Finmin seeks industry inputs on tax rates, exemptions ahead of Budget

The Finance Ministry has emphasised ahead of the Union Budget, that tax exemptions will be phased out and tax rates would be rationalised in the medium term, while seeking suggestion from trade and industry stakeholders.

They have been asked to submit their recommendations by November 15, on policy changes in both indirect and direct taxes by giving economic justification.

“Send your suggestions for changes in the duty structure, rates and broadening of tax base on both direct and indirect taxes giving economic justification for the same,” finance ministry’s Revenue Department’s said in a letter to Trade and Industries Association.

Union Budget for Financial Year 2023 is expected to be presented on February 1.

The letter further said, “As can be seen that the government policy with reference to direct taxes in the medium term is to phase out tax incentives, deduction and exemptions while simultaneously rationalising the rates of tax.”

Currently, more than 100 exemptions and deductions of different nature are provided in the Income-Tax Act.

“We will review and rationalise the remaining exemptions and deductions in the coming years with a view to further simplifying the tax system and lowering the tax rate,” Finance Minister Nirmala Sitharaman had said during her Budget speech. Added that around 70 of them had been withdrawn in the new simplified regime.

The department has asked trade and industry bodies to supplement and justify their suggestion and views by relevant statistical information about production, prices revenue implication of the changes and any other supporting information.

The letter also dwelt on the inverted duty structure said that the request for correction of inverted duty structure for a commodity should necessarily be supported by value addition at each stage of manufacturing of the commodity.

“It would not be feasible to examine suggestions that are either not clearly explained or which are not supported by adequate justification/statistics.” the ministry noted.

The ministry also asked for suggestions on reducing compliances, providing tax certainty and reducing litigations.

However, it has clarified that Goods and Services (GST) matters are not examined as part of Annual Budget, as they are to be decided by the GST Council.

Recommendation related with Central Excise and Custom Duty could be given, it said.

Notably, in FY2021 budget, 80 exemptions related to customs duty were withdrawn, while in 2021-22 budget, it was proposed to review more than 400 old exemptions through extensive consultations from October 1, 2021.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor