With the economy at a standstill because of the lockdown, the Centre is crowding in ideas for revival from the industry.
Key demands and suggestions include improving liquidity, cutting customs duties and goods and services tax (GST) rates, expediting all refunds and a halt on tax scrutiny and searches till the year-end.
Officers across departments and ministries have been asked to speak to people across sectors for ‘SWOT' analysis of issues for revival of the economy. Besides identifying bottlenecks for various sectors, the government is also asking for a wish list from the industry at a time when the global economy is slipping into a recession.
“The government recognises that these are unprecedented times and industry will have to be taken on board to overcome the crisis. Ensuring liquidity is one of the top demands. However, all departments are trying to understand even micro issues hurting the industry,” said a government official.
The International Monetary Fund (IMF) has cut India’s growth forecast for FY21 in its World Economic Outlook (WEO) report to 1.9 per cent from 5.8 per cent, projected in January. It pointed out that the outbreak will throw the world economy into the worst recession. Barclay’s slashed India’s growth projection for calender year 2020 to zero, arguing that the economic impact will be worse than expected.
Inputs have been sought under three heads – bottlenecks being faced by sectors and traders, wish list of the industry and ideas for revival of industry.
The income tax department, for instance, has asked field officers to speak to around 10 people across sectors that they have dealt with and submit suggestions by Wednesday.
The suggestions collated by officers so far include allowing auditors to get special permission to move even during the lockdown with results season round the corner. Another key demand pertains to expediting all tax refunds to improve liquidity in the system. The income tax department had recently announced expediting refunds up to Rs 5 lakh.
Besides, there should be a hold on all scrutiny and search operations by the tax department till March 31, 2021, said another suggestion.
“Most are seeking extension of income tax return filing timelines for the current fiscal year,” said an official.
On indirect taxes, the industry is seeking Customs duty cuts and reduction in GST rates on Covid and non-Covid related items. That has been ruled out by officials, who argue that it will open doors to Chinese imports and prove detrimental to the country’s ‘Make in India’ efforts.
“The industry wants customs duty reduction and even GST cuts. They should understand that it is not doable. However, we are compiling these ideas to be discussed at a broader level,” said another official.
Rajat Mohan, partner, AMRG Associates, suggested that the tax administration should get strict orders not to harass any taxpayer.
“Till next financial year, all kinds of notices and assessments shall be deferred unless any such delay is expected to cause irreparable damage to the public exchequer. Every correspondence with the tax officer, wherever needed, will be by way of email communication only,” he said.
Mohan added that while small and medium enterprises should be given complete freedom from scrutiny assessment for FY20 and FY21, tax refunds upto Rs 1 crore should be processed on a provisional basis, based on self-assessment only.
Gouri Puri, partner at law firm Shardul Amarchand Mangaldas and Co, said that interim measures such as triggering tax deduction and source (TDS) obligation only on actual payment basis, suspending deemed dividend and perquisite taxation on loans given to shareholders and employees in distress will help cash-strapped businesses.