Home ECONOMY Corporate tax, basic customs duty cut, service tax increased

Corporate tax, basic customs duty cut, service tax increased

0
SHARE

New Delhi, Feb 28:

Finance Minister Arun Jaitley Saturday proposed to cut the corporate tax rate by five percent to 25 percent over next four years while increasing the service plus education cess from 12.36 percent to a consolidated 14 percent.

income tax formsPresenting the budget for 2015-16 in parliament, Jaitley said the direct taxation should match the transformation in indirect taxes expected to be brought in by the introduction of Goods and Services Tax (GST) April 1, 2016 onwards.

He said the 30 percent corporate tax is higher than the rates prevalent in other major Asian economies making the industry uncompetitive.

“Moreover, the effective collection of corporate tax is about 23 percent. We lose out on both counts, i.e. we are considered as having a high corporate tax regime but we do not get that tax due to excessive exemptions.

“A regime of exemptions has led to pressure groups, litigation and loss of revenue. It also gives room for avoidable discretion,” Jaitley said.

Proposing reduction of corporate tax rate to 25 percent over the next four years Jaitley said this would lead to higher level of investment, growth and more jobs.

“This process of reduction has to be necessarily accompanied by rationalisation and removal of various kinds of tax exemptions and incentives for corporate taxpayers, which incidentally account for a large number of tax disputes,” he said.

“I wanted to start the phased reduction of corporate tax rate and phased elimination of exemptions right away; but I thought it would be appropriate to give advance notice that these changes will start from the next financial year.

“Our stated policy is to avoid sudden surprises and instability in tax policy,” he said.

Exemptions to individual taxpayers will, however, continue since they facilitate savings which get transferred to investment and economic growth, Jaitley said.

To facilitate a smooth transition to levy of tax on services by both the central government and the states, Jaitley proposed to increase the present rate of service tax plus education cesses from 12.36 percent to a consolidated rate of 14 percent.

In order to spur infrastructure projects, Jaitley also proposed to rationalise the capital gains regime for Real Estate Investment Trusts (REIT) and Infrastructure Investment Trusts (InvITs) sponsors exiting while listing the units subject to payment of Securities Transaction Tax (STT).

Jaitley said rental income of REITs from their own assets will have a pass through facility.

In order to encourage start ups with technology flow, Jaitley proposed to reduce the income tax on royalty and fees for technical services from 25 percent to 10 percent.

Towards achieving the goal of Make in India programme of the government, Jaitley proposed to reduce basic customs duty on certain inputs, raw materials, intermediates and components on 22 items.

This would minimise the impact of duty inversion and cut manufacturing cost.

Other proposals include:

– Excise duty reduction on footwear with leather uppers costing more than Rs.1,000 per pair to six percent;

– Online registration for central excise and service tax and permitting issuance of digitally signed invoices and maintenance of electronic records;

– CENVAT credit time increased by six months to one year; – Services by common effluent treatment plant exempt from service tax

– Customs, excise duty concessions for manufacture of electrically operated and hybrid vehicles extended up to 31.3.2016.

– Converting excise duty on petrol and diesel to the tune of Rs.4 per litre into road cess fun to raise Rs.40,000 crore.

– Cold storage services exempted from service tax for storing fruits and vegetables;

– Negative list of service tax to be pruned and some exemptions withdrawn.

According to Jaitley, the indirect tax proposals would net a revenue of Rs.23,383 crore while the direct tax proposals would result in Rs.8,315 crore revenue forgone. IANS

LEAVE A REPLY

Please enter your comment!
Please enter your name here