The Union Budget 2021 presented by Finance Minister Nirmala Sitharaman on February 1, 2021. Union Budget 2021 is going to be completely paperless in the wake of going Corona virus pandemic. The Cabinet Committee on Parliamentary Affairs has recommended that the budget session of Parliament is to be held in two phases. This would be the first time since independence that the budget papers will not be printed. Centre has received permission for the same from the both houses of parliament. There are huge expectations from the budget as the country hopes to recover from the pandemic-induced economic shock.

Sensex has recently crossed 50,000 points for the first time due to the budget expectations even in the middle of pandemic. Everyone’s eyes are on the upcoming union budget 2021-22. Honorable FM said that hundred years of India wouldn’t have seen a budget been made post pandemic like this. While addressing the CII Partnership Summit 2020, Honorable FM, invited inputs and suggestions as she admitted that it is impossible for her to draft something which is going to be that budget like never before without suggestions from Stakeholders. Mrs. Sitharaman also said that the need of the hour is more investments towards research and development in medical, biotechnology and pharma. India has to look at both public and private partnership and also investment in areas of research for Medicine. In this budget, the Government must work on the reforms which will result in the creation of demand and will boost the growth of economy.

We, as the taxpayers, have also some of the expectations from this Union Budget 2021-22 considering the turmoil cost to the businesses and public at large by Covid-19. Some of the expectations are outlined here below: –

1) Income tax

Increase of deduction under section 80C-

Spending capacity is hit badly under this pandemic. The government needs to boost up the spending capacity in economy. As such, there is no scope for reduction in personal income tax rates as the current tax rates are not very high already. But deduction under section 80c can be increased from 150,000 to 200,000 or more.

Deduction for Employees working from home-

The government can look at providing deduction for expenses incurred by salaried employees while working from home in the upcoming budget as it looks to boost the demand. This point is also suggested by many other tax experts.

Special Provisions for carry forward of MAT credit

The need of the hour is introducing the special provisions for carry forward of losses/ MAT credit expiring in the current year which could have been set off had the lockdown not been imposed.

Avoiding insertion of Coronavirus tax-

In the current scenario, income tax on the income of individuals who are having income more than rupees 10 lacs is 30 percent which is further increased with surcharges and cesses, which is already creating pressure on the disposable income of the inviduals. As per the media reports government is considering to impose coronavirus cess on the individuals with higher slab income. It will be little unfair to impose this kind of cess in the middle of pandemic.

2) GST

Allowing revision of returns –

Unlike earlier tax reliefs, GST law does not permit revision of returns. Changes can be made only in subsequent tax period returns. This creates a lot of problems to the tax payers. Allowing same can be a great help to the registered persons under GST.

Changes in various GST Rules governing ITC-

There is scope for improvement in CGST rules governing input tax credit under GST. Rule 36(4) is concerned with regard to description on the availment of ITC in cases where GSTR-1 are has not been uploaded by their supplier. Rule 36(4) restricts the credit availment in excess of what is reflected in GSTR-2A to the extent of 5% after the recent amendment in CGST rules which is applicable from 1 Jan,2021. This results in blockage of working capital of businesses unnecessarily. Considering the impact of Covid-19, relaxations can be extended to the registered persons under GST by increasing the present limit of 5%. Rule 86B which is being recently inserted, restricting the use of electronic ledger, can be deferred for some time in the interest of trade and stakeholders.

Allowing credit of Input services under inverted duty structure-

In GST, the idea was to place goods and services at par and enable cross credit which prevented the situation of tax on tax and also to enable the businesses in reducing the prices of various goods and services in the market. Rule 89(5) of CGST rules ,restrict the credit of input services under inverted duty structure. Gujarat High Court, in a judgement, pronounce that Rule 89(5) of CGST rules is ultra-vires of Section 54(3) of CGST Act, 2017. On the other hand, Madras High Court held that Rule 89(5) is intra-vires Section 54(3) in recent judgement. With these 2 contradictory judgements, the question still arises that the registered person can claim refund of input tax credit in respect of Input Services accumulated on account of inverted tax structure. Therefore, the govt, can come out with the amendments in Rule 89(5) so as to allow credit of input service under inverted duty structure, which will be a big relief to the taxpayer.

Reduction in GST rates

GST rates can further reduce in respect of some goods or services in order to combat the inflation and also to give a sort of relief to the taxpayer.

3) Other Sectors

a. The aviation sector is expecting fiscal support from the government after the pandemic crippled operation in 2020. The sector hopes for the reduction in high taxes and levies as airline try to find their fit again.

b. After the pandemic hit-year, India’s healthcare sector is looking for holistic reforms like reduction in taxes on healthcare and treatment besides higher budgetary allocations. Betterment allocation for pharma research is also on the cards.

c. MSMEs, acting as the backbone of Indian economy, was hit badly in the pandemic. The government is already working for their betterment. Still, more benefits have to be passed to the MSMEs such as cheaper loans, referential purchase policy and reduction in taxes.

Conclusion:-

There are “never before expectations” from this “never seen budget”. It is expected that FM is likely to announce major reliefs under both direct and indirect taxes. Budget 2021-22 is expected to focus not only to insulate the Indian economy from the internal pressure, but also to unlock the India’s growth potential for attracting the global investors.

Shipra Gupta & Nitin Bansal

More Under Income Tax

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