Among other things, the segment wants goods and services tax (GST) incentives for encouraging of digital payment. “In spite of demonetisation, a large strata of society prefers cash transactions for day-to-day purchases. To encourage and incentivise digital transactions, a GST incentive by way of reduced tax should be provided for payment via digital money. This will help increase the size of the formal digital economy, as consumers will demand digital payment options from retailers,” states an excerpt from a CII pre-Budget
It is also hoping that the government would allow a common market or single registration for e-commerce players.
At present, these have to register in every state, by GST Law. “This leads to serious complexities and increase in compliances, particularly for service sectors such as banking, insurance, telecom, consulting, airlines and e-commerce which have pan-India operations. A centralised registration will significantly lead to simplified and better tax compliance,” the body has recommended.
Also, it is unclear if a company in the business of development and sale of software or providing of information technology -enabled services is eligible for weighted deduction on the research and development expenditure it incurs. CII has suggested amendments under Section 35(2AB) of the relevant Act to make this clear.
Also, an ‘angel tax’ has been a major cause of concern for start-up investors in India. Last year, the Central Board of Direct Taxes got amendments to Section 56(2) (viib) of the Income Tax Act, whereby capital raised by start-ups from domestic angel investors would not be taxed as income even if the investment exceeded the fair market value of the start-up’s shares.
Earlier, such investments were taxed at more than 30 per cent as income from other sources.
However, the exemption is only available to start-ups fulfilling conditions specified by the department of industrial policy and promotion. So, they need to be first certified as start-ups by the government to avail of the tax exemption.