“The Union Budget could announce a roadmap for convergence of all corporate tax rates to 15 per cent, with no exemptions and incentives, by April 1, 2023. A signaling to this effect could help further boost investor sentiment and encourage investments,” CII president Vikram Kirloskar said.
According to the industry body, the desired impact of the reduction in corporate taxes on the ground is still far from satisfactory.
It said one of the reasons behind this has been the multitude of tax rates, which have created tax rate inequalities across manufacturing and service sectors.
The government last year reduced corporate tax rates to 22 per cent, plus surcharge and cess. However, companies will not be allowed to avail any tax exemptions or incentives.
Further, manufacturing facilities that start production before 31 March 2023 and are incorporated on or after 1st October 2019 would be taxed at only 15 per cent, plus surcharge and cess.
The new rates have catapulted India to a very competitive position against many of the OECD (Organisation for Economic Co-operation and Development) and BRICS countries, and others like Indonesia and Philippines.
Over time, the lower rates will reduce the cost of capital and catalyse investments.
The announcement of convergence of all these rates to a single rate of 15 per cent by 2023 will provide a line of sight to industry and investors to take decisions now, CII said.
The statutory corporate tax rate in India has been brought down in the last three decades from 45 per cent in 1991-92 to 22 per cent in 2019-20.