FM defends corporate tax rate cut of 2019, says Rs 7.3 lakh crore collected so far in FY22

Finance Minister Nirmala Sitharaman

Finance Minister Nirmala Sitharaman on March 25 defended the government's September 2019 decision to cut the corporate tax rate, saying the benefits of the move were now becoming apparent and helping the economy, the government, and companies.

"In 2018-19, our corporate tax collections were only about Rs 6.6 lakh crore. Then COVID happened. In spite of that (tax) reduction and the COVID impact, we have already collected corporate tax of Rs 7.3 lakh crore till yesterday," Sitharaman said in the Lok Sabha on March 25.

The finance minister was replying in the discussion on the Finance Bill, 2022, which was passed by the Lower House on March 25.

In September 2019, the government had given companies the option to switch to a lower basic rate of 22 percent from 30 percent.

The corporate tax collected so far this financial year, as mentioned by Sitharaman, is 15 percent higher than the government's revised estimate of Rs 6.35 lakh crore for FY22. In fact, it is also higher than the target of Rs 7.2 lakh crore set for FY23.

The higher-than-estimated corporate tax collections is along expected lines, with the 2022 Budget's numbers widely seen as being extremely conservative.

Complete data on the government's finances for FY22 will not be released until the end of May.

Refuting criticism on rising tax burden on the common man, the finance minister said the government had taken a conscious decision not to fund the economy's post-pandemic recovery through additional taxes.

"I want to draw on the reports that have come out of the OECD (Organisation for Economic Co-operation and Development), which very clearly said that at least 32 countries increased various tax rates during the pandemic. India did not."

"Which are these countries which have had to depend on tax increases to meet the expenses of the pandemic? They are absolutely developed countries, large countries, like Germany, France, Canada, UK, and Russia, apart from many smaller economies. The clear instruction, the first guidance, I received while preparing the 2021 and 2022 budgets was we shall not take the taxation route," Sitharaman said.

Defending the government's stand that discussions are needed prior to adopting a final position on crypto and the budget proposal to impose a tax deducted at source (TDS) of 1 percent on transactions involving these assets, the finance minister said TDS is "more for tracking".

"It is not additional tax. It is not a new tax. It is a tax which is going to help people to track it. But at the same time, for the payer, he can always reconcile it with the total tax that he has to pay to the government."

"There is no new taxation because of the TDS (on crypto). The TDS principle has always been the same. And that probably is also one of the reasons why the tax base has been widening in general. Where we had only about 5. something (crore) earlier in 2014, we are now touching 9.1 crore people," Sitharaman said.