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Budget 2017: India Inc. expects cut in corporate tax

Finance Minister Arun Jaitley may address the transient pain of demonetisation by cutting corporate tax rates in the forthcoming Budget for 2017-18.

Mail Today Bureau   New Delhi     Last Updated: January 20, 2017  | 19:54 IST
Budget 2017: India Inc. expects cut in corporate tax

Finance Minister Arun Jaitley may address the transient pain of demonetisation by cutting corporate tax rates in the forthcoming Budget for 2017-18.

Jaitley in his Budget speech in February 2015 had announced phasing out of tax incentives with effect from April 1, 2017 and reducing the corporate tax rate accordingly from 30 per cent to 25 per cent going ahead.

A survey by financial advisory firm Deloitte Touche Tohmatsu India LLP, on budget expectations of India Inc, shows that 53 per cent of the respondents expect the corporate tax rate to be reduced this time. Given the strict measures taken by the government in curbing black money, it may be the appropriate time to reduce the tax rate, Deloitte noted.

Corporate tax accounted for a little less than a fifth (19 per cent) of the government's receipts during 2015-16 whereas income tax receipts accounted for just 14 per cent of total receipts.

Since the demonetisation announcement, one of the major concerns has been around the deceleration of the growth momentum in the economy emanating from a decline in demand. This concern is reflected in the survey as well because 80 per cent of respondents think the government would unveil measures to counteract the negative impact on demand, it states.

Deloitte further said, 40 per cent of the respondents agree that complete phase-out of tax incentives is a good measure and will reduce litigation. However, an equal number of participants believe profit-linked tax incentives should continue for growth sectors like infrastructure.


Interestingly, 15 per cent of the respondents agree that instead of phasing out incentives for infrastructure sector, it should continue in the form of investmentlinked tax incentive. A majority of respondents (66 per cent) think that the gains from demonetisation are likely to be focused on development expenditure so as to boost investment demand in he economy.

As much as 26 per cent of them are of view that the gains will be spread evenly across major expenditure areas as the government possibly tries to limit the fallout on various sectors, Deloitte said. Around 6 per cent respondents think that the government can go in for increasing subsidy expenditure.

Therefore, the industry clearly continues to hope for policy measures that strengthen the pace of structural reforms, it said. On the impact of demonetisation on real estate industry, the survey said, there may be a phase of depressed demand, but the low-cost and affordable segment will be the driver of growth.

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