Washington, D.C., July 11, 2024
The US-India Tax Forum, a dedicated Tax Policy Forum of the US-India Strategic Partnership Forum (USISPF), has submitted its recommendations on tax amendments for the Union Budget 2024-25, to be presented by the Union Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman, on July 23, 2024.
The US-India Tax Forum has around 350 member companies and is a leading platform that allows Government of India policymakers, global tax experts, and the business community to engage and advocate for a tax environment that is conducive to making India an attractive investment destination. The Tax Forum was recently invited to present recommendations at the Ministry of Finance on industry recommendations on Union Budget 2024-25.
The US-India Tax Forum’s recommendations focus largely on advocating for a stable and predictable tax environment, which is extremely imperative to boost investment sentiment across sectors. An investment-led growth strategy is essential to support India’s economy. To achieve this, measures are needed to enhance the ease of doing business, rationalize the cost of doing business, and simplify tax rates and tariffs.
The simplification of the withholding tax regime is among the top asks of the Tax Forum. With increased adoption of technology and use of data analytics, the scope of Tax Deducted at Source (TDS) and Tax Collection at Source (TCS) provisions needs to be rationalized.
Mr. Tarun Bajaj, Chairperson of US-India Tax Forum and former Revenue Secretary, Government of India, said, “The ensuing budget of the government is expected to build on the reforms previously implemented. It is expected to introduce targeted reforms in direct taxes and customs policies, aimed at enhancing India’s economic partnerships globally. The industry should anticipate measures to streamline corporate tax structures and transactions, incentivize investments, and simplify customs procedures to facilitate smoother trade flows. These initiatives are crucial for fostering a conducive business environment and strengthening bilateral economic ties, ensuring mutual prosperity and competitiveness in the global market. Additionally, they will further build on the ease of doing business for industries in India.”
USISPF President and CEO, Dr. Mukesh Aghi said, “Multinational corporations anticipate Budget 2024-25 to prioritize stable tax policies, robust infrastructure investments, innovative incentives, and sustainable development initiatives, fostering a conducive business environment for growth and global competitiveness. Our recommendations are largely aligned towards these areas, seeking clarity and consistency in regulations.”
Naveen Aggarwal, Partner-Tax, KPMG India said, “India Inc’s expectations are bigger and bolder in the run up to this budget as it awaits substantive proposals around long-standing asks – faster resolution of tax disputes, extension of lower tax regime to incentivize new manufacturing, rationalization of capital gain and withholding tax regimes, amongst the prominent ones. With more than 40 countries across the globe already working towards implementation of Pillar 2 GloBE rules, the need of the hour is for India to develop a comprehensive roadmap for implementing these global tax reforms. This would help ensure that India is on course to get its fair share of taxes. Clarity is also awaited on the future of India’s equalization levy, the fate of which is intertwined with Pillar 1 Amount A MLC ratification.”
Rationalization of corporate tax rates has been a long-standing ask for companies across sectors. The US-India Tax Forum has suggested bringing parity in tax payable by domestic and foreign players in multiple sectors. This would ensure a level playing field in sectors like banking, where foreign banks’ branches pay high taxes in India. Acknowledging the global developments around the minimum tax deal, the Tax Forum has highlighted the inherent need to rationalize corporate tax rates.
Largely in the interest of inbound investments, the Tax Forum has suggested significant reforms in the capital gains tax structure, which is currently complex. There is a need to bring parity among tax rates and holding periods for investments across equity, debt, and immovable property, which are currently quite fragmented. This would lead to a simpler capital gains tax structure and reduce the compliance burden. The Tax Forum’s recommendations also address the need to bring in tax neutrality around the reorganization of mutual funds, a measure which is aligned globally.
The Tax Forum has made elaborate recommendations on overhauling the Transfer Pricing regime in India to mitigate risks emerging from cross-border trade amidst rapid digitalization. Our recommendations focus on suggestions to improve processes and mechanisms underlying transfer pricing audits, dispute resolution mechanisms, and appellate procedures, changes to safe harbor provisions, and bringing in measures to fast-track the closing of the Advanced Pricing Agreement (APA) mechanism and Mutual Agreement Procedures (MAP).
Under indirect taxes, the Tax Forum’s recommendations are largely centered on the rationalization of custom duty rates on specific products. As India seeks to capitalize on the China plus one strategy, it is imperative that the import of critical supply chain components is made cost-effective and the process of bringing goods into the country is streamlined. Customs duty relaxations on the import of supplies which strengthen domestic capabilities are the need of the hour, which will not only improve domestic efficiencies but also add to India’s competitiveness.
The Tax Forum suggestions also include measures for improving trade facilitation processes. Customs processes on the ground should be streamlined to allow the smooth flow of goods, which is achievable by leveraging technology for efficient tax, improving ease of compliance, and testing norms at ports.
The industry eagerly anticipates the Union Budget 2024-25, the first budget of the re-elected Government, which is expected to introduce measures that will stimulate growth across sectors. The business community looks forward to tax efficiency measures and clarifications that will address transactional issues around the tax legislation, unlocking growth and investment opportunities.
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About the US-India Strategic Partnership Forum (USISPF):
The US-India Strategic Partnership Forum (USISPF) is committed to creating the most powerful partnership between the United States and India. As the only independent not-for-profit institution dedicated to strengthening the U.S.-India partnership in Washington, D.C., and in New Delhi, USISPF is the trusted partner for businesses, non-profit organizations, the diaspora, and the governments of India and the United States.
About the US-India Tax Forum:
The US-India Tax Forum is USISPF’s dedicated Tax Policy Forum which enables focused discussion on important advocacy areas across tax regimes in India. The US-India Tax Forum has around 350 member companies and is the leading tax platform bringing Government of India policymakers, global tax experts, and the business community at large to advocate for better tax policy.
The Tax Forum was officially launched on February 25, 2020, and is an initiative to provide member companies with a platform to engage with relevant Government officials on tax issues as they conduct business in the US-India corridor, discuss the future of taxation and how businesses and governments can work together in a global world to improve the ease of doing business environment.
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