Budget 2017: Four taxes that should be lowered or abolished

Equalisation Levy

Backdrop: India was among the first nations to introduce such a levy; recently for service tax, too, it was made mandatory for foreign companies to register in India; it is expected that more services will be brought into the ambit of EL this Budget.

Points to Ponder: With digital proliferation in India rapidly increasing, is it the right time to expand the scope of EL; is the levy justified on the principle that companies should pay tax where their customers are; with several Indian companies providing services globally, will other countries follow suit and will this hurt Indian businesses; with the levy being expanded to B2C services, will it increase costs to end users?


General Anti-Avoidance Rule (GAAR)

Backdrop: Proposed to come into force on April 1, 2017.

Points to Ponder: Are we ready for GAAR; is the administration ready, will it appreciate the nuances or will it become a tool for harassment; considering several other measures, like Treaty changes, do we need GAAR now; what are the global best practices and learnings; what are the safeguards needed; what should international investors look out for; how should Indian industry prepare for it?

Taxing Investments in Startups

Why it’s a bad idea: It is a provision that hurts more than it benefits; out of sync with reality of how investments are made in the startup ecosystem; unfair to levy only on private companies and exempt listed companies where manipulation is higher; unfair to levy only on resident investments; goes against the government’s startup focus; leaves huge amount of discretion with revenue officers on vexed issues like valuation which is against ease of doing business mantra.

Build-up to Budget 2017: Read all the latest stories and analysis by experts

Lowering of Corporate Tax Rates

Backdrop: With surcharge and cess, rates in India are among the highest.

What should be done: Urgent need to calibrate and bring the rate down; most exemptions have been taken away in any case, and hence, lowering should be hastened and not spread out over 4 years; at the same time, critical exemptions like SEZs and infra-related should continue; need to balance tax as an impetus to investment and revenue mobilisation; immediate reduction across the board an imperative to counter demonetisation effect; minimum alternate tax (MAT) rates also need to be rationalised.

Source: PwC