After announcing corporate tax cuts in July this year, the Central government is now planning a second round of tax reforms for foreign investors planning to set up or expand businesses in India.
“Considering the slowdown, the government is planning to encourage businesses to invest and expand in India. The government is considering a tax package for them, especially those who are investing in the labour-intensive sectors,” said a senior finance ministry official.
The government had already slashed corporate tax, in line with recommendations of the report on the much-awaited Direct Tax Code. The Centre has also implemented the recommendations for a faceless tax assessment system in the form of e-assessment.
As per the finance ministry’s own estimate, the decrease in corporate tax will reduce the government’s revenue by around Rs 1.45 lakh crore in the current fiscal, but officials claim that even the stress on revenue will not deter them from taking strong decisions to revive investment.
“The government has taken many reforms including the corporate tax cut. However, many foreign companies were not entitled for these benefits. Now the idea is to include the companies that are creating jobs and are sourcing from local vendors. The ministry is working on the proposal and once approved, this will attract many businesses to invest in India, and in turn create employment,” the official added.
The move comes after the poor performance in the industrial production, which contracted by 1.1 per cent in August, recording the worst performance in last seven years. Even the output of eight core industries in September contracted by 5.2 per cent, mainly on account of decline in output of coal, crude oil, natural gas, cement and electricity, according to government data released on Thursday.
The slowdown has started weighing on the government’s tax collection. The net tax collection for the six months ending September 30 was at Rs 6.07 lakh crore,36 per cent of the full-year target of Rs 16.49 lakh crore. The collection was 39.4 per cent of the budget target in the same period last fiscal year. In absolute terms, revenue receipts stood at Rs 8,16,467 crore at the end of September. For the entire 2019-20, the revenue receipts have been pegged at Rs 19.62 lakh crore.
Determined to boost investments
As per the finance ministry’s own estimate, the decrease in corporate tax will reduce the government’s revenue by around I1.45 lakh crore in the current fiscal, but officials claim that even the stress on revenue will not deter them from taking strong decisions to revive investment.
PM beams about faceless tax assessment
India has rolled out “faceless tax assessment” to forestall any discretion or harassment in tax collection, Prime Minister Narendra Modi said on Sunday as he highlighted major reform initiatives launched by his government in the financial sectors in the last five years, while speaking at an event to mark the golden jubilee of the Aditya Birla Group’s operations in Thailand. He asserted that India now has one of the most people-friendly tax regimes globally, and that efforts are on to further improve taxation system. He detailed how rolling out GST has led to economic integration in the country.