Budget lays a strong foundation for stabilising economy: FICCI

The Foreign Investors' Chamber Of Commerce and Industry (FICCI) has commended the government's efforts in crafting a comprehensive fiscal plan that addresses critical economic challenges while fostering a conducive environment for business growth. 

"With a keen focus on containing inflation, reducing aggregate demand, and nurturing the supply side of the market, this budget lays a strong foundation for stabilising the economy," FICCI President Zaved Akhtar said in a press release published yesterday (6 June)​. 

However, he believes that there are some issues which should be addressed, states the release. 

"A standout feature of this budget is its progressive business-friendly approach, focusing on reducing costs for consumers. The emphasis on a predictable tax system is appreciated, meeting long-standing demands. The introduction of a prospective corporate tax rate enables accurate tax planning for businesses. 

"The proposal to reduce the corporate tax rate for companies not listed on the stock exchange from 27.5% to 25%, subject to compliance with cash transaction conditions, is commendable. It is expected that the proposal to reduce the tax rate will encourage private investment​​​​," said Zaved Akhtar.

The budget reflects a progressive approach by focusing on tax reforms that simplify and clarify the tax regime. This includes expanding the tax base by 25%, introducing electronic fiscal devices, and promoting e-payment systems to streamline tax collection and reduce costs, the press release further reads. 

The number of taxpayers is expected to increase from 2 million to 2.5 million, creating a more business-friendly environment and ensuring greater tax system predictability and transparency. By enhancing direct taxes and implementing the Electronic Tax Deduction at Source (E-TDS) system, the budget aims to improve tax compliance and reduce evasion.

However, according to FICCI, the budget lacks allocation or specific directions for the automation of tax, VAT and customs administration, which would increase efficiency and simplify the tax collection process. The absence of such reforms means the complexities related to VAT credit and potential financial strain on businesses will persist. 

The FICCI president also emphasised that continuous reforms are necessary to ensure that VAT processes are streamlined, reducing the administrative burden on businesses and encouraging compliance, which will ultimately support economic growth​​.

"While we acknowledge the strides made in this budget, we believe that higher allocations in health and education would have further underscored the government's commitment to human capital development. The health sector received an allocation of 8% of the total budget, while education was allocated 12%. Enhanced funding in these areas would support better healthcare services and educational opportunities, leading to a more skilled and healthy population, which is essential for sustainable development," Akhtar said.  

"Experts suggest that allocations of 10% for health and 15% for education would be more appropriate to meet the growing demands and ensure quality services​​​​," he added.