Towards a progressive tax regime

GCCI’s visionary perspectives redefine taxation dynamics in a shifting economic landscape

The wise words of an old proverb remind us, ‘A stitch in time saves nine’…As the nation eagerly awaits the unveiling of the Union Budget 2024-25 on February 1st, the Goa Chamber of Commerce and Industry (GCCI) emerges as a proactive advocate for substantial modifications to the existing tax structures. In a pre-Budget memorandum submitted to Finance Minister Nirmala Sitharaman; Shrinivas Dempo, GCCI President outlined a series of proposals aimed at fostering a more balanced and business-friendly tax environment, explaining significant points and recommendations for the perusal of relevant authorities. Some of the important ones are as follows:-

1) Unified GST rates for the hospitality sector:

GCCI recommends a pivotal shift in the Goods and Services Tax (GST) structure for the hospitality sector. The proposal advocates a uniform GST rate of 12% on hotel rooms, eliminating the current differentiation based on room prices. This move addresses the current complexity where rooms priced differently face distinct GST rates, streamlining the taxation process for both businesses and consumers.

2) Income Tax reforms for individuals and corporations:

Acknowledging the challenges faced by both individual taxpayers and corporate entities, GCCI proposes alterations to income tax rates. Notable recommendations include increasing the standard deduction under Section 87A to Rs. 7.5 lakh, an adjustment reflecting the escalating cost of living. Additionally, the GCCI suggests raising the standard deduction under the new scheme to 25% of the salary, capped at Rs. 2 lakh, fostering a more accommodating tax framework.

3) Overhaul of TDS and TCS provisions:

GCCI underscores the need for reforms in Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) mechanisms. The current system, marked by complexity and various thresholds, is a source of confusion for taxpayers. The GCCI proposes a rationalisation of TDS and TCS sections, consolidating them into broader categories to simplify compliance and enhance operational efficiency. The memorandum aligns with GCCI’s commitment to a transparent and business-friendly taxation framework.

4) Simplifications of Capital Gains:

GCCI recommends a simplification of capital gains provisions, aiming to reduce complexity and tedium. The proposal suggests condensing the number of asset classes and introducing a uniform period of holding for respective asset classes. This simplification aims to create a more straightforward and comprehensible tax structure for capital gains.

5) Incentives for compliant tax payers:

GCCI commends the government for the increasing number of Income Tax Returns (ITRs) filed and proposes tangible benefits for compliant tax payers. Suggestions include faster processing of ITRs and refunds, leveraging data available with Direct and Indirect Tax departments to reward genuine filers. These incentives aim to acknowledge and encourage compliance among taxpayers.

6) Revision of GST returns and introduction of Updated ITC:

Recognising the challenges faced by businesses in coping with GST return revisions, GCCI proposes the implementation of a mechanism to revise GST returns. Additionally, the introduction of ‘Updated Input Tax Credit (ITC)’ is suggested, allowing taxpayers to claim ITC up to two years from the end of the due date, with a small penalty. These recommendations aim to provide flexibility and reduce unnecessary litigations.

7) Taxation reforms for Non-Corporate tax payers:

Addressing the concerns of individual tax payers and partnerships/LLPs, GCCI suggests increasing the rebate under Section 87A and revising tax rates for partnership firms and LLPs. These proposals aim to provide relief to individual taxpayers and create parity in tax rates for partnership firms and LLPs.

8) Recommendations for the tourism sector:

GCCI puts forth comprehensive recommendations for the tourism sector, including seamless GST credit for hotel stays in states where the taxpayer is not registered. The proposal also advocates a single GST rate of 12% for hotel accommodation, fostering affordability and boosting the tourism sector.

9) Rollback of increased Tax Collection at Source (TCS) on overseas travel:

In response to the proposed increase in TCS on overseas travel, GCCI requests a rollback to a more reasonable rate of 1%, citing potential adverse impacts on taxpayers, especially senior citizens. The proposal emphasises the need for tracking mechanisms without imposing significant upfront costs on travelers.

10) GST Input Tax Credit for real estate sector:

To address the escalating construction costs for developers, GCCI recommends allowing Input Tax Credit (ITC) to reduce the tax burden. This suggestion aligns with the original purpose of GST, which aimed to eliminate the cascading impact of taxes.

11) One-window registration for new tax payers:

Recognising the digital strides made in tax administration, GCCI suggests a one-window registration option for new businesses, streamlining the process and reducing redundancy. The proposal envisions a simplified registration process for PAN, TAN, CIN, and GST, fostering Ease of Doing Business (EoDB).

12) Emphasising tourism sector growth:

Highlighting the vital role of the tourism sector in economic development, GCCI recommends amendments to the IGST Act to facilitate seamless GST credit for hotel stays in states where the taxpayer is not registered. The proposed modification aims to boost domestic meetings and conventions, creating a sustainable business environment. Additionally, the call for a uniform GST rate of 12% for all accommodation services echoes the chamber’s commitment to revitalising the tourism sector by making travel more affordable, fostering increased visitor influx, and contributing to overall economic growth. These measures align with the broader vision of positioning Goa and India as a sought after destination for both domestic and international travelers.
The GCCI’s recommendations for Union Budget 2024-25 reflect a comprehensive effort to create a more transparent, simplified, and business-friendly tax regime. The proposals address key challenges faced by various sectors, emphasising the need for reforms that align with the evolving economic landscape. As the government contemplates the budgetary allocations for the upcoming fiscal year, these recommendations offer a roadmap for a progressive and responsive tax framework.

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