Need Simple Income Tax Act and Comprehensive GST
“CII has suggested to the Government that eventually a model should be evolved, where the corporate tax rate comes close to 20 percent as exemptions are proposed to be done away with” said Mr Chandrajit Banerjee, Director General, CII, commenting on the meeting with the Revenue Department that happened on 29 September 2015.
CII has noted that the current corporate tax rate is around 34% (including surcharge and education cess). The proposed corporate tax rate as stated by the Finance Minister is 25% which will effectively mean around 29% (inclusive of surcharge and education cess). The intent of the Finance Minister in the Budget Speech clearly highlighted (a) to bring down the corporate tax rate to a level which is not more than the current effective tax burden (b) which promotes manufacturing, investments and growth. Given that for most sectors the effective rate is around 22% if the effective tax rate after withdrawal of exemptions lands up being in the range of 29%, it will negatively impact industry.
“In this connection, CII has suggested that the Revenue Department does detailed consultation before finalising the reduction road map” Mr Banerjee said.
“With exemptions being proposed to be done away with, this would also obviate the need of MAT, eventually, there should be a very simple Income Tax Act, which would be the biggest reform that can be brought about by the Government,” the CII Director General, said.
CII has also recommended that the government move swiftly on the implementation of TARC (Tax Administration Reforms Commission) recommendations. CII has suggested that the government appoints an implementation group consisting of professionals to oversee and monitor implementation in a time bound manner. Whatever is recommended need not be implemented in entirety if the Ministry feels otherwise. However, a clear indication of what all are being accepted would help with the process, CII has said.
On the subject of black money, CII has suggested promotion of banking channels including use of credit and debit cards, since they leave adequate audit trails and hence dis-incentivise black money generation. CII has said that the government should also consider providing tax incentives for use of credit/debit cards.
On the subject of GST, CII has pointed out that there are some aspects that need attention.
Clause 18 in the Constitutional Amendment Bill, imposing an additional 1% origin based tax, should be removed. If at all additional 1% has to be levied, its application should be limited to inter-state sale of goods only for a period of 2 years; Every effort should be made to include petroleum products, alcohol, tobacco, real property in GST to have a comprehensive base of all goods and services; Electricity duty levied by states and Entertainment tax levied by local bodies should be subsumed under GST and same applies for Octroi that is still levied in cities like Mumbai.
According to CII, if constructed appropriately, GST makes the tax administration transparent and is revenue productive. Presuming that GST will occur sometime in 2016, industry feels that there are lack of clarity regarding the intricacies in its proposed structure, transitional arrangements, administration and procedures, and framework to contain inflationary ramifications. In other countries, consultation on the actual proposals would have taken place in an open manner during this phase and there is no reason why this cannot be done in India, according to CII.
On improving the Dispute Resolution mechanisms, CII was of the opinion that though much has been done in the area of Dispute Resolution during the last few years, the Government should further expedite the approvals by introducing timelines for conclusion of the proceedings and suitable expanding the APA team. Likewise, there should be a mandatory time limit for passing the Authority for Advance Rulings (AAR) order, which could be 180 days from the end of the month in which the application is filed. The number of benches of the Settlement Commission should be increased to allow the Commission to do justice with the enhanced scope to cover reopened assessments.
CII further stressed that in many instances, there is an unintended mismatch between the intent of the Government and the verbal interpretation of the law. There should be efforts to fill such gaps by bringing out suitable clarifications/amendments.
CII has advocated the philosophy of formulating laws and procedures based on mutual faith and reasonable compliances by a vast majority of taxpayers; and that focus of the law should not be on a small minority of habitual defaulters.
New Delhi
30th September 2015