KPMG in India's

pre-budget survey
2021 report

January 2021

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KPMG in India’s Pre-budget survey 2021
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 KPMG in India’s pre-budget survey 2021-22 findings
The year 2020-2021 saw the Finance Minister announce several far-reaching relief measures as well
as an economic stimulus package to support the economy in the wake of the COVID-19 pandemic.
The Union Budget for 2021-22 due to be presented on 1 February 2021 is expected to take this
initiative forward and provide India Inc. with a clear path out of the pandemic-induced economic
distress, and towards higher economic growth.
KPMG in India conducted a pre-budget survey in January 2021 which has captured expectations of
key stakeholders on various tax aspects of the budget. The findings of this survey are summarised
below:
Tax Rates and Relief:
With the Government facing the prospect of significantly increased expenditure in the coming year
(especially in the area of public health), a large majority of respondents believe that the Government’s
revenue needs can be met through increased collections fuelled by an economic recovery as well as
by improved technology-driven enforcement, rather than through the introduction of new taxes. A
smaller number of respondents, however, expect a new Covid-19 cess.
We also asked respondents for their views on what measures the government could adopt to provide
relief to the salaried class. Most respondents felt that an enhancement in the standard deduction on
salary income from existing limit of INR50,000 should be considered.
Dispute resolution
The last two years saw the Government take many far-reaching measures to resolve disputes and
overhaul the dispute resolution framework in the field of taxation. In addition to the Sabka Vishwas
Scheme and the Vivad se Vishwas Scheme to resolve legacy disputes in the field of indirect and direct
taxes, the Government also introduced the concept of faceless assessments and appeals.
A small majority of respondents felt that faceless assessments and appeals in both direct and indirect
taxes would improve efficiency and lead to a reduction in tax disputes. As to what the Government
could do more to help resolve disputes, a whopping 77 per cent of respondents felt that a mediation
scheme should be introduced in the Budget to enable negotiated settlements of tax disputes.
Specific measures like the Advance Pricing Agreement (APA) programme to reduce transfer pricing
litigation got mixed reviews. Only about 38% of respondents felt that the APA programme had been
effective in pre-empting/resolving key transfer pricing controversies. This suggests that measures to
strengthen the APA regime would be welcomed by many taxpayers.
About 40% of respondents also felt that the introduction of the General Anti-Avoidance Rules (GAAR)
and the implementation of the Multilateral Instrument (MLI) could lead to an increase in tax disputes.

© 2021 KPMG Assurance and Consulting Services LLP, an Indian Limited Liability Partnership and a member KPMG in India’s Pre-budget survey 2021 2
firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,
a private English company limited by guarantee. All rights reserved.
Measures to boost credit
While NBFCs have been seeking exemption from thin capitalization provisions (in line with banking
companies) since the time of their introduction, respondents were divided on whether this change
would be forthcoming in the present Budget.
Given the financial impact of the COVID-19 pandemic, a majority of respondents expect an increase
in the deduction with respect to the provisions made towards Non-Performing Assets (NPA) by Banks
and NBFCs. This would provide much required relief to Banks and NBFCs, which are bracing for
increased delinquencies on account of the pandemic.
Greater clarity and certainty
The introduction of tax collection at source (TCS) provisions on sale of goods last year raised certain
questions about its applicability to transactions in shares, securities and other financial instruments.
An exclusion was subsequently provided for listed shares and securities. However, about 43% of
respondents felt that a specific carve out for unlisted shares and securities from TCS was also
warranted.
On the transfer pricing front, a large majority of respondents expect the Government to issue detailed
guidance, similar to that issued by the Organisation for Economic Cooperation and Development
(‘OECD’), for dealing with anticipated transfer pricing issues on inter-company transactions. This
clearly indicates that taxpayers anticipate challenges in inter-company pricing as a consequence of
the pandemic and expect the Government to be proactive and forward looking.
Goods and Services Tax (‘GST’)
We asked respondents if they felt that the GST regime was getting simplified over the last three
years. The response was divided with 45.97% believing that it was simplified, and 41.71% believing
otherwise. This could be on account of multiple reasons such as various notifications/ circulars being
issued on regular basis, number of increased compliances for multiple registrations, stringent
provisions for credits availment, etc. which in turn leads to additional cost and time investments for
business.
When asked for their feedback on the digital compliance system introduced for GST, nearly two-
thirds of respondents were comfortable with the Digital Compliance system introduced for GST. This
is largely because the GST portal has developed into a one stop shop for every GST related issue,
be it filing monthly / annual returns or claiming refunds, receiving and replying to notices,
functionalities enabling following up with vendors in case credit is not reflected and much more.
Further, the introduction of auto–populated figures in payment return, has led to a reduction in
manual efforts as well as clerical manual errors.

