In what happens to be the for the first time, the government of India seeks suggestions from trade associations and industries on direct and indirect tax rates. This is a part of the government’s exercise in formulating the next budget. The government is ensuring that no additional measures are needed once the Union Budget 2020-21 is presented.
Nirmala Sitharaman, the Finance Minister of India, presented her first-ever budget on 5 July 2019. However, she had to come up with additional measures in two stages to boost the ailing economy. If everything goes by the tradition, Nirmala Sitharaman will present Union Budget 2020-21 on 1 February 2020.
Generally, the Ministry of Finance consults experts and stakeholder from various sectors. The latest development of seeking suggestions on direct and indirect taxes is perhaps the first of its kind from the Department of Revenue. It has issued circular asking suggestions on income tax, indirect tax, corporate tax and duties.
Nirmala Sitharaman, realising the reduced corporate earnings, decided to slash the corporate tax on domestic companies from 30% to 22% on 20 September 2019. The effective corporate tax after adding all cess and surcharge is 25.2%. This move was welcomed and was reflected in the stock markets.
Manufacturing companies that are established after 1 October 2019 are levied with the corporate tax at the effective rate of 17%, which was previously 25%. The reduction in the corporate tax rate is expected to hamper the government’s earnings by R 1.45 trillion. However, this move was necessary to boost economic and corporate growth.
Prior to this, there were demands to slash the rates of income tax for individual taxpayers. This demand was made with the view of leaving more money in the hands of people to boost the consumption, which in turn revives the economy which has plummeted to record levels.
India’s economic growth had fallen to its five year low in the quarter ended in June 2019 at 5%. The revival might take some time despite the announcements of various boosters. Furthermore, the government has allocated Rs 25,000 crore for the completion of stalled infra projects.
The decision to seek suggestions from the experts is welcomed. This helps to bridge the gap between the companies, individuals and government. The latest move is expected to alleviate the need for the government to come up with additional measures such as last year.
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