The US-India Tax Forum, a dedicated Tax Policy Forum of the US-India Strategic Partnership Forum (USISPF), has recommended to the government to ensure tax parity between domestic and foreign players in various sectors.
This move would create a fair playing field, especially in sectors like banking, where foreign banks' branches face high tax burdens in India.
Launched officially on February 25, 2020, the Tax Forum has emphasized the importance of rationalizing corporate tax rates in light of global developments such as the minimum tax deal. With around 350 member companies, the US-India Tax Forum serves as a key platform for Indian policymakers, global tax experts, and the business community to collaborate and advocate for a tax-friendly environment that promotes India as an attractive investment hub.
Recently, the Tax Forum was invited to present its recommendations for tax amendments in the upcoming Union Budget 2024-25, scheduled to be announced by Union Minister for Finance and Corporate Affairs, Nirmala Sitharaman, on July 23.
The Tax Forum emphasizes the importance of advocating for a stable and predictable tax environment to boost investment sentiment across various sectors. It is crucial to simplify tax rates and tariffs, enhance the ease of doing business, and rationalize the cost of doing business to support an investment-led growth strategy in India.
The forum also highlights the need to simplify the withholding tax regime, especially with the increased use of technology and data analytics. Tarun Bajaj, Chairperson of US-India Tax Forum, anticipates targeted reforms in direct taxes and customs policies in the upcoming government budget to strengthen India's economic partnerships globally.
Measures to streamline corporate tax structures, incentivize investments, and simplify customs procedures are also expected to facilitate smoother trade flows.
Dr. Mukesh Aghi, President and CEO of USISPF, stated that multinational corporations are looking forward to Budget 2024-25 prioritizing stable tax policies, robust infrastructure investments, innovative incentives, and sustainable development initiatives.
"Our recommendations are focused on seeking clarity and consistency in regulations, aligning largely with these areas," Aghi mentioned.
The Tax Forum has proposed significant reforms in the capital gains tax structure, emphasizing the need to bring parity among tax rates and holding periods for investments across equity, debt, and immovable property to simplify the capital gains tax structure and reduce the compliance burden.
The Tax Forum has emphasized the importance of rationalizing custom duty rates on specific products under indirect taxes. This move is crucial as India aims to leverage the China plus one strategy, making it essential to ensure cost-effective imports of critical supply chain components and streamline the process of importing goods into the country.
The Forum stated, "Customs duty relaxations on the import of supplies that enhance domestic capabilities are essential at this juncture. This will not only enhance domestic efficiencies but also boost India's competitiveness."
The interim budget, presented on February 1, addressed the financial requirements during the transitional period until a new government was formed post Lok Sabha elections. Subsequently, a full budget was expected to be presented by the new government in July.
As the Budget Presentation is scheduled for July 23, Finance Minister Sitharaman is set to break the record previously held by former Prime Minister Morarji Desai. Desai, during his tenure as finance minister, presented five annual budgets and one interim budget between 1959 and 1964. Sitharaman's upcoming Budget speech will mark her sixth.
The government recently announced that the budget session of Parliament will commence on July 22 and conclude on August 12.
