Finance Minister Nirmala Sitharaman on Friday assured industry of cutting the corporation tax rate to 25 per cent across the board once it gets comfort on revenues, and that direct tax laws would be simplified after the task force submits its report later this month.
Addressing members of the Confederation of Indian Industry (CII), the finance minister said she would be travelling to tier 2 cities to understand the issues of harassment faced by corporates from tax officials.
Sitharaman talked about the cordial relationship between North Block and Mint Road. “We have an atmosphere of certainty and cordiality between the RBI (Reserve Bank of India) and the government," she said, adding that the current high level of synergy between the two is helping incentivise investments.
"It is our intent to reduce tax on corporates...There is no second thought on this," she said. Less than 1 per cent of the large corporates now attract 30 per cent corporation tax, with the rest coming down at 25 per cent. The government would consider a uniform 25 per cent tax rate for all categories of corporates after there was comfort that tax revenues were on the upward trend, she said.
A technology-driven platform will be set up wherein cases of harassment can be uploaded, either with and without disclosing identity, she said. She did not rule out the possibility of reviewing some of the milestones in relation to infrastructure. In particular, projects with a bearing on the core sectors and job creation may be brought forward.
"For instance, incentivising affordable housing is likely given its impact on the core sectors," she said.
She also assured the industry of reviewing the criminal penal provisions on corporate social responsibility (CSR) contained in the recent amendments to the Companies Act, passed by Parliament. She said CSR notices with retrospective effect “were unacceptable” and she would put a stop to these.
Meanwhile, capital market participants and foreign institutional investors on Friday presented a charter of demands to Sitharaman, which included a rollback of surcharge on FPIs, review of dividend distribution tax and lowering of LTCG tax, in a bid to shore up investors' sentiment.
Sources said Sitharaman gave a patient hearing to them but restrained from making any firm commitments.
The meeting was part of the exercise being undertaken by the minister to firm up steps to increase investments and boost economy, which is showing signs of slowdown. During the meeting, it was also suggested that employees' provident fund should increase its exposure in the stock market, which in turn would improve liquidity, industry and official sources added.
There was also a suggestion that the long-term capital gains (LTCG) tax be abolished or at least reduced. They suggested that higher surcharge on income beyond Rs 2 crore, which was imposed in the Budget, should not be applicable on FPIs. The government's decision on surcharge had impacted the market.
FPIs who participated in the meeting include Goldman Sachs, Nomura, Blackrock, CLSA, Barclays, and JP Morgan.