Phasing out exemption on the anvil for years

NEW DELHI: The idea of cutting corporate tax rates while simultaneously phasing out exemptions has been in the air for several years but successive governments have shied away from biting the bullet. Indeed, this was one of the recommendations of a panel set up by UPA under Parthasarathi Shome.
While India Inc has consistently clamoured for lower taxes, many among them would hem and haw when asked if they’d be okay with a simpler system with lower taxes but no set-offs.
In his 2015-16 Budget speech, Arun Jaitley had proposed to reduce the rate of corporate tax from 30% to 25% over the next 4 years. He had said that would lead to higher level of investment, higher growth and more jobs.
Jaitley had also said that this process of reduction needed to be accompanied by rationalisation and removal of various kinds of tax exemptions and incentives to corporate taxpayers, which incidentally account for a large number of tax disputes. But revenue consideration had forced him to scale back implementation of his original plan.
In the 2015-16, Jaitley had announced the reduction of corporate tax rate to 25% for companies whose turnover was less than Rs 50 crore, which he said would benefit 96% of companies filing tax returns. He followed that up in the 2016-17 Budget by announcing, “Towards fulfilment of my promise to reduce corporate tax rate in a phased manner, I now propose to extend the benefit of this reduced rate of 25% also to companies who have reported turnover up to Rs 250 crore in the financial year 2016-17.”
He had vowed to fully implement the roadmap for extending the benefits of lower corporate tax rates for all companies when revenues improve due to GST. Now, finance minister Nirmala Sitharaman has completed the unfinished agenda backed by Prime Minister Narendra Modi who has taken the bold political call to go ahead with the sharp cut, foregoing Rs 1.45 lakh crore in revenues.