KPMG in India’s Pre-Budget survey 2020-21 · India’s Union Budget for 2020 is scheduled to be...
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1KPMG in India’s Pre-budget survey 2020© 2020 KPMG, an Indian Registered Partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved.
KPMG in India’sPre-Budget survey 2020-21
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January 2020
2KPMG in India’s Pre-budget survey 2020© 2020 KPMG, an Indian Registered Partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved.
KPMG in India’s pre-budget survey 2020 findings
India’s Union Budget for 2020 is scheduled to be presented on 1 February 2020. It is expected that the Finance Minister will consider several far reaching economic and fiscal measures to boost India’s economic growth.
KPMG in India has through its pre-budget survey conducted in January 2020 tried to capture expectations of key stakeholders on various tax aspects of the budget. The findings of this survey are briefly set out below:
Direct tax rates
• The year 2019 saw the government implement significant tax cuts for domestic companies (to 22 per cent) and for newly set up manufacturing companies (to 15 per cent)1 subject to their giving up available incentives and deductions. More than half the respondents plan to opt for the lower tax regime of 22 per cent by giving up available incentives from FY 2019-20. A majority of respondents also believe that the rate of tax for foreign companies should also be reduced in light of the tax cuts for domestic companies.
• A further stimulus by way of personal tax cuts is now anticipated. A large majority of respondents anticipate that the basic exemption limit of INR2.5 lakh for individuals will be increased. Respondents also expect the Finance Minister to increase the income limit at which the maximum marginal rate of 30 per cent kicks in. If implemented, these moves can help spur consumer demand by complementing the interest rate cuts delivered since last year.
• Enhancements in the deduction under section 80C, the standard deduction and other exemption limits for House Rent Allowance (HRA), children education allowance, etc. are also anticipated by the survey respondents.
• As regards corporate taxes, a little over 50 per cent of respondents believe that the existing dividend distribution tax levied on dividends declared by domestic companies should be replaced by an investor level tax on dividends.
Inheritance tax
• A majority of respondents also believe that the Finance Minister will not introduce inheritance tax. This is in line with the overall expectation that there is a need for providing a fiscal stimulus by reducing taxes on individuals.
1. The Taxation Laws (Amendment) Act, 2019
3KPMG in India’s Pre-budget survey 2020© 2020 KPMG, an Indian Registered Partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved.
Extending tax incentives/holidays
• Keeping in line with the government’s focus on ‘Make in India’, 70 per cent of respondents expect that the weighted deductions currently available for expenditure incurred on in-house research and development to be extended beyond the current sunset period of 31 March 2020.
• Around 50 per cent of the respondents expect the tax holiday for exports available to Special Economic Zone (SEZ) units be extended beyond 31 March 2020.
Transfer pricing
• A large majority of respondents believe that the safe-harbour regulations need a revamp from an administrative standpoint. It is expected that this will make them more acceptable from the point of view of both taxpayers as well as the tax authorities. Respondents are also divided on the readiness of India to undertake risk-based transfer pricing assessments for cases selected on the basis of master file and the country-by-country reports filed and exchanged.
Capital markets
• On the capital markets front, the survey has thrown up some interesting results. While the reintroduction of tax on long term capital gains on listed securities was controversial when it was introduced in 2018, only about 52 per cent of the respondents felt that it should be rolled back. Similarly, there was a muted response to the scrapping of Securities Transaction Tax (STT) on securities, with only 41 per cent in favour of its abolition.
Use of technology
• The use of technology in tax administration has gotten a thumbs-up from survey respondents. A significant majority believes that the faceless e-assessment scheme announced in the last budget will lead to greater transparency and efficiency in the assessment process. As a result, a majority of respondents believe that the e-assessment proposals will prove beneficial to taxpayers.
• About 71 per cent of respondents believe that the time, effort and cost involved in tax compliances has increased in the last few years, while 23 per cent think otherwise. Most respondents have however adopted technology in their tax systems with usage across GST compliance, e-invoicing, tax litigation, digitisation of records and tax computation.
4KPMG in India’s Pre-budget survey 2020© 2020 KPMG, an Indian Registered Partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved.
Dispute resolution
• Dispute resolution continues to be an area of concern among survey respondents. Almost half the respondents believe that the approach of revenue authorities in dealing with international taxation issues are not in line with international norms. While Dispute Resolution Panel (DRP) is indeed a fast-track mechanism intended to address international tax and transfer pricing disputes, it clearly emerges from the responses that almost half of the respondents believe that DRP mechanism is not meeting its objective of resolving disputes amicably.
• Interestingly, a majority of respondents believe that the law should provide for a mechanism for negotiated settlement of disputes in litigation.
