Pre-Budget expectations from Interim Budget 2019

Nikhil Rohera

Partner
Corporate and International Tax

Tax benefits for salaried class through re-introduction of standard deduction and revision of allowances
Carve out tax provisions to streamline proceedings under Insolvency and Bankruptcy Code
Continuation of investment allowance with lower thresholds to boost capex
Rationalisation of corporate tax rates including Minimum Alternate Tax and Dividend Distribution Tax
Extension of patent box regime to income from sale of patented products

Kuldip Kumar
Partner and Leader
Personal Tax

Increasing basic exemption limit from 250,000 INR to 300,000 INR and from 300,000 INR to 350,000 INR for senior citizens (particularly for the lower income group)
Raising of limit of deduction u/s 80C from 150,000 INR to 250,000 INR to provide saving opportunities to public at large
Allowing deduction for interest on fixed return saving instruments for senior citizens and also allowing deduction for routine medical expenses
Providing tax break for creche expenses/allowance and enhancing the tax free medical reimbursements to employees from 15,000 INR to 50,000 INR
Extending the leave travel allowance (LTA) exemption to yearly basis and also expanding the scope to cover international destinations

Rahul Garg
Partner and Leader
Tax Technology

Provide complete tax neutrality while implementing the Resolution Plan as approved by NCLT under Insolvency and Bankruptcy Code.
Abolish ICDS provisions altogether to reduce compliance burden on the industry.
Promote “Make in India” initiative, provide tax exemption to foreign companies in respect of goods procured from India under the toll manufacturing model.
Provide specific exclusion under POEM rules for operating service hubs for global business support services in India.
Concept of “economic employment” should be accepted under secondment arrangements to facilitate ease of doing business and inflow of know-how.

Hiten Kotak
Partner and Leader
Mergers & Acquisitions Tax

Provide exemption in the hands of foreign shareholders for shares received consequent to merger/demergers of foreign entities holding shares in Indian entities.
Eliminate conflict between IndAS and income tax by permitting recording of assets at fair value on demerger between unrelated parties.
Provide relief from Minimum Alternate Tax (MAT) to companies under insolvency proceedings.
Remove ambiguity regarding taxation in the hands of recipient of shares in companies under insolvency proceedings where the acquisition price is lower than the value prescribed.

Deepak Mahurkar
Partner and Leader
Oil & Gas

Include petroleum products in GST: Not having gas and transport fuels in GST and absence of classical GST to the inputs to and outputs from the sector cause administrative and financial burden. This hampers the progress in deregulation of prices, developing competitiveness and most importantly attracting investments by creating environment of ease of doing business.
Rationalise crude cess: Ad valorem cess disallows investors from making the crude oil price rise benefits to be converted into fresh investments into exploration and development. On the other hand, the cess collected is best utilised in the oil industry research, development, capacity building, gap funding or such purposes.
Remove of customs duty on LNG: Demand is log outstanding, of removal of anomaly of import duty waiver on crude oil, but not for natural gas, despite the latter being the fuel the government wants to promote over the polluting fuels like crude oil derived products and coal.
Enable gas swapping: Natural gas is proving to be costly due to long transportation and attendant duties. Sometimes, the transportation is necessary only since the contract is with a distant entity, although the molecules don’t travel since the network provides gas from near source. The gas market development cannot afford these commercial and infrastructure burdens. Gas swapping promotion needs many policy areas and functional perspective. Enabling swapping will also reduce monopolistic behaviour.
Service tax should not apply on cost petroleum and on cash calls: The cost incurred by exploration and production (E&P) operators is not a service provided to the government. Similarly, the cash calls are part of the E&P cost and not cost of service provided. Therefore, service tax should not be levied on these payments.
Create a gas market: Polluting fuels will need to be, by choice and by policy, deprioritised. Concurrently, gas needs to be not only be promoted as fuel of choice but made easy to be bought. Removing hurdles of infrastructure and levies is necessary from the way of gas getting imported or produced. A special task force or high powered committee should be constituted to identify measures and recommend solutions.
Review retail licensing: Include in the eligibility conditions for retail licensing investments in infrastructure for critical for energy security for the common man like import and supply of LPG, and supply of gas to homes or automobiles.
Deploy technology for trust and speed: Make blockchain compulsory for common transactions like sale of products to bulk consumers (B2B), large EPC contracts, etc.

