Budget 2019 | Govt should consider these measures to boost consumer sector: Deloitte

Anil Talreja

The country is pinning a lot of hopes on the newly elected government and the industry expects the new leadership to boost the consumer sector and address pending tax issues through budgetary measures in the upcoming budget.

Some of the key budget expectations of consumer industry are listed below:

- Clarification regarding circumstances wherein LRD would constitute a PE since several distributors operate as LRD and are earning return in line with other third party distributors.

-In view of the Organisation for Economic Co-operation and Development's (OECD) public consultation document on digital economy, wherein market jurisdiction/ user participation is required to be considered for the allocation/ attribution of profits (i.e., move from FAR to FAR+M approach), re-characterisation of AMP spend as an international transaction should be done away with.

- Economic adjustments for consumer sector industries specifically for start-up companies due to underutilisation of capacity, use of market penetration strategies and higher marketing efforts, etc.

- Prescription of requisite documentation for the justification of royalty payments (brand royalty and technical royalty) in order to reduce litigation on account of disallowance.

- Introduction of safe-harbour rates for manufacturers and distributors for selected consumer sector industries.

- In the wake of slow down of economy, introduce measures to increase disposable income in the hands of consumers. These include an increase in the basic exemption limit, a decrease in the tax rate, an increase in the 80C limit and an increase in standard deductions/ tax exempt allowances.

- Extension of section 10AA benefit/ introduction of new export benefit to promote and accelerate exports from India.

- Higher depreciation for large capital expenditure to incentivise the growth of capital formation in the country and boost the “Make in India” initiative of Government. Incentives relating to investments such as section 32AC should be extended.

- Allow the deduction of entire carried forward losses or at least the higher of book losses or unabsorbed depreciation to all the loss making companies falling under MAT.

- Enhance current deduction threshold of Rs 25,000 under 80JJAA to say Rs 50,000 per month to boost employment generation.

-Introduction of tax incentive/rebate (under direct and indirect taxes) for consumers scrapping vehicles registered prior to year 2000 (when emission norms were introduced).

- Restore weighted deduction of 200 percent or continue deduction of at least 150 percent of R&D expenses considering ambitious plan of BS VI norms, electric vehicles, and to provide impetus to R&D in India.

-Adequately address issues related to taxation of digital economy including withholding of taxes on e-commerce players to avoid protracted litigation.

(The author is Partner at Deloitte India.)