India Inc to Jaitley: slash corporate tax rate to 18% to spur investments, consumption

To offset the immediate downturn that industry will go through following the demonetisation move, India Inc has pitched for sharp cut in corporate tax rates in the upcoming Budget.

Rather than go in for phased reduction of corporate tax rate over the next four years, the Modi-led Government should cut corporate tax rate from the existing 30 per cent to 18 per cent (including all surcharges and cess) at one go, the Confederation of Indian Industry (CII) President Naushad Forbes suggested at the pre-Budget meeting convened by the Finance Minister Arun Jaitley here. In return for the slashing of corporate tax rate to 18 per cent — the same rate as existing MAT rate — the Government can remove all tax incentives, concessions and need no grandfathering of previous incentives, Forbes suggested. “We are not asking for removal of MAT. We have suggested that corporate tax rate itself be slashed to 18 per cent at one go. Time is right for Government to usher in simplified corporate tax system. Our calculations show that current effective tax rate is about 19.8 per cent (without any tax incentives/concessions),” Forbes told BusinessLine after the meeting.

Forbes also said that any such corporate tax rate reduction to 18 per cent will bring India in line with the most attractive international destinations such as Singapore, Sri Lanka, UK and Turkey. It will send a powerful message to Indian industry and global investors that India is an attractive investment destination and would be a huge enabler for Make in India. CII has also suggested that Government must accelerate public sector disinvestment and look to divest/privatise by December 31, 2017, 100 companies including the 74 identified by NITI Aayog.

More tax reforms Industry chamber Assocham suggested that the Government must follow the bold demonetisation move with more tax reforms to spur private investments and consumption in the economy.

“The Government must let go of its hold and empower the people to spend more in the current trying times. We have suggested both corporate tax rate cut and enhancing income tax exemption so that more money is left in their hands,” Sunil Kanoria, President, Assocham, told BusinessLine . This apex industry chamber also called for abolition of minimum alternate tax (MAT).

For individuals, Assocham suggested that tax rate should be ‘nil’ upto taxable income of ₹5 lakh. For taxable income between ₹5 lakh to ₹25 lakh, the tax rate should be 10 per cent and 20 per cent for taxable income between ₹25 lakh to ₹1 crore. The tax rate of 25 per cent should be applied for income above ₹1 crore.

On Goods and Services Tax (GST), Kanoria said that he had suggested to the Government that average GST rate be pegged at 15 per cent and the maximum rate at 25 per cent. Also GST on turnover upto ₹1.5 crore be handled by the State Government and above that be handled by the Central Government.

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