Indian government commits to making tax system fairer

The government in India is committed to fairness, simplicity and equity in the country’s tax system, according to Revenue Secretary Sanjay Malhotra.

He said the government is making strides in simplifying tax laws, improving tax compliance and supporting economic growth through prudent fiscal policies.

Finance Minister Nirmala Sitharaman also said a comprehensive review would be carried out on the direct tax regime over the next six months aiming at making direct taxes simpler to reduce disputes.

“Tax growth had reached 14%, outpacing GDP growth due to better compliance and collection efficiency,” Malhotra said in a post-Budget meeting with stakeholders.

He praised both tax administrators and taxpayers for their efforts and asked for continued co-operation to further enhance tax compliance and administration.

He assured taxpayers that the government aims to make tax easier to understand and make the tax paying and collection processes as hassle-free as possible.

He said that the administration seeks to build trust with taxpayers and aims to minimise harassment and inconvenience for honest taxpayers. However, he warned: “For those found dishonest, the law would be applied rigorously.”

The Revenue Secretary also reflected on the government’s broader economic goals as outlined in the recent Budget, focusing on growth, employment and development across various sectors.

These included specific sectors such as the leather, textile, diamond and marine, which have seen reductions in customs duties to enhance competitiveness.

He highlighted the government’s support for industries through measures like the reduction of corporate tax rates of foreign companies to attract both domestic and international investment.

 

Growth slows in services sector in July

Growth in India’s vital services sector remained upbeat in July, leading to strong job creation despite cost pressures pushing up selling-price inflation to a seven-year high, according to a new survey.

The HSBC final India Services Purchasing Managers’ Index, compiled by S&P Global, fell marginally to 60.3 in July from 60.5 in June and was considerably below a preliminary estimate of 61.1.

However, the overall pace of expansion was sharp and the index remained above the 50-mark that separates contraction from expansion for the 36th straight month.

It was the longest period of expansion since the survey launched in December 2005.

“Service sector activity rose at a slightly slower pace in July, with new business increasing further, primarily driven by domestic demand. Looking ahead, services firms remained optimistic about the outlook for year-ahead,” said Pranjul Bhandari, chief India economist at HSBC.

International demand, though increasing at a slower pace than June’s fastest rise in a decade, also indicated robust demand from abroad.

The new export business gauge was the third-highest since the sub-index was added to the survey in September 2014. The first and second highest were also recorded this year in May and June, respectively.

The solid demand outlook drove a rebound in expectations for activity in the next 12 months, lifting the future activity sub-index from an 11-month low set in June. That led to another strong level of hiring, despite easing from June’s 22-month high. Companies took on extra exployees to meet the expansion.

Generating jobs for young people has been one of the biggest challenges for the Indian government and the services sector has been creating employment, albeit at a mild pace, for more than two years.

To address the issue, the government plans to allocate 2 trillion rupees ($24 billion) over the next five years, the finance minister announced in a recent budget.

Higher raw material and labour costs added to expenses faced by service providers last month and they increased their prices at a faster pace.

Selling price inflation rose significantly in July, and was the joint-highest in seven years as firms passed on costs to clients, the survey showed.

Data for June released last month showed the country’s annual retail inflation rose for the first time since December, to a fraction over 5%, above the Reserve Bank of India’s (RBI) medium-term target of 4%.