Tax rates more competitive and better aligned to global standards now: Gokul Chaudhri, Deloitte Touche Tohmatsu India LLP

Govt has delivered a rather bold set of measures which will incentivise corporate India to start investing.

In some ways, the government has delivered upon a rather bold set of measures which will incentivise corporate India to start investing, says Gokul Chaudhri, Partner, Deloitte Touche Tohmatsu India LLP. Excerpts from an interview with ETNOW.

The markets on a tearaway rally cheering the FM's tax cut announcements. What do you think are the implications of the measures?
There were quite a few bold announcements and in some ways they bring far more change than what the Union Budget did earlier this year. First and foremost, our tax rates becoming far more competitive and better aligned to the global standards. Mr Jaitley had promised to bring us to a 25% tax rate in India. Today, it was achieved. It has been a five-year journey but we have finally reached this milestone and it is a commendable milestone to have a 25% corporate tax rate inclusive of surcharge and cess.

We also have a big thrust for the Make in India initiative with 15% corporate tax rate and we would finally get away from the bugbear of minimum alternate tax (MAT) for a large part of corporate India. MAT not only added to the tax burden of companies, it added to the tax complexity of working in India. So, we are doing well with these announcements both on the complexity index as well as the competitive index. The government has also responded well to the various concerns on the buyback tax front, ruling out tax on buybacks announced before July 5. They have expanded the areas in which CSR funding can now be directed and have addressed the issue in relation to the surcharge for the FPIs. So in some ways, the government has delivered upon a rather bold set of measures which will incentivise corporate India to start investing.


Do you think the series of relief measures for FPIs, corporate India will lead to widening the tax net by pure simplification?
Firstly, it is simplification and secondly, the government does believe that they can invest for the future, because once investment rises, it leads us back to profitability and a higher collection of taxes. India did benefit in the past by adopting a policy of lowering its tax rates and increasing its overall tax collection through a corresponding increase in investment, growth and profitability.

What is the sense that you get when we just look at our rates versus some of the other Asian countries, what are some of the European countries more investments can be attracted to going ahead?
The tax rate has to be read alongside what the country has got to offer and therefore in absolute terms, India will probably be in the median of the corporate tax rates globally. Both the UK and US have brought down their tax rates to low 20s and some of the ASEAN countries are lower than that, but India has demonstrated a very bold move of moving away from 30 plus to come down to 25, in a period of time where there is going to be pressure on the exchequer. So the commitment to carry on these reforms is very strong. Given the nature of what India has got to offer from its market and the wide spaces that it offers for growth, the tax rates are competitive for us.
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