NEW DELHI: There have been differences within the finance ministry over the proposal of lowering tax rates and its timing. The Department of Revenue and the Department of Economic Affairs are not on the same page over when it should be implemented, said an official.
“There is agreement on the tax cut for individual taxpayers but there is disagreement over its timing. While the Department of Economic Affairs is of the view that relaxing tax immediately will boost the consumption and help the economy to recover given in retro effect like corporate tax, the Department of Revenue is of the opinion that the decision must be taken for the next fiscal after assessing the overall revenue for this fiscal,” a senior official from Finance Ministry told this publication.
The Direct Tax Code (DTC) has suggested the rationalisation of slabs with a rate of five per cent for incomes of Rs 2.5 lakh to Rs 5 lakh, 10 per cent for those earning Rs 5 lakh to Rs 10 lakh, 20 per cent for Rs 10 lakh to Rs 20 lakh, 30 per cent from Rs 20 lakh to Rs 2 crore and 35 per cent for those with incomes above Rs 2 crore.
The government has already announced slashing of corporate tax for corporate, which is in line with the recommendations of the much-awaited DTC. The government has also implemented the recommendation on faceless tax assessment system in form of E-assessment.
Meanwhile, the revenue collection is a matter of concern for the government. Official data suggested that the corporate tax cut will result in revenue loss for the government to the tune of Rs 1.45 lakh crore.
Further, the Goods and Services Tax collection is also on downward lane amid slow economic activity with the collection dropping sharply in September to Rs 91,916 crore from Rs 98,202 crore collected in August to hit a 19-month low.
Last week, Industrialist Adi Godrej had suggested that the government should introduce more stimulus package in the form of lowering income tax rates to boost consumption. He said the government should spend more to help economic growth, even if means breaching fiscal deficit target.
“The current growth rate of economy is slow and we need to stimulate it. We need to have the growth rate up and even if it means that the fiscal deficit goes up, I do not think, it matters. It must do,” Godrej said.
About the reduction in the corporate tax, he said it would help in revival of the industry.