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A suggestion to the Union Finance Minister Arun Jaitley to reconsider the levy of Dividend Distribution Tax (DDT) on companies and instead levy tax on dividends in excess of ₹25 lakh at the hands of the shareholders has been made by the Indian Chamber of Commerce and Industry, Coimbatore (ICCIC).
It also wants the extension of the Technology Upgradation Fund Scheme (TUFS), which now covers the textile industry, to the engineering industry as well.
In a memorandum to Arun Jaitley, the President of ICCIC, RR Balasundharam, pointed out that the trade and industry has been pressing for the implementation of the Goods and Service Tax (GST) and Direct Taxes Code and urged the Government to implement them during the current year.
He said with a view to accelerating business growth, corporate tax should be cut to 25 per cent and basic exemption limit for non-corporates should be hiked to ₹20 lakh. The benefits of exemption from MAT given to infrastructure investment should also be extended to industries supporting infrastructure so as to ensure overall growth.
The ICCIC President pointed out that the Dividend Distribution Tax at 15 per cent was 'very high’ and with the 30 per cent corporate tax, the total tax on companies’ profits worked to a high 45 per cent. He felt that the "necessity of this tax" on companies should be revisited, particularly as the Government was contemplating levy of tax on the super rich. The levy also hit the cash flow and growth of companies, affecting thus the small retail investors.
Balasundharam argued for abolishing the DDT levied on companies. Instead, tax on dividends received in excess of ₹25 lakh could be levied at the hands of the shareholders with a lower tax rate. This would also serve the purpose of taxing the super rich as planned by the government. He also wanted the GoI to extend the benefits of TUFS now enjoyed by the textile industry to the engineering industry as well.
The other suggestions included treating CSR expenses deductible with a weighted deduction similar to Sec 35 AC of the Income Tax Act, raising the Service Tax exemption limit to ₹25 lakh from the current limit of ₹10 lakh, allowing Cenvat credit at 100 per cent on capital goods bought in the year of purchase instead of 50 per cent, etc.
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