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Govt unveils roadmap to phase out corporate tax exemptions
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SME Times News Bureau | 21 Nov, 2015
The government on Friday unveiled a detailed roadmap to phase out tax
exemptions for the corporate sector and bring down its tax rate to 25
percent from 30 percent now.
"This is a step towards
simplification of tax laws, which is expected to bring about
transparency and clarity," an official statement said, taking forward
the promise made by Finance Minister Arun Jaitley in his budget speech
earlier this year.
"Profit linked, investment linked and area
based deductions will be phased out for both corporate and
non-corporate tax payers. The provisions having a sunset date will not
be modified to advance the sunset date," the statement said.
"Similarly, the sunset dates provided in the (Income Tax) Act will not be extended."
In
case of tax incentives with no terminal date, a sunset date of March
31, 2017 will be provided, either for the commencement of the activity
or for claim of benefit, depending upon the structure of the relevant
provisions of the act.
"A regime of exemptions has led to
pressure groups, litigation and loss of revenue. It also gives room for
avoidable discretion. I, therefore, propose to reduce the rate of
Corporate Tax from 30 percent to 25 percent over the next four years,"
Jaitley had said.
"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."
According
to the finance minister, the basic rate of corporate tax of 30 percent
in India was higher than the rates prevalent in the other major Asian
economies, making our domestic industry uncompetitive.
But the
effective collection was around 23. "We lose out on both counts -- that
is, we are considered as having a high corporate tax regime, but we do
not get that tax due to excessive exemptions."
Among the various
measures the depreciation, currently available up to 100 percent on
some assets, is proposed to be reduced to 60 percent from April 1,
2017. The new rate will apply to all the assets, new or old.
Similarly,
in the case of capital expenditure, the government intends to do away
with weighed deductions, which amount to as mush as 150 percent in some
cases such as warehousing facility for farm produce and fertilisers.
The government has invited comments from stakeholders within 15 days.
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