Budget 2018: Finance Minister Arun Jaitley is gearing up to present the Modi government’s fifth Union Budget on February 1. Budget 2018 will be the most crucial one as this will be the last full budget before the 2019 Lok Sabha elections. As the budget 2018 date is nearing, the common man, investors, industrialists are expecting that in his budget 2018 speech, FM Jaitley will address their issues. Some of the most talked about issues are agriculture, income tax exemption, job creation in India etc. Generating jobs is a complex issue and depends upon a host of things. Of those, corporate tax is one of the pivotal factors, say TV Mohandas Pai and S Krishnan. Notably, FM Jaitley has touched upon the issue in Budget 2017.
“With the statutory CT rate at 34.61%, India is among the high tax countries in the world. India’s CT rate is higher by 10%-plus compared to the worldwide average statutory CT rate,” noted IT veteran and Krishnan said. “FM Jaitley in his 2015 Budget, promised to reduce CT rate from 30% to 25%, with the corresponding withdrawal of exemptions over the next four years. He then withdrew many exemptions. In his 2017 Budget proposal, he only announced a reduction in CT rate to 25% for smaller companies with annual turnover up to Rs 50 crore, effectively reducing the high rates,” tech investor Pai and Krishnan said in a column in Financial Express.
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Ahead of Budget 2018, Pai and Krishnan said, “This high rate in the country is negatively impacting the competitiveness of Indian multinational companies and that of India as a destination for investment. Our tax laws incentivise automation, capital-intensive and big industry at the cost of labour-intensive and small-scale industries which create more jobs.” “The manufacturing industry’s increased use of capital and automation along with huge tax incentives is leading to reduced employment growth in a labour-surplus country. For too long, India has incentivised big industry and more automation, discriminating against labour and jobs. While automation increases productivity, jobless growth will destroy our society, and creating jobs remains the foremost priority,” they said.
Both of them have prescribed that the situation can changed. “Budget 2018 needs to reduce the CT rate to 25% and keep the promise. Also, accelerated depreciation accounts for the largest tax incentive. The projected revenue impact in FY17 due to accelerated depreciation is Rs 54,345 crore. It accounts for about 43% of gross revenue foregone of Rs 1,25,119 crore. Accelerated depreciation is provided as an incentive for capital investment, incentivising capital-intensive firms and adversely affecting labour-intensive firms,” Pai and Krishnan said.