan. While demonetisation and GST led to some market disruptions and subdued production sentiment, the economy has recently shown signs of recovery. There are strong reasons to believe that consumption sentiment and investment demand might see a turnaround. Healthy growth outlook for the economy in 2018 also resonates with the survey, with more than 60% of respondents expecting growth to remain above 7%.





Is there a greater ease of doing business in India than last year?
India recorded a dramatic jump of 30 places to reach 100th rank in the World Bank’s Ease of Doing Business. This year, the improvement was mainly on six of 10 parameters. This is reflected in the survey, with almost 70% respondents saying that the improvement in ease of doing business is limited to some specific areas. Further action on infrastructural bottlenecks, swift implementation of investment projects, and restarting of stalled projects would be critical.


Choose three areas, out of the following, where you feel GoI has to do much more reform (1 being the most critical and 3 being the least)
The Indian government has also announced setting up of a committee to examine and recommend changes in the direct tax framework. That tax reforms are needed is also echoed in the survey where close to 50% of the respondents indicated that reform in tax litigation should be the most critical priority now for the government. After this, reforms in the real estate sector were considered as most vital. Surprisingly, ease of closing a business was considered to be of the least importance




Rate the following as significant factors that will impact the Indian economy in the near term (1 being the most significant and 5 being the least)
There are a number of risks that the Indian economy is likely to face in 2018 — market uncertainty ahead of general elections, changes in the US and global economy, rise in crude oil prices. Our survey respondents agree that the upcoming general elections (45.5%) followed by rise in crude oil prices (37.2%) are the two import factors that will shape the economic trends in the coming year.





Do you expect the corporate tax rate to be reduced in Budget 2018-19?
While presenting the Union Budget 2015-16, the finance minister had made a proposal to reduce the corporate tax rate from 30% to 25% over the next four years. In the Finance Act 2017, the government extended the 25% tax rate only to companies with a turnover up to Rs 50 crore. Half the survey respondents (50%) expect corporate tax rate to be reduced to 25% for all companies.






Rank, in terms of priority, the following actions that you wish to see in the upcoming budget (1 being top priority and 8 being the least)
Among the various tax measures such as lower personal income tax rates, lower corporate tax rates, consistency on GST compliance, achieving ease of doing business, our survey respondents placed a higher weightage on reducing personal tax rate (47.11%), followed by lower corporate tax rates (29.75%). Consistency on GST compliance and interactive GST helpline with solutions were two important measures pointed out by respondents.








Which area of the tax regime is most in need of reforms/rationalisation? (Rate 1 to 5; 1 for top priority and 5 for least)
In the tax regime, reforms in personal tax and corporate tax were given the highest priority, followed by indirect taxes including GST. Reforms in M&A, Companies Act, FEMA etc along with transfer pricing were considered as the least priority.





Where is reform/ease most required in the Indian tax administration? (Rate 1 for the most critical and 5 for the least)
Assessment and appeal process is considered as the most critical reform in the tax administration by our respondents, followed by certainty of interpretations/positions to bring down prolonged litigation. Speedy refunds along with more income-tax tribunals and courts are areas where ease is required. Multiple forms are required for filing and reporting, which is considered cumbersome and should be scrapped.





What is the global perception of Indian tax? (Choose one)
Most of the respondents (45%) say that, globally, Indian tax authorities are perceived as highly aggressive which has dented the image of the country and reduces the confidence of global investors to boost further investment in India. The fact that such a large percentage believe this indicates that reform is needed on a large scale to boost investment in India.







Should the deeming provision under the Income Tax Act — Sec 56(2)(x) and Sec 50CA — and MAT be amended or not apply in case of acquisition under insolvency law? (Choose one)
Most of the respondents (46%) believe that the MAT provisions along with provisions of Sec 56(2)(x) and 50CA should be amended, followed by 43% saying that there should be a clarification that these provisions should not apply in case of an acquisition under the insolvency law. MAT provisions have not yet been amended to extend the exclusion (for liabilities written back under IBC) to an insolvent company thus liable to pay tax at 20% on book profits. Further, the acquirer under section 56(2)x)/ 50CA will be liable to pay tax on the FMV of listed shares of stressed companies.





How will you summarise the impact of GST on your sector/industry? (Choose one)
46% of respondents say the impact of GST on their respective sector/industry till date has been neutral, while 25% feel the impact has been positive. The majority (51%) say that, in the coming year, GST will impact their sector/industry positively, while a small percentage (13%) still feels the impact will be negative.







Rate the following reforms, in terms of priority, to be made in the existing GST framework (1 being top priority and 5 being the least)
After the implementation of GST, tax rates, legal provisions and compliance timelines have been frequently amended and revised. Filing of GST returns (GSTR-2 and GSTR-3) has been deferred and additional summary returns (GSTR-3B) have been prescribed for the time being. All the features of the GST portal is yet to be operational. Hence, simpler compliance has emerged as the reform with the top priority that is sought in the existing GST framework.





What is the impact of GST on your production and sales? (Choose one)
The majority of respondents (73%) are of the view that GST has either positively impacted production and sales or has been neutral. Others are not sure about the impact or felt the impact was adverse.
Should the finance minister lower personal income tax rates in Budget 2018-19?
Given the growing cost of living and inflation, there is a need for reduction in tax outgo at personal level. Majority of the respondents (54%) have placed weightage on tax rate reduction by at least 5% across all categories, followed by 33% calling for raising the exemption limit by at least Rs 2,50,000, and 10% asking for bringing back the standard deduction. These measures will make more funds available to an individual, which will boost domestic demand and kick-start savings and investment.









Should the finance minister lower personal income tax rates in Budget 2018-19?
Given the growing cost of living and inflation, there is a need for reduction in tax outgo at personal level. Majority of the respondents (54%) have placed weightage on tax rate reduction by at least 5% across all categories, followed by 33% calling for raising the exemption limit by at least Rs 2,50,000, and 10% asking for bringing back the standard deduction. These measures will make more funds available to an individual, which will boost domestic demand and kick-start savings and investment.