Corpr tax rate reduction will make India more competitive

Dismissing criticism that proposals in the Budget for 2015-16 are pro-corporate, Revenue Secretary Shaktikanta Das on Tuesday said reduction in corporate tax rate will make India more competitive, and enable companies to invest more and create more jobs.

"It is not that this decision (of reduction of corporate tax from 30 percent to 25 percent in the next 4 years) is going to benefit only a particular class of people. "...My sincere reply to such critics is that when you reduce the corporate tax rates, the promoter does not take away all money, the money remain with the company.

The company is a legal person.If money remains with the company then it enables the company to invest more and create more jobs," Das said at an event organised by industry body CII.

The Revenue Secretary said "our present corporate tax rate is not competitive" and corporates have choice to go to countries like Thailand Indonesia. Das said that even if a company does not invest and its money remain with the bank, then also it will improve liquidity of banks.

"The other criticism could be that what if promoter announces higher dividend, higher remuneration for them? Then also they will have to pay more tax," he said. Former Finance Minister and senior Congress leader P Chidambaram had said that the budget proposal to reduce corporate tax from 30 percent to 25 percent would benefit the corporate to the tune of crores of rupees by saving taxes every year for the next four years.

On the proposal of raising service tax from 12.36 percent to 14 percent, Das said,"It was an necessary measure in our movement towards Goods and Services Tax (GST)." Once Goods and service tax GST) will be implemented, the states will also get power to collect taxes then obviously rates will be more than current rate of 12 per cent.

"Are you going to increase rate of service tax overnight say from 12 percent to 22 percent when GST will be implemented? Obviously economy cannot absorb it. "So if minor doses of tax rate increases are brought out then it will be easier to absorb increase in tax rate," Das noted.

On retrospective amendment, the Finance Secretary said,"If we look at General Anti Avoidance Rules (GAAR) also there was an element of retrospectivity in GAAR, it was supposed to be applicable on all transactions after 2010, now the Finance Minister has announced it will be applicable on transactions on or after April 1, 2017.

"So therefore retrospectivity is not a issue at all, its a dead issue".