DELHI: Revenue Secretary, Shaktikanta Das, told in his interview that India proposed lowering of corporate tax to 25% from 30% in four years starting in FY17 will urge investment.
The reduction has to move in tandem with the elimination of exemptions. It will also depend on the quantum. How much revenue are we losing by cutting the tax rate and how much are we gaining by eliminating exemptions. Yes, it should be on a largely equal (basis)—four years, it works out to 1.25% each year.
It could be 1% first year, 1.5% year after that. That will also depend on what kind of buoyancy we get from GST (goods and services tax). Each percentage (point) cut means a loss of Rs 18,000-20,000 crore. This is not taking into account the exemptions because some of the exemptions will have to be grandfathered. When we make a beginning it will be a reasonably decent beginning. It will not be that we will start with just some 0.5%. Our tax rates are highest among neighbouring countries.
Today, a domestic investor or a foreign investor has the choice of investing in India, China, Indonesia, and Malaysia. Our tax rates are 30% while in these countries they are 25% or less.
