New Delhi: Industry chamber CII on Friday suggested that the government should reduce the personal income tax rate and slash corporate tax further to 15 per cent for all companies over three years to boost demand and propel growth.
In a pre-Budget consultation meeting with Revenue Secretary Ajay Bhushan Pandey, the Confederation of Indian Industry (CII) recommended focusing on providing impetus to consumption and investment.
CII suggested that in order to bring about uniformity, all corporate tax rates should be converged to 15 per cent with no exemptions and incentives over a period of three years till 2023.
The government in September reduced the corporate tax from 30 per cent earlier to 22 per cent for all companies and 15 per cent for new manufacturing units to boost economic growth which fell to over six-year low of 4.5 per cent in the second quarter of the current fiscal. Companies opting for new lower tax rates will not be entitled to any exemptions or deductions.
"A signalling to this effect in the budget could help further boost investor sentiment and encourage investments," the industry body said.
It also recommended boosting consumer sentiment by putting more disposable income in consumers' hands and giving direct cash benefit of Rs 4,000 to farmers to propel spending.
CII said there is a need for creating fiscal space for investment in infrastructure, enhancing rural demand, boosting private investments, augmenting government revenue and bridging the trust deficit.
"In order to boost consumption demand, it is important to enhance the disposable income of people especially at the bottom of the pyramid. Hence, the government should reduce personal income tax rates to enhance disposable income. This will increase household demand as well as enhance sagging household savings," CII said.
It also suggested that the Central Board of Direct Taxes (CBDT) can constitute an expert panel of mediators comprising retired senior tax officials and experienced professionals who can mediate and try to resolve tax disputes at the assessment stage itself in a time-bound manner.
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This would boost sentiments and augment revenue, said CII.
In order to enhance rural demand, the government may release two instalments of PM-Kisan scheme together totalling Rs 4,000 per farmer to add disposable incomes in the hands of rural consumers.
The government may also consider increasing public spending on rural infrastructure, especially rural roads and productivity enhancing agri infrastructures such as irrigation and specialised agri-market infrastructure.
Higher disinvestment target for next year and continuing monetisation of assets such as ports, roads, airports and government land would help in augmenting government revenue, it suggested, adding that the proceeds should be used for building new infrastructure.
Further, it recommended adoption of expansionary fiscal policy to allow fiscal deficit to increase by say 0.5 to 0.75 per cent of GDP beyond the Fiscal Responsibility and Budget Management (FRBM) Act targets.
This will give government additional fiscal space of about Rs 1.1 lakh crore to Rs 1.6 lakh crore. This additional fiscal space should be used for investing in capital expenditure, particularly in infrastructure.
"While getting back to the FRBM targets, there should be a glide path to return to the FRBM target over a period of 2 to 3 years," CII added.
The industry lobby also urged the government to continue with 10 per cent peak rate of customs duty for the year 2020-21.
The union finance minister will present the Budget for 2020-21 in February next year.
