NEW DELHI: The government will walk the talk on its 2016 promise of lowering the corporate tax rate in a major way in the full budget in July if it is voted back to power.
The government is looking at bringing down the corporate tax rate to 25 per cent, from the existing 30 per cent, for corporates having a turnover of between Rs 250 crore and Rs 500 crore.
This message is being spread among corporates ahead of the Lok Sabha polls to swing the upper middle level business voters.
In the budget for fiscal 2015-16, the government had announced a plan to reduce the corporate tax rate from 30 per cent to 25 per cent within four years to align it with global tax rates.
Sources here said the Finance Ministry will shortly start estimating the outgo on account corporate tax rate cuts and the possible ways to make up for the loss of revenue through higher compliance and widening of the tax base.
This will be followed by the finalisation of the tax rate cut proposal to be presented to the new government at the Centre.
Official sources said that tax reduction is the government’s call, especially with elections round the corner. Many people feel a revision is due, as corporate tax rates in India are quite high.
But the revision is contingent on the improvement in Goods and Services Tax (GST) collections and the changes would be limited to companies with a turnover of up to Rs 500 crore, and not for all the companies.
To reduce corporate tax in a phased manner, the Finance Ministry had in the last fiscal extended the benefits of the reduced corporate tax rate of 25 per cent to companies reporting turnover of up to Rs 250 crore in the fiscal 2016-17, raising the earlier turnover limit of Rs 50 crore.
Currently, corporates with turnover above Rs 250 crore pay 30 per cent corporate tax.
The phase-wise direct tax rate lowering is part of the government’s strategy to offer sops at regular intervals ahead of the elections to win the minds of the voters. The government had extended income tax rebates in the interim budget presented last month.
Source- Business Standard.