© 2021 KPMG Assurance and Consulting Services LLP, an Indian Limited Liability Partnership and a member KPMG in India’s Pre-budget survey 2021 3
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Customs and Trade
A large percentage of respondents believe that the CBIC should introduce Customs assisted
assessment for Micro, Small and Medium Enterprises (‘MSMEs’). Since this sector lacks adequate
infrastructural, technological and financial support, introduction of Customs assisted assessments
and other trade facilitation measures would be beneficial.
About 40% of respondents believed that Authorised Economic Operators (AEO) certified importers
should be exempted from Customs (Administration of Rules of Origin under Trade Agreements)
Rules, 2020 (CAROTAR, 2020) related enquiries with respect to live shipments. This is in line with
the important role played by AEO certified importers in international trade, and a recognition that their
Customs procedures are efficient and compliant.
Overseas Listings
In line with the need to provide a level playing field for Indian companies to access overseas capital
markets and facilitate a better valuation for equity shares, we asked respondents if the Government
should announce provisions to facilitate a regime for direct overseas listing of Indian companies.
Nearly 70 per cent of the respondents were in favour of such a move.

© 2021 KPMG Assurance and Consulting Services LLP, an Indian Limited Liability Partnership and a member KPMG in India’s Pre-budget survey 2021 4
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01 How do you expect the government to fund
increased public health expenditure in 2021
and beyond?

49%
29%
20%
2%
Increased Introduction A COVID-19 Improved and
collections from of new taxes cess on existing focused
existing taxes taxes enforcement
fuelled by an using technology
economic and analytics
recovery

© 2021 KPMG Assurance and Consulting Services LLP, an Indian Limited Liability Partnership and a member KPMG in India’s Pre-budget survey 2021 5
firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,
a private English company limited by guarantee. All rights reserved.
02 What measures should the government consider
to provide tax relief to the salaried class?

74%
57%
Enhanced
standard
deduction for
salaried
individuals from
Tax-free
allowances/perquisite
39%
existing limit of s for salaried
INR50,000 individuals keeping in
Separate
mind work from home
deduction for
arrangement –
medical expenses
provision of internet
in relation to
connection/furniture/
COVID-19
headsets etc.
treatment

© 2021 KPMG Assurance and Consulting Services LLP, an Indian Limited Liability Partnership and a member KPMG in India’s Pre-budget survey 2021 6
firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,
a private English company limited by guarantee. All rights reserved.
03 Are General Anti-Avoidance Rules
(GAAR)/Multilateral Instrument (MLI) likely to
increase tax disputes and create more uncertainty?

Maybe

Yes 50%
No
39%
11%

© 2021 KPMG Assurance and Consulting Services LLP, an Indian Limited Liability Partnership and a member KPMG in India’s Pre-budget survey 2021 7
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04 Do you think a specific carve out from the Tax
Collection at Source (TCS) provisions is needed
for unlisted securities and financial assets?

Yes
43%
Maybe
No
28% 29%

© 2021 KPMG Assurance and Consulting Services LLP, an Indian Limited Liability Partnership and a member KPMG in India’s Pre-budget survey 2021 8
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a private English company limited by guarantee. All rights reserved.
05 Do you expect NBFCs to be exempted from
limitation on interest deduction under section
94B of the Income-tax Act?

