Finance Minister Nirmala Sitharaman on Wednesday unveiled the first set of measures undertaken by the government under its "Atma Nirbhar Bharat" package to help the country fight the economic fallout from the coronavirus (COVID-19) pandemic. The government said it will provide nearly Rs 4.5 lakh crore of loan guarantees for small businesses, non-banking financial companies and power companies as part of measures to combat the economic damage caused by the novel coronavirus pandemic. It will also set up two debt and equity funds amounting to Rs 70,000 crore to support stressed businesses, and will contribute to the social security funds of workers for three months.
The first tranche was focused on small businesses while little relief was provided to the salaried taxpayer, say tax experts.
Here are key points highlighted by tax experts in the first instalment of measures announced by the Finance Minister:
"Announcements focused on kickstarting businesses"
"As it was very clear, the majority of the announcements were focused on the MSMEs, NBFCs and HFCs... The intent was not to give any further benefits to salaried taxpayers at this stage," said Sudhir Kapadia, national tax leader, EY.
What does this means for non-salaried tax payers?
"There is nothing significant for non-salaried taxpayers. There will be a 25 per cent deduction in withholding tax rates for all the payments made to non-salaried class and these include rental payments, payments to contractor, professional fees etc. the non-salaried class of people which essentially means small businessmen will get there net receipts slightly higher," Hitesh Gajaria, tax partner at KPMG India said.
"Nothing for salaried taxpayer"
"There is nothing as far as the salaried taxpayer is concerned and even for others. There is no change in the final tax liability," said BMR Legal founder Mukesh Butani.
"As far as businesses are concerned, on whose behalf the taxes have to be deducted. In this environment, businesses are going through unprecedented stress, which is going to be reflected in financial statements, and profifitability and tax liability of the organisations," he said.
"Time to rethink we collect taxes in our country"
"What I would have liked is complete rethinking on how we collect taxes in our country. For example USA, UK and Australia does not have system of internal tax collection that is the TDS on anything except salaries," Mr Gajaria said.
"I would have liked to see same thing here. It is a high time to relook at the system of collecting tax at source because every thing is in electronic mode. The government had a justifiable reason of collecting tax at source when they did not had electronic information, today the government has virtual presence in everybody's life through collection of data from so many sources. There is no real need to pressure people to fulfill statutory obligation of collecting taxes for government and paying them within set timelines," he added.
"Objective of package aimed at reviving economic activity"
"There are extensions of various days for filing returns, assessments and even for Vivad Se Vishwas scheme. There are certain procedural concessions and there is liquidity. But the overarching objective, be it for businesses, professionals or salaried class, is revival of economic activity. Therefore with this kind of a package the objective really needs to be seen and understood as revival of economic activity beginning with MSMEs which employs the most and therefore protecting the employment is biggest objective alongside revival of economic activity," Vipul Jhaveri, managing partner Tax at Deloitte India said.
