The Challenge of Reforming Indian Tax System for Enabling Make in India

The ambitious “Make in India” campaign was unveiled on 25^th September 2014 with an aim to turn India into a globalmanufacturing hub. It is a major national program designed to facilitate investment, foster innovation, enhance skill development, protect intellectual property and build best-in-class manufacturing infrastructure. In order to resonate well with the “Make in India” program, it was imperative that certain tax incentives are offered to investors that will go on a long way in providing the much-needed impetus to the manufacturing sector. The present study highlights some of the key incentives, which are already provided in the Income tax Act, 1961 (the Act) along with recommendations for the future. To aid Make in India, some basic needs like well built pan India infrastructure, simple tax and transfer pricing regulations, exemption of tax on IT Companiesand Research &Development budgets are essential. The present paper explores the impact of one of the largest tax reforms GST on Make in India. This reform is most likely to incentivise Indian manufacturing by removing cascading and simplifyingcurrent complex indirect tax structure. “Make in India” is an important initiative meant for promoting manufacturing and generating employment, but its successful implementation will require a stable and proper fiscal setup both at the Centre and State besides an industry friendly environment. This paper explores the emerging tax trends across the globe. It also discussesthe policy and administrative reform measures needed for a stable, certain, less litigious and facilitative tax environment in India that supports investments and growth through Make in India.