No
Yes
37% Maybe

33%
30%

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06 Considering the current financial hardship due to
the COVID-19 pandemic, should the tax deduction
with respect to the provisions made towards Non-
Performing Assets be increased for banks/NBFCs?

Yes 47%

No 25%
Maybe
28%
© 2021 KPMG Assurance and Consulting Services LLP, an Indian Limited Liability Partnership and a member KPMG in India’s Pre-budget survey 2021 10
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a private English company limited by guarantee. All rights reserved.
07 Do you think that there is a need for the government
to issue guidance on transfer pricing implications of
COVID-19 similar to guidance issued by OECD and
other countries?

Yes

76%
Maybe

18%
No

6%

© 2021 KPMG Assurance and Consulting Services LLP, an Indian Limited Liability Partnership and a member KPMG in India’s Pre-budget survey 2021 11
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08 Do you believe that Indian Advance Pricing
Agreement (APA) programme has been effective in
pre-empting and/or resolving the key transfer pricing
controversies in India?

Maybe

Yes 41%
38% No

21%

© 2021 KPMG Assurance and Consulting Services LLP, an Indian Limited Liability Partnership and a member KPMG in India’s Pre-budget survey 2021 12
firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,
a private English company limited by guarantee. All rights reserved.
09 Do you think that faceless assessments and appeals
in both direct and indirect taxes will improve
efficiency and eventually reduce tax disputes?

Yes

54%
No

27% Maybe

19%

© 2021 KPMG Assurance and Consulting Services LLP, an Indian Limited Liability Partnership and a member KPMG in India’s Pre-budget survey 2021 13
firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,
a private English company limited by guarantee. All rights reserved.
10 Should the government introduce a mediation
scheme in the Budget to enable a negotiated
settlement of tax disputes?

Yes

77%
Maybe
No
12%
11%

© 2021 KPMG Assurance and Consulting Services LLP, an Indian Limited Liability Partnership and a member KPMG in India’s Pre-budget survey 2021 14
firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,
a private English company limited by guarantee. All rights reserved.
11 Do you think the GST regime is getting simplified
over the last three years?

Yes
No

46%
42% Maybe

12%

© 2021 KPMG Assurance and Consulting Services LLP, an Indian Limited Liability Partnership and a member KPMG in India’s Pre-budget survey 2021 15
firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,
a private English company limited by guarantee. All rights reserved.
12 Are you comfortable with the digital compliance
system introduced for GST?

Yes

62%
No

Maybe
22%
16%

© 2021 KPMG Assurance and Consulting Services LLP, an Indian Limited Liability Partnership and a member KPMG in India’s Pre-budget survey 2021 16
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13 Should Central Board of Indirect Taxes and Customs
(CBIC) introduce Customs assisted assessment for
the Micro, Small and Medium Enterprises (MSME)
industry?

64% Maybe

Yes
No
30%
6%

© 2021 KPMG Assurance and Consulting Services LLP, an Indian Limited Liability Partnership and a member KPMG in India’s Pre-budget survey 2021 17
firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,
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14 Should Authorised Economic Operators (AEO)
certified importers be exempted from Customs
(Administration of Rules of Origin under Trade
Agreements) Rules, 2020 (CAROTAR, 2020) related
enquiry, with respect to live shipments?

Maybe
Yes
No
44%
41%
15%

© 2021 KPMG Assurance and Consulting Services LLP, an Indian Limited Liability Partnership and a member KPMG in India’s Pre-budget survey 2021 18
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a private English company limited by guarantee. All rights reserved.
15 Should the Honourable Finance Minister use this
Budget to announce provisions to facilitate a regime
for direct overseas listing of Indian companies?

Yes

70%
23% Maybe

No 7%

© 2021 KPMG Assurance and Consulting Services LLP, an Indian Limited Liability Partnership and a member KPMG in India’s Pre-budget survey 2021 19
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a private English company limited by guarantee. All rights reserved.
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