Finance minister Arun Jaitley
“The reduction in the corporate tax rate will result in a higher level of investment and higher level of growth, he said, amid shouts of protest from the opposition benches”
Jaitley also promised a “comprehensive bankruptcy code of global standards” in the next fiscal year, a relief to creditors and an important step if India is to lower a cost of capital that is among the highest in Asia.
Dismissing criticism that the proposals in the Budget for 2015-16 are pro-corporate,”It is not that this decision (of reduction of corporate tax from 30 per cent to 25 per cent in the next 4 years) is going to benefit only a particular class of people
“Revenue Secretary said the reduction in corporate tax rate will make India more competitive, and enable companies to invest more and create more jobs”.critics is that when you reduce the corporate tax rates, the promoter does not take away all money, the money remains 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,”
Some executives said the budget lacked proposals to get Indian consumer spending, a lack of which has weighed on retailers and carmakers.
“We were expecting a strong impetus towards domestic demand creation that can lead to the growth of Indian manufacturing sector,” said Kishore Biyani, chairman of Future Group, one of India’s biggest retailers.
“Leaving the (individual) income tax slabs and rates unchanged are going to leave less money in the hands of the common man to spend on domestically produced goods and services.”
But businesses welcomed the expected introduction of GST by April 1, 2016. Indian companies have long argued for GST, saying it simplifies business planning and improves the collection of tax.
“GST… Will go a long way in streamlining tax administration and result in higher tax collection for the center and states,” said Sunil Duggal, chief executive officer of consumer goods maker Dabur India Ltd.
As per data from consultancy KPMG, there are many countries which have higher tax rates than India’s. The US has a rate of 40 percent, Japan has 35.64 percent, Argentina and Zambia have 35 percent and Venezuela and Brazil have 34 percent.
But many others, including our peers in the Brics grouping South Africa (28 percent) and China (25 percent), have lower rates. So the argument has been in favor of a lower rate, as this will drive investments in the country.
However, it is not clear whether there will be a reduction in the tax rate applicable for foreign companies which pay a 40 percent tax.
Apart from the 30 percent basic rate, domestic companies also pay a 10 percent education cases and also a 10 percent surcharge (on the tax). This renders the effective rate at 33.99 percent.
In the run up to the budget, there was an expectation that the FM may cut the cases, surcharge or the minimum alternate tax. The FM has refrained from doing anything to these elements.
Sources
Frist spot/ NDTV/INDIATIMES
AAShirgurkar&Associates 