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Corporate Expectations from the Union Budget 2022
Introduction
During the Covid-19 pandemic, corporates and organizations, especially smaller companies, found themselves strained. With lockdowns impacting manufacturing and production, most companies took a hit to their bottom line. Now that the Union Budget would be tabled on 1 February, expectations are high.
Here are some of the top expectations from Budget 2022 from the corporate sector of India:
1. Reduction in Corporate Tax for Foreign Companies
At present, foreign companies with Indian branches are subject to a corporate tax rate of 40%*. On the other hand, domestic companies' headline corporate tax rate is at 22%, slashed from a previous level of 30%. Given that there is quite a disparity in the two rates, corporates are hoping that the Union Budget of 2022 will provide certain concessions for Indian branches so that India can remain a competitive and lucrative market for foreign companies setting up shop here. It would also boost the 'Make in India' initiative.
2. Ask of Manufacturing Companies
New domestic manufacturing companies are subject to a concessional corporate tax rate of 15%** as long as they begin production before 31 March 2023. However, many companies have been set back in their manufacturing timelines in light of the pandemic. A KPMG report found that most of those surveyed favour extending the timeline for manufacturing beyond 31 March 2023 so they can take advantage of the reduced tax.
3. Support for MSMEs
Almost 95%*** of India's businesses are comprised of micro, small and medium enterprises. These companies took a significant hit during the pandemic. Expectations are for the Union Budget to improve access of funds to this sector and ease tax norms. Supporting MSMEs will also create much-needed employment when jobs are increasingly difficult to come by, and unemployment rates are soaring.
4. Support Disproportionately-Impacted Sectors
The pandemic hurt specific sectors of the economy. Hospitality and tourism were impacted gravely during the pandemic as travel restrictions were imposed. So was aviation. These sectors are still reeling under the effects of the last two years of depressed activity. Experts and industry players are pinning their hopes on Budget 2022 to announce specific revival measures for these sectors so that they can get back on their feet as soon as possible. With a third wave on the rise, these disproportionately affected sectors will need a boost, whether in terms of new measures, tax reliefs, offering interest-free loans, subsidies, relief in interest payment, and higher incentives to stay afloat.
5. GST and Import-Export Tax Reduction
Certain sectors, such as the textile industry and automobile industry, are subject to high GST and import and export charges, making it difficult for them to sustain. Key players in these industries are hoping for the Union Budget to make announcements to reduce tax rates and provide concessions to boost activity.
Final Word
The Indian economy needs support from the government to bounce back after the pandemic. To reach the target of becoming a $5 trillion economy, corporates and organizations are looking to the Finance Minister for much-needed support from Budget 2022.
*40% (source – PWC as of 23rd Dec 2021)
**15% (source – PWC as of 23rd Dec 2021)
***95% (source – Invest India as of 8th Jun 2021)
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