Maintain capex drive, prioritize innovation, continue tax simplification: FICCI

On Jun 21, 2024

NEW DELHI, 20 June 2024: In a pre-budget consultation meeting with Finance Minister today, Mr Subhrakant Panda, Immediate Past President, FICCI emphasized the need to continue supporting the growth momentum by energizing demand, laying thrust on infrastructure development, taking further measures to rein in food inflation, supporting MSMEs and prioritizing innovation and research & development in the country. “We look forward to a prudent budget that builds upon the strengths of Indian economy for accelerated growth and remains committed to fiscal consolidation,” he added.

“The Union Budget, being the first major public policy announcement of the government, is expected to set the tone for the next five years in terms of government’s policy direction,” Mr Panda noted.

Highlighting the importance of simplification of the tax system, Mr Subhrakant Panda said, “The Union Budget 2024-25 should continue the process of simplification and rationalization of taxes for enhancing ease of doing business. This will also reduce tax related litigations and improve efficiency in the taxation system.” He further added that there is a need to keep an eye on global developments in the current uncertain times to ensure that the Indian industry is not impacted adversely.

FICCI’s specific recommendations for the Union Budget 2024-2025 are as below:

Maintain thrust on investments: The government should continue to lay thrust on public capex on physical, social and digital infrastructure in the upcoming Union Budget. The capital expenditure outlay for FY25 should be increased by 25 percent over RE for FY24 to Rs 11.8 lakh crore.

Prioritise innovation and research and development:

Operationalise the Rs. 1 lakh crore corpus announced in Interim Union Budget for research and innovation in sunrise sectors by ensuring that TRL 2-4 level research is taken up to innovations with TRL 8-9 implementation levels, so that ideas are developed into cash-flow.
Review the current Patent Box regime to reap the true benefits of this wholesome incentive –
- The condition of joint patentee also being ‘true and first inventor’ be amended to enable the company funding the R&D for development of the patent and owning it as first assignee to claim the benefit of 10% tax rate.
- It should be clarified that royalty received from overseas for a patent which is registered in India as also in a foreign country also qualifies for concessional rate of tax.

Announce setting up of innovation clusters co-locating private sector, academia, investors, start-ups and government funded R&D institutions for critical areas (renewable energy, water, smart mobility, new materials, life sciences).
Shift focus of publicly funded research in autonomous government laboratories to publicly funded research in higher education institutions as this will build a supply of advanced research talent needed by companies.

Continue simplification of the tax regime:

Simplify TDS provisions – To further enhance the ease of doing business, the government should consider laying down a roadmap for rationalization of TDS rate structure. It is suggested that there be only three rate structures for TDS payments – TDS on salary at slab rate, TDS on lotteries/online games etc. at maximum marginal rate and two standard rates for TDS for different categories. Simplification of the TDS rate structure will considerably ease the compliance burden on the taxpayers and avoid litigation due to characterization disputes.
Simplify capital gains tax regime in terms of two or three broad buckets of different types of assets, holding period for such assets to turn long term, indexation benefit eligibility, LTCG tax rate and STCG tax rate for such assets without distinction between residents and non-residents. Indicative broad buckets could be (a) Equity instruments (b) Debt instruments and (c) Other assets.
Introduce a new independent Dispute Resolution Forum for effective and time bound dispute resolution.
Initiate GST 2.0 reforms, with fewer GST tax slabs (max 3), inclusion of hitherto excluded sectors, and revamp of GST law to have minimal friction in achieving pass through of all input tax credits in the entire value chain.
Rationalize custom duty rates where duty inversions exist for products such as textiles, aluminium, chemicals, etc.

Enable MSMEs in meeting their requirement for liquidity and finance:

Revise the qualifying turnover criterion for mandatory registration of companies on TReDS platform to more than Rs 250 crore from Rs 500 crore currently.
Every tax invoice raised by GST registered MSME unit should reflect automatically on the respective TReDS platform where MSME unit is registered. Such invoices to be made deemed accepted and made available for Financial Institutions to provide funds to MSMEs.
Leverage Account Aggregator framework for MSME lending by reviewing the legal and compliance issues that prevent joint and corporate accounts from the scope of AA.

Provide thrust to exports:

Revise rates of duty drawback, RoDTEP to make Indian exports competitive while ensuring that the revised rate structure is WTO compliant.
Develop a blockchain based single portal for all trade related compliances (linking multiple portals from DGFT, Customs, multiple PGAs, shipping lines, logistics providers, banks, etc.)
Increase cross-border paperless trade by implementing electronics exchange of customs declarations, electronic exchange of certificate of origin, electronic certificates related to SPS, etc.

Strengthen agri-ecosystem and boost agri-productivity:

Launch an agricultural yields mission for bottom 100 districts on the lines of aspirational districts.
Launch a national program for developing farm technicians over next 5 years to provide new technologies and services to farmers such as soil testing, micro irrigation, drones, sensors, farm machinery, post-harvest technologies as well as operation and maintenance of in-village water supply system.
Create R&D network through collaboration between private sector and govt agri-research institutions to develop climate-resilient seeds and precision farming technologies.
Set up a national board for FPOs (NBFPO) to promote, upskill, provide a network for and monitor progress of FPOs; link each FPO with KVK/Agri-university/ development institutions (ICAR, IARI, etc.) for continuous technical support and guidance.

Provide acceleration to Tourism:

Grant infrastructure status to ‘tourism’ projects with capex above INR 50 Cr.
Create a ‘Tourism Development Fund’ co-financed by the Centre and States to support creation of ancillary infrastructure in and around new destinations/remote districts.

Continue to promote sustainability:

Release National Taxonomy for Green Finance comparable and interoperable with global taxonomies, frameworks and principles.
Create pathways for green transition for all sectors.
Launch a national level vision document for circular economy that provides a framework with clear goals, strategies and initiatives that promote circular practices across different sectors.
Initiate a review of the Priority Sector Lending framework to bring within its purview climate adaptation and climate risk mitigation activities such as clean transportation (e.g. Electric Vehicles), EV charging infrastructure, sustainable water and waste management, recycling, etc.
Improve share of RE in the energy mix by strengthening Open Access and developing a ‘National Storage Framework’ for energy storage solutions (BESS, PHS etc.)

Addressing food inflation: To mitigate food inflation, resolute action backed with hard data is required at multiple points and among multiple stakeholders. We believe this can be done only with an efficient structure, backed by the authority of the PMO. We suggest a Food Inflation & Response Strategy Team (FIRST) to create an e-enabled, empowered coordination framework which can work with and across multiple key governmental agencies, to proactively address food inflation through logistical strategies in the short term. In the long-term learnings can be captured to form the basis of agricultural production and distribution planning for supply side management of inflation.

Enable affordable financing for accelerated electrification growth of last mile mobility:

Introduce SIDBI EV4ECO Scheme for Electric Three-Wheeler Passenger Carrier (L5M Auto Rickshaw) to support 10,000 vehicles.