Times conducive for an investor-friendly budget

Sai Nikesh | The Dollar Business With a view to lift investment flow into the country, the Ministry of Finance, Government of India, seems to be highly focused in creating a friendly environment to investors through its measures in the upcoming budget. From changes in minimum alternate tax for foreign investors to considering of the recommendations from Partho Shome panel, the government is high on facilitating foreign investors. On recommendations from the Partho Shome panel and in line with the demand from foreign investors, the Indian Finance Ministry is mulling to further defer the General Anti-Avoidance Rule (GAAR) to avoid obstacles for investment flows. The GAAR, which strictly opposes avoidance of taxes, was introduced in 2012-13 budget and then delayed till April 1, 2016 and now the government is likely to push it further owing to the emerging demand for Indian market from overseas investors. Here, it is noteworthy to mention that earlier in a statement referring to the upcoming budget as a big bang, the Indian Finance Minister Arun Jaitley had said that the Goods and Service Tax, which no one thought will take its form in the upcoming budget. In India, a stable indirect tax regime is required to nurture e-commerce platforms. However, the likely implementation of GST is expected to favour the e-commerce sector on a larger scale, as they have been incurring losses by paying VAT taxes to the State governments on behalf of the sellers.  Likewise, many other comprehensive reforms are expected from the Ministry of Finance, which is aimed at making India a market with huge foreign capital, under Make in India policy. Meanwhile, the halving of the oil prices globally since mid-2014 has favored the Indian government in collecting more tax revenues towards achieving deficit targets. The Finance Minister Arun Jaitley had stated earlier in January that as of now the oil prices are coming down, but cannot say the future, as the oil companies are also facing losses after passing reductions on nine earlier occasions. However, he said, the taxes collected on oil may somehow come as a help to meet the revenue for social sector expenditure. So, the present decline of oil prices will be a good news for the government and the government is hoping that the decline in oil prices will not only help in meeting fiscal deficit targets, but will also help in allocating resources for reforms.  

This article was published on February 5, 2015.