Indirect tax
• Just under 50 per cent of respondents believe that the provisions dealing with the place of supply of R&D, testing services and other performance-based services under GST are detrimental to the export of services. Since persons in India who render such services to customers outside India also contribute foreign exchange for the country, the exclusion of such services from the ambit of export of services is seen by respondents as affecting exports.
The inf ormation contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeav or to provide accurate and timely information, there can be no guarantee that such information is accurate as of thedate it is received or
that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation
© 2020 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
This document is for ecommunications only
5KPMG in India’s Pre-budget survey 2020© 2020 KPMG, an Indian Registered Partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved.
Industry195Total
Responses 2192 19
Automotive Banking/NBFCConsumer
MarketsDefence
Energy and
Natural resources
Financial
ServicesHealthcare
InsuranceMedia and
entertainment Private equityReal estate and
construction
Transportation
and logisticsSocial sector Other
6% 2% 8% 0.5%
5% 8% 4% 3%
3% 2% 2%
3% 0.5% 32%
Education
2%
IT/BPO
17%
Telecom
1%
Industrial markets
1%
6KPMG in India’s Pre-budget survey 2020© 2020 KPMG, an Indian Registered Partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved.
Do you expect the Finance Minister to increase the basic
exemption limit (INR2.5 lakh currently) for individuals?
0 1
7 8 %Yes
1 5 %Maybe
7 %No
7KPMG in India’s Pre-budget survey 2020© 2020 KPMG, an Indian Registered Partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved.
Do you expect the Finance Minister to increase the
income limit at which the maximum marginal rate of 30
per cent for individuals applies from the existing limit of
INR10 lakh?
0 2
7 2 %2 2 %
6 %
Yes
Maybe
No
8KPMG in India’s Pre-budget survey 2020© 2020 KPMG, an Indian Registered Partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved.
Do you expect the government could consider enhancing
the following limits? (select all applicable)
0 3
Deduction under
section 80C from
INR1.5 lakh
Standard
deduction for
salaried individual
from INR50,000
Tax free allowances for
salaried individual like
HRA exemption,
children education
allowance, etc
8 2 %5 3 %
4 4 %25%
50%
75%
100%
9KPMG in India’s Pre-budget survey 2020© 2020 KPMG, an Indian Registered Partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved.
Do you think the Finance Minister will introduce
inheritance tax?
0 4
Yes
1 1 %
Maybe
2 9 %
No
6 0 %
Ta
x
10KPMG in India’s Pre-budget survey 2020© 2020 KPMG, an Indian Registered Partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved.
Do you think Dividend Distribution Tax (DDT) should be
abolished and replaced with a shareholder level tax on
dividends?
0 5
5 4 %Yes
1 1 %Maybe
3 5 %No
11KPMG in India’s Pre-budget survey 2020© 2020 KPMG, an Indian Registered Partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved.
Weighted deduction for expenditure incurred on in-
house R&D facility is expiring on 31 March 2020. Do you
expect an extension of this in order to support R&D
programmes and ‘Make in India’ initiative?
0 6
7 1 %Yes
1 4 %Maybe
1 5 %No
12KPMG in India’s Pre-budget survey 2020© 2020 KPMG, an Indian Registered Partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved.
Do you expect an extension in the sunset date of tax
holiday for Special economic zone (SEZ) units beyond
31 March 2020?
0 7
No
Yes
Maybe
5 0 %
3 5 %
1 5 %
13KPMG in India’s Pre-budget survey 2020© 2020 KPMG, an Indian Registered Partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved.
Do you expect the Finance Minister to provide any tax
relaxation(s) or waiver(s) to companies going through
insolvency proceedings under Insolvency and
Bankruptcy Code?
0 8
NoYes
Maybe3 1 %
3 5 %
5 0 %1 9 %
14KPMG in India’s Pre-budget survey 2020© 2020 KPMG, an Indian Registered Partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved.
Will exempting long term capital gains attract more
Foreign Portfolio Investment (FPI) i.e., should the tax
imposed of 10 per cent on long term capital gains by
Finance Act, 2018 be reversed?
0 9
No view5 3 %Yes
3 1 %No
1 6 %
15KPMG in India’s Pre-budget survey 2020© 2020 KPMG, an Indian Registered Partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved.
Should Security Transaction Tax (STT) be abolished?
1 0
Yes
4 2 %No
4 3 %
No view1 5 %
16KPMG in India’s Pre-budget survey 2020© 2020 KPMG, an Indian Registered Partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved.
Should the rate of tax for foreign companies also be
reduced in light of the reduction in tax rate for domestic
companies?
