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Budget 2018: Corporate tax reduced to 25% for firms upto Rs 250 crore turnover

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Arun Jaitley
Image: PTI

New Delhi, Feb 1: Finance Minister Arun Jaitley on Thursday proposed to reduce the corporate income tax rate to 25 percent for companies with a turnover of upto Rs 250 crore.

Unveiling Budget 2018-19 in the Lok Sabha, Finance Minister Arun Jaitley recalled that 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 percent of the total companies filing tax returns.”

“I now propose to extend the benefit of this reduced rate of 25 percent also to companies who have reported turnover up to Rs 250 crore in the financial year 2016-17,” he asserted.

“This will benefit the entire class of micro, small and medium enterprises which accounts for almost 99 percent of companies filing their tax returns,” he further added.

Jaitley stated the revenue the exchequer will forgo during the coming financial year on account of this relaxation has been estimated at Rs 7,000 crore.

The Finance Minister also noted that following the latest Budget proposal, of about 7 lakh companies currently filing returns, only around 7,000 companies with turnover of more than Rs 250 crore will remain in the 30 per cent slab.

“The lower corporate income tax rate for 99 per cent of the companies will leave them with higher investible surplus which in turn will create more jobs,” Jaitley said.

Earlier during his presentation, he made a significant announcement of fiscal slippage with implications for pushing inflation, revising upwards the government’s fiscal deficit target for 2017-18 to 3.5 per cent of the GDP, or the equivalent of Rs 5.95 lakh crore. The higher target came in place of the 3.2 per cent for the contemporary fiscal announced earlier.

On the other hand, the Finance Minster projected a fiscal deficit of 3.3 per cent of GDP for the year in the upcoming financial year.

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Fitch says India’s GDP to expand by 11% in FY22

It added that India’s medium-term growth to slow to around 6.5 per cent after the initial rebound.

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GDP means for you and me

Fitch Ratings says India’s GDP to expand by 11% in 2021-22 after falling by 9.4% in current FY21 fiscal.

It added that India’s medium-term growth to slow to around 6.5 per cent after the initial rebound.

India’s coronavirus-induced recession has been among the most severe in the world, amid a stringent lockdown and limited direct fiscal support. The economy is now in a recovery phase that will be further supported by the rollout of vaccines in the next months and we expect GDP to expand by 11.0% in FY22 after falling by 9.4% in FY21.

However, we expect the medium-term recovery to be slow. Supply-side potential growth will be reduced by a slowdown in the rate of capital accumulation – investment has recently fallen sharply and is likely to see only a subdued recovery. This will weigh on labour productivity and our projection of supply-side potential GDP growth for the six-year period FY21 to FY26 has been lowered to 5.1% p.a. compared to our pre-pandemic projection of 7% p.a.

Our historical analysis of India’s growth performance highlights the key role played by a high investment rate in driving growth in labour productivity and GDP per capita over the last fifteen years.

But investment has fallen sharply over the last year and the need to repair corporate balance sheets and firm closures will weigh on the pace of recovery.

Constrained credit supply amid a fragile financial system is another headwind for investment. The banking sector entered the crisis with generally weak asset quality and limited capital buffers. Appetite for lending will be subdued, particularly as credit-guarantee and forbearance measures rolled out in the crisis start to be unwound.

The economy should be able to grow somewhat faster than estimated supply-side potential over the medium term following the unprecedented downturn in FY21. But our projection for the medium-term recovery path – at around 6.5% p.a. over FY23 to FY26 – would leave GDP well below its pre-pandemic trend.

The research report, “India Set for Slow Medium-Term Recovery” is available at the above link and at www.fitchratings.com.

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Maharashtra stops automatic adoption of Centre’s GST circulars

What this means is that the state would have flexibility in devising regulations to suit its interest rather than blindly following the central circulars.

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Uddhav Thackeray

New Delhi, Jan 14: In a clear case of defiance of the Centre’s authority on GST matters, the Maharashtra government has decided that the state would have the last say in the applicability of circulars defining regulations on issues of the indirect tax.

A circular issued by the Maharashtra Goods and Service Tax Department (MGSTD) on January 12 says that the state would examine all circulars issued by the Central Board of Indirect Taxes and Customs (CBIC), and upon examination, issue a separate circular regarding its applicability for the implementation of the MGST Act.

With this, the state also withdrew an earlier circular no. 39 T of 2019 that provided for deemed adoption of all circulars issued by the CBIC by the MGSTD. The state, however, said that all central circulars issued till withdrawal of this circular would enjoy status quo and would be adopted for implementation of the MGST Act.

What this means is that the state would have flexibility in devising regulations to suit its interest rather than blindly following the central circulars.

In the fourth year since the GST’s implementation, this is second major resistance mounted by states over implementation of GST laws. The states already strongly resisted the Centre’s move on GST compensation and pushed it to frame regulations that protected their interest.

“Biggest fears of model code for a federal democratic country like India are coming true even before the completion of its 4th anniversary of GST. Fight between the Centre and states over compensation for loss has already reached judiciary, and now the state government of Maharashtra has also issued clear instructions that they will have parallel set clarifications on same matters which will supersede the clarifications issued by the Central government,” said Rajat Mohan, senior partner, AMRG and Associates.

Maharashtra has justified its move suggesting that it is to maintain the integrity of communication and avoid confusion caused as to which circular instructions are to be followed. Sources, however, said it has been done as on several matters, states had a divergent view on how things needed to be implemented. In additional, unique nature operational issues in the state, created difficulties in adoption of central regulations.

Sources said that the Maharashtra government’s decision would further weaken the process of decisions being taken unanimously by the GST Council.

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Modi Govt to sell up to 10% stake in SAIL via OFS

Shares of SAIL on the BSE closed at Rs 74.70 per share, lower by 1.58 per cent from its previous close on Wednesday.

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Steel Authority of India

New Delhi, Jan 14: The Centre will sell up to 10 per cent stake in Steel Authority of India Ltd (SAIL) through offer for sale (OFS).

The OFS will take place on Thursday and Friday.

“Offer for Sale (OFS) in SAIL opens on Thursday (14.1.2021) for non-retail investors. 15th January (Friday) is for retail investors. GoI would divest 5 per cent equity with a 5 per cent greenshoe option,” said Tuhin Kanta Pandey, Secretary, Department of Investment and Public Asset Management (DIPAM) on Twitter.

The floor price for the OFS has been set at Rs 64 per share.

Shares of SAIL on the BSE closed at Rs 74.70 per share, lower by 1.58 per cent from its previous close on Wednesday.

The government is likely to miss its disinvestment target by a wide margin and the fiscal deficit is not likely to be anywhere near the target of 3.5 per cent of the GDP in 2020-21 (April 2020 to March 2021). While privatisation of firms such as Bharat Petroleum Corporation Ltd (BPCL) and Air India has been pushed to the next fiscal due to COVID-19-related delays, tax collections have been hit hard as restrictions imposed to curb coronavirus dented incomes all around.

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