Amid the process of electing a new Government, the Finance Ministry has indicated that the process of phasing out profit-linked deductions and minimising exemption on corporate tax may continue in the new Budget.

This is evident in a communication sent to industry and trade bodies seeking suggestions on direct and indirect taxes for the General Budget 2014-15, in which the tax authorities have written that as regards direct taxes, “the Government’s policy is to phase out profit-linked deductions and minimise exemptions; you make take this into considerations while forwarding proposals.”

Industry and trade bodies have been asked to send their suggestions by May 5. The Ministry will consider the suggestions in formulating proposals for the Budget. The new Government is expected to present the full Budget in mid-July.

Earlier this year, an interim Budget and Vote-on-Account was presented, mainly to get Parliamentary consent for expenditure during April to July. It had some indirect tax proposals to boost consumer non-durables, capital goods and automobile industry, but only for a few months.

Revenue authorities have sought suggestions for changes in duty structures, rates and broadening of tax base on both direct and indirect taxes, besides simplification and rationalisation of duties and taxes. Direct taxes include personal income tax, corporate tax, securities transaction tax and wealth tax, while indirect taxes include custom duty, excise duty and service tax. Tax authorities have made it clear that each proposal should come with proper economic justification. For example, if there is suggestion for reducing excise duty on, say cars, there should be relevant statistical information about production, prices and revenue implication. Similarly, any request for correction of inverted duty structure for a commodity should necessarily be supported by value-addition at each stage of its manufacturing, they said.

Industry and trade suggestions are critical as the Finance Ministry, in the interim Budget, has projected gross tax collections at ₹13.79 lakh crore during 2014-15. This requires a growth rate of 19 per cent. It may be noted that tax collection during 2013-14 was revised lower to ₹11.59 lakh crore. Similarly, tax collection is expected to grow at around 12 per cent against the target of 19 per cent.

However, officials are hopeful of better collections during the year, as there are some improvements in industrial environment and corporate profits, too, are likely to grow at better pace during the current fiscal.