FICCI President Mr Pankaj R. Patel said at the pre-budget meeting with the industry, convened by the finance ministry, this move will help in retaining India's overall competitive environment globally.
FICCI stressed that many key global economies were opting for significant rate cuts -- for instance, the US is on the verge of historic tax reform that proposes to cut the corporate tax rate from a top rate of 35% to 20% as well as provide relief to individuals - and this approach should also be followed by India.
Although a roadmap for bringing down corporate tax rates to 25% was laid out in earlier budget, this is not yet implemented across the board. FICCI president also stressed on the need to consider the impact of the Dividend Distribution Tax and the Buyback Tax.
"Together with the basic corporate income tax, this pushes India's overall tax rate for companies well beyond 40%, which is quite high," he said.
Other measures suggested by FICCI at the meeting, also attended by senior finance ministry officials, includes convergence of the Goods and Services Tax (GST) rates to 3 - 4 and inclusion of all excluded items till date, along with simplification of the compliance mechanism and removal of the applicability of GST on Intra-entity transfer of services within the same legal entity.
FICCI also pointed out that there is a need for clarity on Anti-profiteering provisions under GST, specifically related to its applicability at product or entity level, examination at State or Central level, applicability on products/ stocks prior to GST, etc.
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Such clarity is important as there can be penal consequences if the taxpayer is found not complying with these obligations. Furthermore, the taxpayer should not be made liable to follow such guidelines retrospectively.
While welcoming the enactment of Insolvency and Bankruptcy Code, 2016 (IBC), FICCI also feels that tax considerations are important for successful implementation of insolvency schemes and tax provisions should not be a deterrent in achieving the policy objectives of IBC. In this regard, there is a need to exempt levy of Minimum Alternate Tax (MAT) on write back of notional income pursuant to approved plan of IBC.
Urging the government to continue its focus on productive expenditure (infrastructure capex), FICCI said if this requires relaxation of fiscal deficit target, it should be considered. (If required, Fiscal Deficit up to 3.5% of GDP can be considered).
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