Economic Revival, need of the Hour!
By Kushagra Mathur
As we are all aware of the economic crisis our country and the whole world is facing right now. It’s not an astonishing fact that the economy is hit hard by the pandemic and even before the pandemic the economy was already under the web of economic slowdown. All we could now say about the pandemic is that it has made the situation worse. As we don’t have any idea about how long this lockdown is going to last we should be well equipped, with all that we have to fight against the recessionary phase that we are going to witness really soon. This calls for some major fiscal measures on the part of the government to combat the situation and to bring back the path of growth and development in the economy. Fiscal measure implies amendments both in the direct as well as the indirect tax regime.
Starting with the amendments required in the direct tax regime, a few measures have been jotted down below.
(1) It is quite evident from the Demonetisation that a large part of the money lies in the parallel economy. The major proportion of unexplained investments and money (under section 69 & 69A) stands unutilised due to the 60% tax rate plus 25% surcharge and 4% cess( thus making the effective rate of tax 78%). If this tax rate can be reduced to 10% in case of unexplained investments (under section 69) and to 30% in case of unexplained money (under section 69A) it will incentivize the use of idle money in the economy.
(2) Further, Long Term Capital Gains tax (under section 112A) which has not proved to be a major source of government revenue can be kept aside (deferred) for 2-3 years, this measure will solve the liquidity problem as people can get away with excess capital assets and use its proceeds for running business.
(3) To combat the undue surge in the unemployment rate, deduction under section 80JJAA for additional employee cost can be improvised further to contain provision relating to retention of employees. The deduction of an amount equal to 20% of existing employee cost should be provided. Further the ceiling for employee emoluments can be increased from the current 25,000.
(4) Deduction under section 80HHC for export income can be brought back so as to make the Domestic Companies competitive with the rest of the world.
Moving to the indirect tax regime, major amendments required are as under-
(1) Working capital finance to the businesses can be equal to the GST on monthly basis. This would have dual benefits- (a) Timely payment of GST to government authorities (b) Interest earnings to bank with increased loans.
(2)Procedural requirements for the GST refund should be eased.
(3) The General GST rate of 18% can be reduced to 15% considering the economic condition.
The measures stated above would have a bearing on revival of the economy and may prove to be a paragon of an impregnable economic environment disclemar.