1 1
5 2 % 4 0 %Yes No
8 %No view
17KPMG in India’s Pre-budget survey 2020© 2020 KPMG, an Indian Registered Partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved.
Should Tax Deducted at Source (TDS) obligations cast
on non-resident payers under section 195 be restricted
only to those non-residents which have a tax presence
in India?
1 2
6 1 %
2 4 %
Yes No
1 5 %No view
18KPMG in India’s Pre-budget survey 2020© 2020 KPMG, an Indian Registered Partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved.
Do you think that the approach of revenue authorities in
dealing with international tax issues (e.g. determining the
existence of a Permanent Establishment (PE), attribution
of profits to PE, royalty classification etc.) is in line with
international norms?
1 3
Yes
No
2 3 %
4 8 %
Maybe2 9 %
19KPMG in India’s Pre-budget survey 2020© 2020 KPMG, an Indian Registered Partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved.
Have the measures announced in last year’s budget in
relation to the ‘angel tax’ provisions improved the
overall tax climate faced by start-ups?
1 4
3 7 %Yes
3 5 %No view
2 8 %No
20KPMG in India’s Pre-budget survey 2020© 2020 KPMG, an Indian Registered Partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved.
Remain at the old rates
and avail incentives
Not decided
Opt for the 22 per cent rate
Will you opt for the concessional 22 per cent rate
available under the Taxation Laws (Amendment) Act,
2019 without incentives, or choose to stay at the normal
rates and avail tax incentives?
1 5
2 0 %
2 3 %
5 7 %
21KPMG in India’s Pre-budget survey 2020© 2020 KPMG, an Indian Registered Partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved.
Do you think the next round of safe harbour regulations,
from AY 2020-21, need to be revamped, especially from an
administration perspective, to have a better acceptability
amongst taxpayers and Revenue authorities?
1 6
6 4 % 4 %3 2 %
Yes NoMaybe
22KPMG in India’s Pre-budget survey 2020© 2020 KPMG, an Indian Registered Partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved.
Do you believe India is ready for risk-based transfer
pricing assessments/audits, for cases selected on the
basis of master file filed and Country-by-Country
Reporting (CbCR) filed/exchanged?
1 7
3 5 %
Yes
3 4 %
No
3 1 %Maybe
23KPMG in India’s Pre-budget survey 2020© 2020 KPMG, an Indian Registered Partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved.
Do you think the mechanism of having Dispute
Resolution Panel (DRP) is meeting its objectives of
resolving disputes amicably between the taxpayers and
the tax department?
1 8
2 7 %Yes
4 9 %No
2 4 %Maybe
24KPMG in India’s Pre-budget survey 2020© 2020 KPMG, an Indian Registered Partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved.
Do you think that place of supply provision in case of
performance-based services viz. R&D services, testing
services (section 13 of the Integrated Goods and Services
Tax Act, 2017) are detrimental to export of services?
1 9
4 8 %Yes
3 4 %Maybe
1 8 %No
25KPMG in India’s Pre-budget survey 2020© 2020 KPMG, an Indian Registered Partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved.
Has the overall time, effort and cost required for tax
compliance increased in the last few years?
2 0
7 1 %Yes
2 4 %No
5 %Maybe
26KPMG in India’s Pre-budget survey 2020© 2020 KPMG, an Indian Registered Partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved.
6 8 %
Yes No view
1 5 % 1 7 %No
Will the new faceless e-assessment scheme lead to
greater transparency and efficiency in the assessment
process?
2 1
27KPMG in India’s Pre-budget survey 2020© 2020 KPMG, an Indian Registered Partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved.
Do you believe the e-assessment proposals will be
beneficial to Tax payers?
2 2
Yes No7 0 % 1 5 %
No view
1 5 %
28KPMG in India’s Pre-budget survey 2020© 2020 KPMG, an Indian Registered Partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved.
Do you think a negotiated settlement mechanism for
closure of issues in litigation should be introduced?
2 3
Yes
7 7 %
Maybe
1 2 % 1 1 %
No
29KPMG in India’s Pre-budget survey 2020© 2020 KPMG, an Indian Registered Partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved.
Do you use technology products for tax compliance in
any of the following areas?
2 4
GST
compliance
E-invoicing Managing tax
litigation
Digitalisation
of tax records
7 8 %Direct tax
computation
4 2 % 1 6 % 3 3 % 3 9 %
30KPMG in India’s Pre-budget survey 2020© 2020 KPMG, an Indian Registered Partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular
individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such
information is accurate as of the date it is received or that it wil l continue to be accurate in the future. No one should act on such
information without appropriate professional advice after a thorough examination of the particular situation.
© 2020 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affi liated
with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
This document is for e-communications only.
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