SME Times News Bureau | 25 Jan, 2020
The Union Budget could announce a roadmap for convergence of
all corporate tax rates to 15 per cent, with no exemptions and incentives, by
1st April 2023, said industry body CII.
A signaling to this effect could help further boost investor
sentiment and encourage investments, added Vikram Kirloskar, President,
Confederation of Indian Industry (CII).
For private investments, one of the biggest game-changer reforms announced last
year was the reduction in corporate taxes, but the desired impact on the ground
is still far from satisfactory, he said.
One of the reasons behind this has been the multitude of tax
rates, which have created tax rate inequalities across manufacturing and
service sectors. In the interest of simplification and uniformity, it is
required that all these tax rates be converged over a period of time, he added.
CII welcomes the Government’s bold move to reduce corporate tax rates
substantially. The Government recently reduced corporate tax rates for all
corporates to 22%, plus surcharge and Cess. However, these companies will not
be allowed to avail of any tax exemptions or incentives.
Further, manufacturing facilities that start production
before 31 March 2023 and are incorporated on or after 1st October 2019 would be
taxed at only 15%, plus surcharge and cess.
The statutory corporate tax rate had been brought down in the last three
decades, from 45 per cent in 1991-92 to 22 per cent in 2019-20, which is really
commendable and encouraging for the industry.
The new rates have catapulted India to a very competitive position against many
of the OECD and BRICS countries, and neighbours like China, Indonesia and
Philippines. Over time, the lower rates will reduce the cost of capital and
However, such varied tax rates create tax rate inequalities amongst companies
across manufacturing and services sector and also amongst the manufacturing
companies based on the time period of start of production.
It is to be noted that as per the latest OECD data, many countries in the world
have a corporate tax rate of 15 per cent, such as Canada, Lithuania, Maldives,
Mauritius, Oman and Serbia. Countries like Ireland, Andorra, Bulgaria, Paraguay
and Hungary follow an even lesser rate of corporate taxes.