Rohan Shah, Managing Partner, Economic Laws Practice

On the indirect tax front there are some clear positives for the corporate community. The thrust on measures to reduce tax litigation is welcome as it will help resolve pending disputes and also create certainty for the future. In view of the impending move to GST, certain measures have been taken including the imposition of an additional cess of 0.5% ad valorem, there has also been a rationalisation of the CENVAT credit structure and certain items like clothing and jewellery will now be subject to excise duty. If one were looking for something which ought to have been addressed and was missed, the provisions for arrest on indirect tax disputes which have been plaguing the sentiment of the Indian industry should have been definitively modified to prevent arrest for custodial investigations. Qua GST, while some subtle steps have been taken, some might have wished for a more positive affirmation of an action plan and dates. Personally, I think there will be more concrete announcements on GST in the latter half of this Budget Session of Parliament.

On direct taxes, the beneficial taxation regime for new manufacturing units, start-ups, asset reconstruction companies and global patent incomes are all positive and supportive steps. The introduction of a fresh scheme of amnesty in direct taxes with a more benign interest and penalty as also assurances against prosecution; may well elicit a far greater participation. The adoption of the Easwar Committee Report on simplifications is also welcome. The settlement scheme on “indirect transfers” is however a dampener as the requirement for tax payment is in a manner an endorsement of the retrospective amendment introduced by the previous Government. While the resolution of this issue is not easy, this Budget proposal for settlement of indirect transfers by payment of the tax amounts may not garner adequate support. This critical issue unfortunately continues to remain unresolved.

The tone and tenor of the budget is positive and pro-India at all levels.

Krish Iyer, President & CEO, Walmart India

The Union Budget 2016 continues to rightly focus on rural and infrastructure sector. The planned investment in these two critical sector will not only create jobs but also give impetus to demand generation and economic growth.

The government’s proposal to create e-market for our farmers through ‘Unified Agri Marketing platform’ is very bold and forward looking and will positively impact country’s farmers. We will continue to strengthen our Direct Farm programme to complement government vision to make a difference to the lives of our millions of farmers.

The continued focus on ease of doing business, as highlighted by Finance Minister Arun Jaitley augurs very well for the industry. Recognition of retail trade as the largest service sector employer in the country and proposed focus to simplify the regulations for retail sector is very laudable. The Retail sector in India is currently the hotbed of economic growth. The sector has made noteworthy progress over the last two decades, with rise in disposable earnings, shift in youth populous and an attitudinal shift in consumer preferences. India is a domestic consumption driven growth story and therefore this support & encouragement to the retail trade will surely further drive consumption, which in turn will help manufacturing sector and job creation.

The announcement by the finance minister to allow small & medium shops to open all seven days of the week is very encouraging. I also commend the government announcement to circulate a Model Shops and Establishments Bill, which can be further adopted by the state governments.

The decision by the government to allow up to 100% foreign direct investment (FDI) through FIPB in marketing of food products produced and manufactured in India is very progressive and will help in reducing wastage, helping farm diversification and encourage industry to produce locally within the country. This far reaching reform will benefit farmers, give impetus to food processing industry and create vast employment opportunities.

In addition maintaining fiscal discipline by restricting fiscal deficit to 3.5% for FY 2016-17 and commitment to 'no retrospective taxes' are commendable and these decisions will help control inflation and boost investor confidence respectively.

Overall this is a very good budget. Adherence to fiscal discipline, with emphasis on growth, development, increasing infrastructural & rural spending, and simplifying retail trade norms are key aspects of the budget.

Sunil Shah, Partner Deloitte Haskins & Sells LLP

Corporate Tax

The Budget has taken a step forward in rationalizing the tax regime through sunset provisions for certain exemptions and deductions. It will also give a boost to manufacturing and to SMEs through the reduction in tax rates. Startups will be encouraged by the 3-year tax holiday and capital gains exemption for investors.
The special patent regime is an innovative idea and will encourage indigenous research and development.

The rules for place of effective management have been deferred by one year in response to representations by stakeholders. This will give time to companies to make adjustments to align with the rules.

The proposals such as stay of demand, easing of TDS requirements, the alternative facility for non-residents who do not have PAN, the procedure for e-assessment and time limits for passing effect orders will facilitate a taxpayer-friendly environment and in turn the objective of ease of doing business.”

Prashant Deshpande, Partner, Deloitte Haskins & sells LLP

Indirect Tax

In the backdrop of make in India initiative, the manufacturers have been spared the rate increase, except in a few sectors like automobile and Tobacco. Rate increase has been spared for service providers too, but for the levy of Krishi Kalyan Cess for which input tax credit would be available.

Rate structure rationalization of customs and excise duties for specific sectors such as information technology, capital goods would address the inverted duty structures faced by some of these industries. Housing gets a boost with relief from service tax and exemption from excise duties on ready mix concrete for affordable housing programs.

The dispute resolution scheme rightly targeted at appellate level would benefit litigation reduction for those taxpayers who did not take the benefit of lower penalties at earlier stages of dispute or those tax payers with smaller demands who are no longer required to pay penalties.

Simplification and rationalization of CENVAT credit was long due with provisions relating to apportionment of credit between exempt and taxable services clearly found wanting. Improving the flow of credit, reducing compliance burden would help all tax payers. Input credit distribution form a common warehouse would help multi locational manufacturers.

Deferred payment of customs duties would help accredited importers to release cargo before payment of duty, thus reducing dwell time and bring down transaction costs.

Saloni Roy, Partner Deloitte Haskins & Sells LLP

Indirect Tax

There were enormous expectations from the Finance Minister as this is their 3rd budget. Announcements regarding GST were expected, however there was no commitment of a date for GST introduction in the Finance Minister’s speech apart from a mention that focus would be to introduce it at the earliest.

Introduction of 12 new benches of the CESTAT should help in reducing the congestion currently existing in the litigation system. However, levy of new Krishi Kalyan Cess of 0.50% on all services, though creditable, is a setback as it would increase the cost of services. This cess would have an impact on all aspects of the economy, since all taxable services will attract this cess. Further, levying and reporting service tax would be more complex as service tax and Krishi Kalyan cess would be creditable but Swachh Bharat cess would not be.

Overall, it’s a budget with some reform but it leaves us with an expectation that more could have been done.

Samir Gandhi, Partner, Deloitte Haskins & sells LLP

CbC- BEPS action plan

As expected & per commitment to G 20 / OECD BEPS Action Plan , it is proposed to introduce CbC reporting at India.

Indian HQ companies having consolidated group turnover of Euro 750 Million ( INR 5250 Cr Approx.) will be required to submit the prescribed template containing information on the various group companies operating outside India.

The information will cover transactions with related / unrelated parties , profit before taxes , number of employees , capital & tangible assets deployed.

It is hoped that tax authorities will apply the CbC for risk assessment & not for transfer pricing assessments. It is also stated the criteria of no of employees , asserts deployed be not used for global formalatory apportionment - a variant of profit split.

It will be advisable to also simultaneously introduce efficient dispute resolution mechanism like MAP & APA while introducing of CbC.

While transparency is welcome . tax policy makers have also assured the sufficient measures will be taken to ensure confidentiality of information submitted by the taxpayer under CbC.