Ajay Kakra
Director
Food and Agriculture

Technology adoption: Greater focus on providing better access to farmer friendly technology, which will support him with farming and market operations.
Market integration: Sustained focus on building the National Agriculture Market Portal (eNAM) model of market integration to link stakeholders
Pull mechanism: Utilise pull mechanism (pay for results) to incentivise participation of the private sector for marketing of R&D products, tackling key challenges such as crop productivity, nutrition, livestock management, pest resistance and other areas where the regular push mechanism (pay for product) doesn't work.
Price volatility hedging: Effective interventions to control price volatility for key essential and non essential commodities.

Sandeep Ladda
Partner and Leader
Technology

Weighted deduction under section 35 (2AB) for R&D activities should be extended to companies engaged in the development and sale of software or providing IT services.
Since e-way bill rules are expected to come into force soon, a simplified and smooth framework should be implemented, which will go towards enhancing the ease of doing business index.
Adjustments to past years income emanating from APAs should be recognized as income of those years itself, else is resulting in higher tax liability on account of MAT.
Availability of credit of Equalisation Levy to overseas Online Ad companies has increased cost of doing business in India. A clarification should be issued that this levy is indeed on income allowing access to the treaty for claiming credit.
On GST, while Tax Collected at Source (TCS) has been suspended till March 2018 for eCommerce companies, it can prove to be extremely challenging to not only register in several states, but also comply with various onerous obligations in each state for the eCommerce companies. This provision should be deleted altogether.

Frank D'souza
Partner and Leader
Entertainment & Media

Clarifications on applicability of Rule 9A on income from digital rights for feature films
Weighted deduction for development of cinema screens in tier II and tier III cities
Weighted benefit on CSR spends towards sports
Tax exemption for international sporting events held in India
Levy of Local body entertainment tax on movies should be removed or atleast be put to a minimum cap on exhibition of movies

Bimal Tanna
Partner and Leader
Industrial Products

Reduction in overall corporate tax rate to 25% for all companies, in line with the commitment made by the Finance Minister
Clarity on GST implications of various sales promotion schemes
For companies referred to NCLT under the Insolvency and Bankruptcy code: Waiver of outstanding loan and interest thereon should not be taxed under MAT and normal provisions
Restoring the investment allowance under section 32AC and higher depreciation for plant and machinery from 15% to 25% to provide a boost for investment in manufacturing industries
Restoring the highest rate of depreciation instead of present 40% to provide impetus to industries using energy saving equipment which is efficient in curbing the pollution
Allow the carry forward of unutilised R&D deduction under section 35 (2AB) benefit for an indefinite period (on the lines of unabsorbed depreciation)

Kavan Mukhtyar
Partner and Leader
Automotive

Accelerate spend in infrastructure to have positive impact on the commercial vehicle industry in the short term.
Increase weighted deduction of R&D investments will incentivise industry to increase investments in R&D given the challenges of rapid technological shifts.
Introduce fewer GST slabs for vehicles and streamlining of compliance processes.
Promote e-mobility by lowering the GST rate on battery electric vehicles to 5%.
Incentivise replacement of ageing commercial vehicles in a phased manner would promote shift towards cleaner transportation.

