New Delhi: Ahead of the Budget in February, Finance Minister Arun Jaitley on Monday strongly pitched for lower tax rates in country in a bid to stimulate the $2 trillion economy.
“Taxes have to be globally competitive. There is a need to lower the level of taxation as we broaden the base of economy," Jaitley said at the inaugural session of professional training for new batches of Indian Revenue Service officers in Faridabad.
As economies develop, payment of taxes becomes a part of citizens' duty, he said.
He said tax authorities to reciprocate tax payers who pay their dues on time voluntarily with a tax friendly administration.
The statement assumes importance as the economy is projected to slow in the second half of FY17 after the demonetisation drive crimped consumption and hit economic activity.
India Inc has demanded cut in tax rates and bolstering government spending on infrastructure and rural areas to pump prime the economy.
The Confederation of Indian Industry (CII), Ficci and Assocham have presented their Budget wish-list to Jaitley seeking changes in personal tax rates, exemption limits, corporate taxes and goods and services tax (GST).
CII said that corporate tax rates should be aligned to those prevailing in other Asian countries. "In the other Asian countries, the prevailing maximum tax rate in case of companies ranges from 16-25 percent. Also, average effective corporate tax rate across industry sectors in India is about 22-23 percent. It is suggested that the corporate tax rate should be brought down to 18 percent (all inclusive),"
As for income tax for individuals, the CII wants the exemption limit to be raised from the current Rs 2.50 lakh per annum annual income to Rs 3 lakh. The subsequent slabs of 10 percent, 20 percent and 30 percent should be applicable to annual income range of above Rs 3 lakh and up to Rs 10 lakh, above Rs 10 lakh and up to Rs 20 lakh and above Rs 20 lakh, respectively, according to the daily.
Recently, Assocham president Sunil Kanoria told BTVi that the demonetisation has crimped economic activity by 40 per cent and the economic growth may be impacted by 1-2 percentage points in FY17. The economy grew 7.6 per cent in FY16, up from 7.2 per cent in FY15.
“If we have to come out of this challenging situation and start to grow again, I think there has to be a follow up reforms post this demonetisation,” said Kanoria, who is also the vice chairman of SREI Infrastructure Finance.
“What the budget should look like is to reduce the tax rates substantially. The GST rates ideally should not be more than 15 per cent. We should not be looking at the 18 per cent now given the higher revenues that will now come in,” he said highlighting India Inc’s wish-list for the Budget.
“We believe that on individual tax structure, the minimum slab should go up from Rs 2.5 lakh to at least Rs 5 lakh. We believe, for individuals with income up to Rs 25 lakh the tax rate should be 10 per cent and above that it can be 20 and 25 per cent. The maximum tax rates should be brought down to 25 per cent.”
For corporates, Kanoria said the tax rate should be 25 per cent and all the surcharges should be removed.
In his Budget announcement for FY16, Finance Minister Arun Jaitley had announced lowering corporate tax rates to 25 per cent in four years. The government lowered the tax rates for small firms but continue to tax heavily big companies.