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Pressure on FM to fulfil promise of cutting corporate tax rate

Press Trust of India  |  New Delhi 

Jaitley will be under pressure to moderate rate for the industry which was promised a lower levy of 25 per cent by the three years ago, experts said.

With the substantially cutting corporate tax, the will also need to keep India's rate globally competitive, they added.

The industry is doubtful whether Jaitley would fulfil his promise of reducing corporate rate from 30 per cent to 25 per cent over four years. However, it wants the to consider moderating it to at least 28 per cent in the forthcoming Budget.

To be unveiled on February 1, it would be the last full Budget of the present

In his Budget speech of 2015-16, Jaitley had said "a regime of exemptions has led to pressure groups, litigation and loss of It also gives room for avoidable discretion. I therefore propose to reduce the rate of corporate tax from 30 per cent to 25 per cent over the next four years. This will lead to higher level of investment, higher growth and more jobs."

Not expecting Jaitley to cut corporate tax rate to 25 per cent in view of fiscal constraints, Rashesh Shah said the minister should endeavour to bring it down to 28 per cent.

The subdued indirect tax collection following rollout of the Goods and Services Tax (GST) from July 1 last year has put pressure on the fiscal deficit, which has been pegged at 3.2 per cent of the GDP for 2017-18.

The recently raised borrowing target by additional Rs 50,000 crore for the current fiscal to meet the shortfall.

"I am hoping that in this Budget, they will bring down the tax rate to 28 per cent at least to give a confidence that they are on that path," Shah told

He was also of the view that the cut in tax rates would also help the Indian industry in meeting the challenges emanating from tax cuts by the in the and its aftermath in other developing countries.

In December last year, Republicans passed a sweeping overhaul of the tax code in more than 30 years.

The approved the USD 1.5 trillion tax bill, which includes permanent tax breaks for corporations and temporary tax cuts for individuals, by a final vote of 51-48.

CII suggested that the corporate tax rate should be brought down to 18 per cent all inclusive.

"Reduction in tax rates should even be extended to other forms of unincorporated bodies/business entities like partnerships, LLPs, AOPs and societies to ensure horizontal equity between different legal forms in which business is carried on," it recommended.

Although the corporate tax rate of is competitive in comparison with the global rates, Shardul Amarchand Mangaldas Partner said considering the recent slashing of corporate tax rate in US, there is a need to revisit the tax rate in Budget 2018 as it will have an impact on overall returns for US investors.

Further, in order to encourage flow of funds (in form of dividend) from overseas subsidiaries, the reduction of MAT on such dividends is warranted, Singhania said.

"In order to facilitate the insolvency bids, the government may provide clarification on the waiver of loan by lenders in the hands of the company under normal provisions of the Act, 1961," he said.

According to Partner Gokul Chaudhri, direct tax measures could contribute towards 'Make in India' and push growth.

"This would involve reduction in the corporate tax rate to 25 per cent in line with the Minister's four year old announcement; US has substantially reduced its corporate tax rate to 21 per cent from January 2018," Chaudhri said.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, January 11 2018. 18:25 IST