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Status quo signals stability in tax regime: Experts


MUMBAI: Taxation experts have opined that making no major changes in the tax structure signal a strong resolve to have stability in the tax regime and at the same time, expressed the hope that the government returns to fiscal consolidation sooner than later.

Surprising everyone, especially the markets which closed with the biggest Budget-day gains of 5 per cent, the Budget left all taxes unchanged barring for some cess to fund the farm sector or increase any direct taxes. All it did was to tweak the customs and excise duties on certain products to rationalise them.

EY India’s Sudhir Kapadia said no major changes in the design or rates of direct taxation signals strong resolve to have stability in the tax regime. Though foreign shareholders in domestic companies will get the benefit of lower withholding rates on dividends under tax treaties, disallowance of deduction on goodwill in merger transactions is an unexpected dampener, he added.

Also, the proposed dispute resolution committee for only small taxpayers is disappointing, as there is a crying need for an omnibus mediation channel for all taxpayers, especially where large tax disputes are likely to arise, he said.

Abhishek A Rastogi of Khaitan & Co said tax holiday extension for start-ups till March 2022 gives necessary boost to the newage economy. The moot point, however, remains whether this extension is enough for start-ups to come to the normal growth rate trajectory, and whether there will be any further extensions as we move closer to the new deadline.

Interestingly, capital gains exemption on investments in start-ups have also been extended to March 2022, incentivising investment especially in the promising ventures, he said.

On the proposal to prospectively amend Section 2(42C) of the Income Tax Act defining slump sale may impact computation of capital gains in case of slump exchange transactions. The slump exchange transactions are a regular feature in holding-subsidiary slump exchange model with a view that capital gains are not applicable, he said.

While the government has been working to curb tax evasion, a move towards de-criminalisation of offences will help the economy in the long-run. While steps towards decriminalisation have been taken with respect to LLPs, a move in that direction for GST is of utmost importance, Rastogi told .

Sanjay Tolia of PwC India said the proposed board for advance rulings and a dispute resolution panel for small taxpayers will pave the way for further tax certainty.

Pranav Sayta of EY India said though the Budget has done well by focussing on reviving growth rather than being unduly worried by the immediate-term fiscal deficit given the special circumstances.

One does hope that returning to the path of fiscal consolidation happens sooner than later, he added.

Sonu Iyer of EY India said the continued focus on making the lives of the taxpayers easy by measures like no tax return filing requirement for persons over 75 years and above earning only pension income, pre-filling of tax returns with capital gains and interest income details, and faceless tax assessments expanded to include tax tribunals and dispute resolution committee, among others, is very positive.

S R Patnaik of Cyril Amarchand Mangaldas said the reassessment period, reduced from six to three years, will help reducing the number of cases in going forward and also shows that the government is willing to trust its citizens.

On the impact of the proposed faceless appellate scheme, it will have to be seen as to how the scheme is going to be implemented because unlike the first appellate system, which was still within the executive control of the government, the ITAT is an independent body.

On totally removing tax on REITs and InvITs dividends, he said it will enable a greater acceptability of such schemes.

Harpreet Singh of KPMG India said the agriculture infrastructure and development cess on imported apples, peas, lentils, alcohol, chemicals, silver and cotton is aimed at encouraging domestic products and not imports.

Suraj Malik of BDO India said the Budget has rightfully recognised the new-age gig economy, including platform workers, and made provision for benefits including insurance, minimum wages and health benefits. This should be coupled with a simplified compliance regime for aggregators and employers to make the delivery of benefits effective.

Gopal Bohra of NA Shah Associates said the reduction in the tax assessment period to three years from six if the undisclosed income is above Rs 50 lakh will reduce significant uncertainty for the taxpayers and litigation.

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