FICCI expects potential tax reforms and increased capital expenditures in upcoming budget

New Delhi [India], July 18 : The Federation of Indian Chambers of Commerce & Industry (FICCI) has anticipated that the government might reform the taxation system in the union budget, aimed at stimulating economic growth.
The FICCI's anticipation is based on the survey conducted by the body. The FICCI stated that the Union Budget might have reforms on the taxation side aimed at stimulating economic growth. It expects relief on the taxation front with the simplification of GST rates, an increase in state finances, and the simplification of capital gains tax in the upcoming budget announcement this year.
On the fiscal management and expenditure front, the industry body said that the government has done a deft job on the fiscal side, and it is expected that prudence will continue to remain important to ensure macro stability.
The economists in the FICCI survey opined, "The government has an opportunity to leverage additional resources from robust tax collections and the Reserve Bank of India's dividend transfer. This fiscal headroom could be used to increase the spending on social sector schemes, especially to support the rural economy. Furthermore, subsidy estimates are anticipated to remain stable, reflecting a focus on targeted benefit delivery."
As per the anticipation, the capital expenditure target could be increased, but not much deviation is expected from Rs 11.1 trillion for the financing year 2025. "This could be attributed to slow capex spending in the first half of FY25 on account of elections and monsoon," the body said.
"Survey participants are looking at the simplification of the capital gains tax regime in terms of two or three broad buckets of different types of assets, the holding period for such assets to turn long term, indexation benefit eligibility, LTCG tax rate and STCG tax rate for such assets without distinction between residents and non-resident," the FICCI added.
In addition, the participants also expect that the government can introduce measures for employment generation and skill development.
The body anticipates that the government might introduce employment-linked incentive schemes, increase investment in labour skilling, and focus on enhancing women's workforce participation. They further stated that there would be a focus on infrastructure development.
"Enhancement of food processing capacity and reduction of wastage need an improvement in storage infrastructure. These measures could significantly reduce post-harvest losses and add value to agricultural produce," the economists said.
For the Micro, Small and Medium Enterprises (MSMEs) the government could support these enterprises through measures such as an extended non-performing assets (NPA) classification period from 90 days to 180 days to provide financial breathing room.
"The Interim Budget announced earlier this year displayed a clear intention towards encouraging innovation and this is expected to continue. The participants expected further details and modalities on the R&D and innovation fund announced in the Interim Budget for its effective utilization," the FICCI added.