Declaring that tax buoyancy and the taxation base have increased in India significantly in recent times, Finance Minister Arun Jaitley on Monday held out hope of further cuts in corporate and indirect taxes in future in line with the government's earlier promises.
At a post-budget interaction here organised by industry chamber FICCI, he said that the corporate tax rate can be brought down to the promised 25 per cent only after all the previous exemptions granted to industry had ended.
"When I had promised in 2015 to cut the corporate tax rate to 25 per cent from 30, in four years, I had also categorically mentioned it would go with phasing out exemptions," the Finance Minister said.
"However, exemptions have a 'sunset' date, and if you phase them out before the expiry of the sunset clause then one is open to charges of retrospective action," he said, citing the Vodafone tax controversy in this connection.
"So, we will wait for the sunset clause to die out. It would not be proper to end exemptions midway as some industries may have been set up based on them. The opportunity to reduce the corporate tax rate will arise when all the exemptions end," he added.
Presenting Budget 2018-19 on Thursday, Jaitley announced that corporate tax would be reduced to 25 per cent from the coming fiscal for companies which had a turnover up to Rs 250 crore during 2016-17. In his budget last year he had announced a similar reduction for companies with annual turnover of less than Rs 50 crore in fiscal 2015-16, which "benefited 96 per cent of the total companies filing tax returns".
Raising the ceiling next fiscal in line with the new definition for SMEs "will benefit the entire class of micro, small and medium enterprises which accounts for almost 99 per cent of companies filing their tax returns," he said.
Jaitley told industry leaders here on Monday that the profitability of companies had increased with the rationalising of Goods and Services Tax (GST) rates which was an ongoing process.
The second half of last year saw a radical reworking of the items within the four-slab GST structure by the supremely federal institution of the GST Council, whereby all but 50 of over 1,200 items remained in the highest 28 per cent bracket. Those retained included luxury and sin items, the cess on which goes to fund the compensation to states for the loss of revenue arising from implementing GST.
"The GST Council is trying to further reduce the number of items in the 28 per cent slab. Going ahead, I see a further rationalising of rates within the structure and of the structure itseld," Jaitley said.
"In my view, finally it will only be luxury items and demerit goods left in the highest slab," he added.
The new indirect tax regime unifying the Indian market has four tax slabs of 5, 12, 18 and 28 per cent.