Taking one more step towards its July 2014 Budget promise of bringing down the corporate tax rate at 25 per cent for all corporates in a phased manner, Finance Minister Nirmala Sitharaman on Friday announced to extend the benefit of lower corporate tax of 25 per cent to companies with annual turnover of up to Rs 400 crore.
“So far as corporate tax is concerned, we continue with phased reduction in rates. Currently, the lower rate of 25 per cent is only applicable to companies having annual turnover up to Rs 250 crore. I propose to widen this to include all companies having annual turnover up to Rs 400 crore,” said the Finance Minister, adding that this will cover 99.3 per cent of the companies.
In his Budget announcement last year, the then Finance Minister Arun Jaitley had announced reduction in corporate tax rate from existing 30 per cent to 25 per cent, for all firms with turnover of up to Rs 250 crore, adding that by doing so almost 99 per cent of companies would receive the benefit. By extending the benefit to companies with turnover of up to Rs 400 crore, Sitharaman on Friday said that the government has covered additional 0.3 per cent of the India Inc into the lower corporate tax slab. While CII welcomed the move and its director general Chandrajit Banerjee called it an important policy signal towards government’s commitment to reduce corporate taxes, there are some who felt a little let down.
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Vivek jalan, co-founder, Tax Connect Advisory Services, said that while the move will give a boost to industry, “it was expected that such relief would be spread across all corporates which is a small dampener.”
While Jaitley had last year said that extension of benefit to firms with turnover of up to Rs 250 crore would lead to an estimated revenue loss of Rs 7,000 crore, this year the government did not provide a break-up as to how much revenue loss it would suffer on account of extension of lower tax benefit to companies with turnover between Rs 250 crore and Rs 400 crore. While addressing a press conference later in the day with the Finance Minister, the Revenue Secretary said that the net of surcharge on high networth individuals and cut in corporate tax rates for companies of turnover up to Rs 400 crore will lead to net increase in revenue of Rs 6,000-7,000 crore. This means that the government is expecting a significant rise in revenue on account of additional surcharge on income tax for individuals with taxable income of over Rs 2 crore.