FICCI’s Budget Wish List To Boost Investments, Innovation and MSMEs

In anticipation of the Interim Union Budget for 2024-25, the Federation of Indian Chambers of Commerce and Industry (FICCI) has outlined a set of expectations and recommendations covering various aspects of the economy. These proposals are aimed at fostering economic growth, encouraging innovation and simplifying taxation and compliance for businesses. Here are the key points:

1. Maintaining Thrust on Investments and Green Finance: FICCI has suggested that the government should continue focusing on public capital expenditure, especially in physical, social, and digital infrastructure, given the current global challenges. The Federation has called for the establishment of a national taxonomy for green finance to enhance transparency in sustainable financing. This includes creating a standardized framework for measuring, reporting, and verifying sustainable financing activities.
2. Improving India’s Competitiveness as a Global Manufacturing Hub: FICCI has recommended incentivizing and attracting large investments from global manufacturing companies by extending the concessional tax regime for manufacturing operations for at least five years. The Federation has acknowledged the success of Production Linked Incentive (PLI) schemes and suggested their continuation to ensure stability and confidence among investors.
3. Prioritizing Innovation and Research & Development (R&D): FICCI has highlighted the importance of innovation as a key driver for economic growth and recommended enhancements to the existing patent box regime, making it more inclusive and encouraging “Make in India” by extending benefits to the sale of patented products manufactured in India. The Federation has proposed extending the concessional tax rate to new R&D companies setting up substantial facilities within the next five years.
4. Further Support for MSMEs: FICCI has recommended revising the qualifying criterion for mandatory registration on the TReDS (Trade Receivables Discounting System) platform to expand its reach to more companies. The Federation has proposed leveraging the Account Aggregator framework for MSME lending to address legal and compliance issues and suggested changes in Non-Performing Asset (NPA) classification norms for MSMEs to extend the limit for classifying overdue payments from 90 to 180 days.
5. Simplifying Compliance with Respect to TDS: FICCI has called for a rationalization of TDS rates, suggesting a simplified structure with three rate categories and a “negative list” of payments exempt from TDS to reduce disputes related to categorization and interpretation and enhancing the ease of doing business.
6. Removing Double Taxation on Buy-back through Open Market Purchases: The Federation has proposed exempting Buyback Distribution Tax (BBT) for listed shares bought back through the ‘open market through stock exchange’ method to avoid double taxation and has recommended continued application of capital gains or business income tax in the hands of shareholders.
7. Tokenizing Collateral for Credit Growth: FICCI has suggested collaboration between the banking industry and regulatory bodies to accelerate the creation of digital securities and has called for the digitization of land records and leveraging the Account Aggregator framework for information collateral.
8. Supporting the Evolving Start-up Ecosystem: The Federation has advocated parity between long-term capital gains (LTCG) tax on listed and unlisted equities to attract domestic and international investors to start-ups and has proposed extending the deferral of taxation on ESOP (Employee Stock Ownership Plan) perquisites to all employees, not just those in section 80IAC qualifying start-ups.
9. Introducing a New Independent Dispute Resolution Forum: FICCI has recommended the establishment of an independent forum comprised of experts like retired judges or professionals for timely and effective dispute resolution and has emphasized a streamlined process with a stipulated period for adjudication, limited adjournments, and binding decisions on both the Tax Department and taxpayers.
10. Expanding the Scope of Dispute Resolution Committee: FICCI has urged the elimination of threshold limits for the Dispute Resolution Committee, making it available to mid-sized and large-sized taxpayers for dispute resolution.

FICCI believes that these recommendations, if incorporated into the Interim Union Budget, will contribute to enhancing the ease of doing business, promoting investment, and fostering innovation in India. The organization emphasizes the importance of creating a business-friendly environment to ensure the country’s economic resilience and growth.