Professional Opportunities

POEM

Opportunities for Tax Professionals from Budget 2017:-Every year, the budget generates abundance of opportunities for the professionals practicing in the tax domain. However saying that, scale of opportunities will substantially be enlarged when the FM will disclose the provisions of the most anticipated and awaited Budget in the history of Indian economy.

A. GSTThis years Budget will mark dawn of a new era in Indirect tax structure by the long awaited implementation of the GST. GST will pose a huge challenge in implementation and thus will create materialistic and rewarding opportunities for the practising professionals. In short run post implementation, professionals will be bombarded with the procedural compliances from registration to filing of periodical returns whereas in the long run huge amount of litigation work can be expected.

B. POEM, GAAR and BEPSThe above mentioned mechanisms are in consideration for implementation for last so many years. These mechanisms prevent tax avoidance practises including treaty abuse. CBDT recently has notified guidelines to determine POEM of a company. If a company’s POEM is in India, then its global income will be subject to tax in India. GAAR provisions are deferred for a number of times already. Before enactment of the Budget 2017, CBDT has clarified that GAAR provisions will be applicable from next F.Y.Further, the FM may give a clue about its stance on BEPS action plan and its uniformity with the multilateral instrument for BEPS by OECD. Considering these developments, professionals practicing in direct tax including International tax should expect a great deal of consulting and litigation opportunities.

Why Budget 2017 is Significant ?

PRE BUDGET 2017 Analysis:

Why Budget 2017 is more significant ?

A. Demonetisation Demonetisation has provide the basis for Less cash Economy, Digital money, strict compliance of Law coupled with creating a clean environment for GST implementation. This move can result in a long term positive structural change in the working of the Indian economy. However it has resulted in severe short term pain to the people, the agricultural sector, manufacturing sector including the MSME which has negatively impacted the GDP of the Indian economy.

B. Elections in 5 states Post BudgetPost Budget – legislative elections in Five states i.e. Uttar Pradesh, Punjab, Goa, Uttarakhand and Manipur. These states collectively represents 20% of the total population in India.

Budget 2017 can influence the outcome of these elections and lack of non beneficial provisions may even dethrone the ruling party in the parliamentary elections in 2019.

Expectation from Budget 2017

Reduction in Rates of Income Tax for Corporate and Other assesses

A. Corporate Tax Rates In Budget 2016, FM promised the reduction in the corporate tax rates to 25% over a four year period cycle. Budget 2017 may reduce the corporate tax rates of 30% by 2% to 3%.It is further expected that MAT provisions are either discontinued or a reduction in effective rate of MAT coupled with indefinite carry forward of MAT credit (from prospective effect if not retrospective) is anticipated.

B. Individual Tax ratesIncrease in basic exemption limit along with change in slab limits

This will result in increase in disposable income in the hands of the Individual tax payer.This increase is estimated as Individual tax payer are deprived of any such benefit in last two budgets.For salaried class, government may hike amount of allowance as mentioned u/s 10(14) such as children education allowance, transport allowance etc which are allowed as a deduction from income from salaries.

Expected Slab limits Tax rate Effective increase NotesUpto Rs 3-4 Lakhs Nil Upto Rs1.5 Lakhs Subsequent increase in Rebate

u/s 87A for small tax payer upto Rs 8 lakh3-4 lakhs but upto 7- 8 lakhs 10% Upto Rs 3 Lakhs

7-8 lakhs but upto 15 lakhs 20% Upto Rs 5 Lakhs

More than 15 Lakhs 30% Upto Rs 5 Lakhs

Key observation on Individual taxation on the basis of past Budgets

This government has introduced beneficial provisions for small tax payer u/s 87A and taxed the high earning individual by introducing section 115BBDA in Finance Act 2016.

It is justifiable to interpret that the policies of the government be it Demonetisation, enactment of Benami Property Act, IDS-1 , IDS-2 is to charge heavily on high and undisclosed earnings of high net worth individuals.Similar provisions can be introduced in the Budget2017.

Expanding beneficial provisions under Chapter VI-A for corporate & individualsTo promote or strengthen1. Personal & Corporate tax savings2. Housing scheme for individuals3. Digital Economy4. MSME, Skill India, Make in India5. Creation of employment

NOTE:-The government should allocate substantial part of the Budget towards revival of agricultural, manufacturing, MSME sector post demonetisation in addition to welfare and empowerment of the backward classes of the society.

Welcome to New India – Digital India

Demonetisation has led to a positive structural change in the lifestyle of people of India. People whether rich or poor, whether in urban area or rural area, today has a positive and likeable taste of making payments using digital modes. The government has also launched mobile Apps such as BHIM & UPI which can facilitate payments through a Smartphone.Further, as per the IT minister 99% of Indians over 18years of age have Aadhaar cards. Digital India will focus making India a “Less Cash economy” thereby improving the existing image of India from “Black Cash economy”.

Following expected provisions can be addressed by the FM in the Budget:• Norms for periodical reporting of cash transactions by special class of dealers dealing beyond specified limits of cash, specifying the nature of transaction along with the Aadhaar or PAN of the other party to the transaction.• Introducing profit linked or Investment linked deductions to widen the infrastructure base in order to facilitate the strengthening of the digitisation movement in the country.• Introduction of new projects for creation of smart cities.• Aadhaar based subsidy to Individual tax payer to purchase of Smartphone.•Promotional provisions in form of various incentives to dealers to encourage them accepting digital payments.

The above provisions, if implemented, will not only deepen the faith of a honest taxpayer in the government but will also enable the government to trace out and penalise a dishonest tax payer efficiently.

GST - Goods & Service Tax

Finally, the FM will be able to announce the implementation of the most talked about Indirect tax structure in the Indian territory i.e. GST. Because of GST, multiple indirect form of tax collection will merge into one tax, thus eliminating the cascading effect existed therein. In the longer run, it will be convenient for the commercial enterprises to comply with the provisions of one tax which is uniform for the whole of the India.

Being new to the Indian territory, the introduction of this tax will provide huge challenges in implementation for the businesses of the assessees that are spread in more than one location in the Indian territory. However, the greater will be the opportunities to the professionals who expertise in this tax post budget and for many years after its implementation.

Following are the expected benefits of GST in the long run:• Elimination of cascading effect • Uniform indirect tax structure in the whole of Indian territory• Reduction in cost of goods and services• GDP growth• Facilitate ease of doing business in India

About the Author

Deepanshu Gupta has qualified Chartered Accountant course from Institute of Chartered Accountants of India in 2015. He is a commerce graduate from Delhi university and an alumni of Ramjas Public School (Day Boarding) having completed his higher secondary education in the year 2008. He has done his internship from UCC & Associates LLP (Prime global member firm) and post qualification has worked over an year for TR Chadha & Co LLP.

The author has experience in Direct Tax Compliance; Financial Planning & Reporting; Indian GAAP; Forensic, Statutory & Internal Audits; Risk Advisory & Risk Assessment and Internal Control Over Financial Reporting (ICFR) assignments for Listed as well as non listed enterprises in diverse industries.

The author aims to be a leader in matters related to Income Tax.

The author invites suggestions as regards to the content in the PowerPoint presentation.

Kindly feel free to contact atEmail id - Guptadeepanshuca@gmail.comPhone - +91-9999271393

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