Pre-budget parley: Industry pushes personal income tax cuts, fuel price relief and MSME support

Corporate India on Monday urged Finance Minister Nirmala Sitharaman to use the upcoming Budget to tackle the ongoing demand slowdown and pave the way for a consumption boost to propel economic growth. Their package of submissions for the fiscal interventions in the budget includes both personal and corporate tax rate cuts, reduction in fuel prices through excise duty cut, and enhanced public capex on the lines of the recent years. 

At the pre-Budget meeting with industrialists, chaired by Sitharaman, there was also demand for measures to ensure easy access of finance to Micro, Small and Medium Enterprises (MSMEs). 

India Inc also made a case for widening the scope of Production Linked Incentives (PLIs) to beyond the current 14 sectors and include sectors such as gems and jewellery. 

Industry chambers called for a reduction in the maximum marginal personal income tax rate, currently at 42.74 per cent under the highest slab and 39 per cent in the new tax regime, highlighting the significant gap compared to the standard corporate tax rate of 25.17 per cent. They also pointed out that India’s high personal income tax rates are notably steep compared to global standards.

Ranjeet Mehta, CEO and Secretary General, PHDCCI, said: “To boost consumption, we have recommended that tax rate up to ₹50 lakh taxable income should be 25 per cent and above ₹50 lakh it should be 30 per cent.”

ITC CMD and CII President Sanjiv Puri said there is need to reduce marginal tax rates for personal income up to ₹20 lakh per annum. This will trigger the virtuous cycle of consumption, higher growth and higher tax revenue, he added. 

While corporate tax rates have become globally competitive, in order to ensure larger tax compliance by individuals, similar reduction in personal income tax rates is recommended, industry chamber Assocham said. 

While tax cuts and fuel price reductions are seen as immediate consumption drivers, the industry also stressed the importance of maintaining the government’s focus on capital expenditure to sustain long-term growth.

“In upcoming Budget, there is a need to increase capex spending by 25 percent over the ₹ 11.1 lakh crore budget for FY’25, with enhanced focus on rural infrastructure. In particular, investments in irrigation could target coverage of 80 per cent of gross cropped area by 2030”, said Puri.

Vijaya Sankar, Vice-President, FICCI and Chairman, Sanmar Group, suggested that government must consider increasing capex in FY’26 by 15 percent over 2024-25. Sanjay Nayar, President, Assocham said that despite the policy for collateral-free loans, MSMEs still face challenges in accessing credit. 

He suggested that the upcoming Budget provide an additional allocation or net to enhance credit flow to the MSMEs, much like the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) launched during COVID, which proved to be a lifeline driving the growth of MSMEs.

The other significant recommendations made by industry at Monday’s meeting include setting up of a Sovereign Wealth Fund; setting up of inter-State institutional platforms for power, land and labour (on the lines of GST Council); and expedite Free Trade Agreements with countries like the EU and the UK.