Existing Corporate Tax Structure Very Reasonable, Given The Size Of Indian Economy, Says Revenue Secretary

The official said that the concessional tax regime, which was effective for four years for new manufacturing units, wasn’t extended beyond the current fiscal year, keeping in mind the economy

The current taxation structure for corporates is very reasonable in light of the size of the Indian economy, Revenue Secretary, Sanjay Malhotra, said. The official said that seeing the economy size, the concessional tax regime, which was effective for four years for new manufacturing units, wasn’t extended beyond the current fiscal year. Notably, corporates are currently taxed at a rate of 22 per cent. 

Speaking about the tax structure in an interview with PTI, the Secretary said, “The Interim Budget 2024-25 provides for continuity in taxation regime and the benefits given to taxpayers in the last years are showing results in the form of huge buoyancy in personal income tax. Taxpayer services have been a major focus of the government and this will continue going forward. Taxpayer services includes rationalisation, simplification, and trust-based taxation with less scrutiny and more pinpointed assessments and use of technology. We are hopeful taxpayer services will continue to improve helping us in compliance and improving tax collection efficiency.”

Commenting further on the decision to not extend the concessional tax regime for corporates beyond March end, the official noted that the scheme was launched in 2019 and firms were provided a long time to establish new units and get the concessional 15 per cent tax rate. 

“A long period of four years was given. This is the time that a large company put on the ground right from conceptualisation, planning, raising of funds, sufficient time was given it was extended by another year till March 31, 2024, because of Covid. These investments have a long gestation period. The existing taxation of our country now for corporates at 22 per cent, when compared to the economy of our size, is very, very reasonable. In light of all these, it was felt that this was the date that it was to sunset and it should sunset,” Malhotra added. 

Earlier in 2019, the government notified that any new domestic firm incorporated on or after October 1, 2019, will have the choice to avail of the rate of 15 per cent for paying income tax if they are making any fresh investment in manufacturing, conditional to them starting their production on or before March 31, 2023. The deadline was further extended till March 31, 2024, in the Budget tabled in 2023. Malhotra clarified that firms that begin operations before the end of the current fiscal year will be eligible to continue receiving the benefit. 

In September 2019, the government also reduced the corporate tax slab for existing firms from 30 per cent to 22 per cent, and from 25 per cent to 15 per cent for new manufacturing firms, incorporated after October 1, 2019.