Citing the constraint of Budget, Revenue Secretary Hasmukh Adhia said that a reduction in corporate tax is a challenge and cannot be done unless there is an increase in share of personal income tax. “We said we would love to do it for everyone. But we have the constraint of Budget,” he said, adding that the challenge is to get the resources.
“Unless we increase our spread of personal income tax, unless we have more people coming forward and filing the exact detail of income, it’s a challenge for us. That’s what we are trying to do,” Adhia said at a post-Budget interaction held by FICCI.
The biggest challenge is to increase the share of the personal income tax in the total kitty. “It is abysmally low. If you take the share of GDP, it is only coming to 2 per cent. This would probably be the lowest in the world. 2 per cent of GDP coming from PIT is very very surprising,” Adhia said.
A 1 per cent cut in corporate income tax rate from the current 30 per cent will cost Rs 18,000-19,000 crore in revenues, Adhia said.
Finance Minister Arun Jaitley, in his Budget speech in February 2015, had announced reduction of the corporate tax rate to 25 per cent from 30 per cent in a phased manner over the next four years starting 2015-16, accompanied by fewer exemptions. He further said that the profile of personal income tax payments does not match with the consumption profile.
“How is it possible that out of only 76 lakh people showing income of more than Rs 5 lakh in the country, 56 lakh are salaried people? We need to do something about it and it’s a big challenge for us,” he said.
To attract companies to set up new manufacturing units, last year’s Budget had reduced tax rate for such companies to 25 per cent.
Industry representatives raised concerns about the applicability of the Budget announcement of 5 percentage point cut in corporate tax to 25 per cent for businesses with a turnover of up to Rs 50 crore for new companies formed last year. Adhia said that the department may need to examine the wordings of the law, though new companies of last year are likely to be accorded the benefit.
On the other Budget proposal regarding levying of a penalty for delay in filing bill of entry by importers, Adhia said a relaxation could be given for a certain time frame after examining the suggestion.
The average time for filing a bill of entry is 2-3 days by an importer, as per government estimates, S. Ramesh, member, central excise and service tax, ministry of finance, said. He added that importers could file advance bill of entry for imports to avoid clogging at ports.
Ruling out rollback of the proposal to restrict tax incentive for second home to Rs 2 lakh per annum, Adhia said there is no point in subsidising purchase of second property by those who have surplus funds.
He said it is prudent to subsidise first-time buyer and not the second property owner who is not staying in that but earning income from the second unit.
The Finance Bill, 2017, proposes to restrict such set-off of house property loss to Rs 2,00,000 per annum only. Balance loss, if any, will be carried forward to be set off against house property income of subsequent 8 years.
Under the present dispensation, there is no such limit for set-off of loss from house property, which is mainly the difference between the rental income and interest on home loan.
“Government resources are very very limited. The question is should the government be subsidising first-time homeowners who are occupying own house or should the government be subsidising the second acquisition of the property by people who have got surplus money to invest in real estate,” Adhia said.