The Foreign Investors' Chamber of Commerce & Industry (FICCI) felt GDP growth target of 8.2 per cent would be highly challenging. considering the Covid-19 pandemic and the continuing uncertainty
FICCI while expressing its reaction to 2020-21 National Budget Proposals on Friday, said considering the health risks and the inadequate infrastructure in health sector, the allocation in health sector and social security and welfare could have been more.
Appreciating some steps, FICCI said reduction of corporate tax rate of non-publicly traded companies from 35 per cent to 32.5 per c ent, will encourage industrialisation and Foreign Direct Investment (FDI) in the country.
While this is a welcome change, this reduction should be extended to companies and sectors like bank, telecom sectors, it added.
FICCI in a statement said, increase in the tax-free income threshold and reduction of tax rate applicable for the taxpayers other than companies and local authorities will give much needed breathing space to taxpayers fighting the recession caused by Covid-19.
The chember welcomed reduction in Advance Tax (AT) on imported raw materials for manufacturing industries from existing 5.o per cent to 4.o per cent; Simplification initiatives like VAT on foreign services, increase of time limit for input tax credit to four tax periods (from existing two), acceptance of the bill issued by gas, water, electricity and telephone authorities as Tax invoice.
It termed allowing 80 per cent VAT rebate on transportation service as input credit is a good move, although this should have been extended to 100 per cent of actual VAT paid for carrying VAT chargeable goods.
The Chamber expresses its concern over limiting the valid promotional expenses of the company up to 0.5 per cent disclosed turnover, and that reduction ceiling of overseas travelling expenditure to 0.5 per cent from 1.25 per cent may increase the effective tax rate 5 per cent to 15 per cent depending on the size of the company.
It also expressed concern over introduction of 2.0 per cent withholding taxes on local supply of essential commodities, such as rice, atta, potato, garlic, onion, etc. through local L/C.
FICCI said allowing undisclosed money to be deposited in the banking channel after paying a lower income tax rate without obtaining any satisfactory explanation of source may contradict with prevailing Anti-money laundering (AML) guidelines.
Regarding VAT, FICI said, the debated GO issued in October'19 for limiting the scope of input tax credit has now been incorporated as part of the Act, which will now permanently restrict the eligibility of claiming legitimate input tax credit. This will increase the cost of doing business.