Union Budget 2024 Needs to Bolster the Manufacturing Sector to Attract Investments

Manufacturing industries feel that the Union Budget has the scope to come up with incentives to promote manufacturing in the country and attract investors so that India can become an alternative to China. Writes Sutanuka Ghosal.

New Delhi: The Union Budget that will be tabled on February 1 needs to bolster India's manufacturing sector, positioning the country as an attractive alternative to China. The Budget should extend the favourable tax rate of 15% for new manufacturing companies, aiming to sustain the growth momentum, especially in comparison to other successful examples like Apple and Foxconn setting up bases in India.

Along with this, the government should opt for a strategic approach towards increasing the exports, which have been dwindling due to various reasons like the geopolitical tension, recession in the US and the overall economic slowdown in the global markets.

Export & Make In India- As the Ministry of Electronics and Information Technology sets an ambitious goal of making India a $300 billion powerhouse by 2025, it is expected that a substantial portion, around $120 billion, will be contributed through export activities.

A boost to the manufacturing sector has the potential to create job opportunities, contributing to the broader goals of the ‘Make in India’ Initiative.

Evolving the PLI- The Production Linked incentive Scheme can be evolved further to boost sustainable growth. A section of the industry feels that transforming it into a Design and Innovation Linked Incentive scheme would not only encourage investments in production capabilities but also channel funds into research and development. This shift can foster a culture of innovation, ultimately enhancing the competitiveness of Indian industries globally.

Lower tax regime- Executives from Dhruva Advisors feel that the budget is anticipated to include an extension of the lower tax rate provision for new manufacturing companies for at least 5 more years beyond the current sunset clause, in order to encourage and support the continued shift of global manufacturing to India.

Woes of CIT(A) appeals- The budget expectation emphasises the need for urgent and legally mandated redressal of the slow progress in disposing of appeals at the first appellate level. The current situation, where Non-Disposal of Appeals by Commissioner of Income Tax (Appeals) (CIT(A)), has resulted in a backlog, locking up funds from taxpayers' 20% deposits and withholding revenues due to the tax department. There is a call for swift action to address this issue.

Compliance burden in TDS, TCS- The budget is expected to address the increased compliance burden on taxpayers related to the payment of TDS and TCS. The proposal suggests a rationalisation of these provisions to reduce the compliance burden without impacting tax revenues. The aim is to streamline the process and minimise the involvement of those deducting taxes in unnecessary litigation, especially since they are essentially collecting taxes on behalf of the revenue.

OECD's Two-Pillar Approach- The budget expectation centres on the introduction of domestic laws aligning with the Two-Pillar Approach of the Organisation for Economic Co-operation and Development (OECD). The enactment of these provisions in the upcoming budget is highly anticipated and closely watched by the international community.

Divestment & Leveraging of PSUs- The anticipation is for the budget to emphasise and provide a clear direction on expediting the disinvestment program, leveraging the strong performance of PSUs and the positive momentum in PSU shares on the stock exchange.

The GIFT City initiative of inviting Family Offices to be set up is yet to reach fruition pending final RBI approvals. The flip-flop on this count needs to be addressed.

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