Government sources suggest there are ongoing discussions to extend the cut in corporate tax rate for larger companies in the upcoming Budget, reports CNBC-TV18's Shereen Bhan.
For a large universe of companies the tax rate was brought down to 25 percent. At the start of this government’s tenure they had announced the glide path and so we could see some forward movement on that front but there is no final decision yet.
As part of pre-Budget consultation process, there is a meeting today of industry with the government and as part of the recommendations big demand has come from the industry for a significant reduction in the corporate tax rate. How much of that is possible will depend on government’s revenue constraints as well.
Given the US senate has approved a tax overhaul on Saturday, Singapore has tax rate of 17 percent, UK has it 20 percent, CII has recommended that India should reduce Corporate Tax to 18 percent all inclusive at the earliest with the withdrawal of tax incentives, and exemptions, withdrawal of surcharges and Cess.
The Arvind Modi Panel was set up a short while ago and one will have to see if the government will move ahead of that because the recommendations from the panel will come only in six-month’s time.
Other recommendations made by CII are they are voting for a three rate GST structure.
There are also recommendations from the industry for the government to intervene on power sector because it is one of the worry area and they believe government must create a national power distribution company and also address the stressed assets in the power sector.
On bank recapitalization, there are three suggestions that the CII is likely to make to the government. First is banks may be permitted to reissue the recapitalisation bonds, which can be purchased by institutional investors, even general public, which might help raise another Rs 1.35 lakh crore. Second, to drive efficiency in banking system – to lower government’s stake in banks, first to 52 percent and then progressively to 33 percent and if required preference shares be issued. Third, is that banks may also be permitted to securitise good loans and sell them.
Reacting to the above developments, Ashok Wadhwa, Group CEO, Ambit said this government and the finance minister has stayed on the track of whatever they have said.
On the expectation of corporate tax rate cut for large companies, he said given revenue constraints and government’s desire to maintain fiscal discipline, it is unlikely that the tax rates would go down to 18 percent, certainly not in a hurry. However, it is quite possible that the finance minister may bring it down to 25 percent for larger companies but whether it will be done at one go or it will be a two-step approach, one does not know, said Wadhwa.
It looks difficult that Corporate Tax rate would be cut because the government has other priorities at present, said Wadhwa.
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