 "Arun Jaitley")
Days ahead of the Budget, finance minister Arun Jaitley on Wednesday said that India needed competitive tax rates to become an attractive manufacturing hub that will help create jobs and boost economic growth.
"In order to keep manufacturing competitive, we have to keep our rates competitive and, therefore, have to occasionally vary those rates...," Jaitley said at the Investiture Ceremony 2016 and Annual Central Excise Custom Day Function.
Manufacturing is not only an extremely important activity but it is one activity with its spiral effect on the economy which also creates the largest volumes of job, and a tax on that manufacturing adds to the government revenue, he added.
He said the revenue was the lifeline of governance and if governments have no adequate revenue, it becomes almost impossible for the government to function.
The corporate tax may see a small reduction from the current 30 per cent rate as the finance minister moves to reduce it to 25 per cent over the next four years, as promised in the last Budget. Towards that, the Budget will lay down the roadmap to simultaneously phase out exemptions for the corporate sector, simplify administration, and improve India's competitive edge globally.
The corporate tax rate is 30 per cent but it is effectively 23 per cent due to many exemptions. In 2014-15, the government is estimated to have foregone revenue worth Rs 62,400 crore in corporate taxes on account of various incentives, up from Rs 57,800 crore a year ago.
"As the economies grow, not only the width of revenue grows but the expectation of people for greater level of developments, evolution of society as a welfare state also grows. Manufacturing in any growing economy has a very vital role," Jaitley said.
He said the efficiency of the excise department was critical to make sure that "what is due from each producer or manufacturer to the country is realised by us (the government)".
He further said because of some "clever manufacturers" that try to avoid paying right taxes, it was necessary that the excise department remained vigilant, used intelligence, and had a keen technological knowhow with the highest level of integrity and professionalism.
