New Delhi: The Government should reduce the corporate tax rate across the board to 25 per cent to spur economic growth and increase overall tax...
New Delhi: The Government should reduce the corporate tax rate across the board to 25 per cent to spur economic growth and increase overall tax collections, the FICCI has suggested. The Chamber has also suggested revision in the tax slabs for the individual taxpayers with the top 30 per cent rate to be applied beyond Rs 20 lakh annual income. The FICCI said this in its pre-Budget recommendations for 2019-20. On corporate tax, the Chamber said businesses nowadays are faced with high tax cost leading to increased cost of production and resultant lower surplus for reinvestment and expansion. The basic corporate tax rate of 30 per cent coupled with dividend distribution tax rate of 20 per cent makes the effective tax cost for an Indian company too high. The Government has phased out the tax incentives, the reduction in corporate tax rate has been limited only to companies with certain turnover. With many key global economies going for significant rate cuts, there is a need for India to consider across the board rate cuts for businesses.
On Minimum Alternate Tax (MAT), the Chamber said the purpose behind introduction of MAT was to bring all zero tax companies and to neutralise the impact of certain benefits/incentives. With phasing out of exemptions and incentives under the Act, the current rate of MAT of 18.5 per cent is quite high and has impacted significantly cash flow of companies who otherwise have low taxable income or have incurred tax losses. With the phasing out of exemptions and deductions available under the Act, the burden of MAT should also be gradually reduced from the current levels of 18.5 per cent to a rate which will be commensurate with the phasing out of tax exemptions and incentives.
The FICCI said it was well recognised that scientific research is the lifeline of business in all countries of the world. Indian residents are paying huge sums by way of technical services, fees to foreign technicians to upgrade their products and give the customers what latest technology gives globally. If in-house research is continuously encouraged, outgo on account of fees for technical services will reduce and this will help indigenous businesses to grow. Withdrawal of weighted deduction in respect of scientific research expenditure will put a dent in the 'Make in India' initiative. It is recommended that weighted deductions allowed under the Income Tax Act, 1961 to various modes of scientific research expenditure be continued. The Government can also consider introducing benefits in the form of research tax credits which can be used to offset future tax liability (like those given in developed economies).