Dhiraj Mathur
Partner
Aerospace and Defence

The need of the hour is to upgrade the present equipment at a faster pace.
Budget allocation needs to be directional in nature, i.e. allocation of defence budget towards indigenous design, development and manufacturing.
Trim the expenditure on non-core activities, which will result in reduction of revenue expenditure and thus enable the increase in capital budget over the coming years.
Section 10(6C) of the Income Tax Act, as per which a non-resident can apply to the government for income tax exemption from royalty/FTS income on defence related projects should be suitably amended to exempt other incomes as well.
In order to encourage the creation of an industrial base in the aerospace and defence industry, it is recommended to extend the benefits of investments linked deduction available under section 35AD.
The government should consider bringing an exemption under GST regime for construction of defence airports and bringing aviation turbine fuel under the GST regime with a uniform rate across India.

Hemal Uchat
Partner
Mergers and Acquisitions Tax

Amendments in Insolvency & Bankruptcy Code (IBC) to make it a “complete code”, including in Income-Tax Act (ITA) such as (a) Loan and interest waivers/write-backs (irrespective of usage) to be exempted from Minimum Alternate Tax (MAT) (b) Relief/concessions for continuity of tax losses (including for change of shareholding) and from past assessments (c) Non-applicability of valuation norms for purchase of shares (under Section 56) for listed/unlisted shares.
M&A tax boosters such as (a) Carry forward of tax losses for all businesses and not limiting it to industrial undertakings (b) Carry forward of MAT credit in mergers/demergers (c) Clarity on taxation of contingent consideration at the time of its receipt (d) Aligning demerger provisions under the ITA with newly introduced Indian Accounting Standards (IndAS) (e) Reduce capital gains tax rate of unlisted shares from 20% to 10% for resident shareholders (f) Tax neutrality to mergers/demergers of limited liability partnerships (LLPs).
Sector-specific incentives to push Make In India and soften tax rates to 25%

Sanjay Tolia
India Markets Leader and APAC Transfer Pricing Leader

India has been voted as the 5th most attractive investment destination by CEOs worldwide in PwC's CEO survey. This promises further growth and calls for increased, 'Tax Certainty' and 'Ease of Doing Business'. The Indian Advance Pricing program for Transfer Pricing stands out tall and confident. I would like to see the success replicated for Corporate Tax, Customs and GST.

Sujay Shetty
Partner and Leader,
Pharma and Life Sciences

Continue to promote innovation in the country: Weighted deduction availed under Section 35(2AB) should be restored to 200% and its scope expanded to cover various nuances of R&D such as in-house intangible asset development, expenditure on R&D facility, clinical trials by CROs, filing patents etc.
Rationalisation of ‘Patent Box’ regime: Providing clarification on Section 115BBF.
Rationalisation of taxes on raw materials/capital equipment used for manufacture of life saving drugs: Components and raw materials used by indigenous manufacturers to produce diagnostics and lifesaving drugs should be exempted from GST.
Tax incentives to start-ups – Section 80IAC: Benefit should be extended to start-ups incorporated before 1 April 2016 as well. Exemption from MAT to be provided. Start-ups to be excluded from limitations under Section 79 without any conditionalities. Government should address tax implications, protect investors - both retail and venture capital funds - and also help these startup ideas grow with capital.

Kameswara Rao
Partner and Leader
Energy, Coal and Utilities

Investment incentives may be sunset completely in renewable energy and be offered, instead, to emerging areas such as offshore wind, electric transport, and storage.
Stranded assets may not deliver sustainable returns unless project specific issues on fuel supply, PPA approvals, and a capital top-up are addressed. The government may propose schemes to fill this gap.
Manufacturing will get a positive boost if the government proposes more clarity on the pipeline of auctions to procure over 110 GW renewable energy in the coming months to year 2020.
Distribution utilities facing higher costs and losses must invest in automation and outsource services. The government could propose reforms to dilute utilities’ monopoly power to bring in competition and efficiency.

Manish Agarwal
Partner and Leader
Infrastructure

The government’s focus on increasing public spend has enabled the construction cycle to pick up. However, the efforts towards reviving private investment have yielded insufficient impact so far. Foreign investor interest is visible, but opportunities have been limited. A focused coordinated emphasis on implementation of several initiatives announced earlier is required to attract investors.

Pre-Budget expectations

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