This suggestion was rejected by the government as a few panel members raised objections and Modi was replaced by Akhilesh Ranjan
A panel formed to review the government’s direct tax code had in September 2018 recommended the Finance Ministry to cut corporate tax from the current 25-30 percent to 15 percent, Business Standard reports.
Initially headed by Arbind Modi, the panel is expected to submit its report on July 31.
The panel had also recommended abolishment of the Securities Transaction Tax (STT) and Dividend Distribution Tax (DDT), restructuring of the long term capital gains (LTCG) tax and individual-level tax on income from dividend and LTCG, and changes to the personal income tax rates, the report stated.
This suggestion was rejected by the government as a few panel members raised objections and Modi was replaced by Akhilesh Ranjan. The rest of the panel remained unchanged. Both Modi and Ranjan are members of the Central Board of Direct Taxes (CBDT).
Moneycontrol could not independently verify the report.
The new report may retain some of the original’s proposals while adding new recommendations, which could reduce the cost of capital, enhance returns, remove debt capital bias and boost private investment. The report also presented dissenting views as alternatives.
The panel estimated that cut in corporate tax would increase tax collection, the report stated. This idea was also supported by the FinMin’s Economic Survey, which found that private investments provided significant economic stimulus.
Another notable feature of the panel report was the recommendation of shifting from ‘resident-based’ tax to ‘source-based’ taxation, which would allow for taxation of MNCs (at 15 percent on par with domestic companies) who may not have a base in India but had monetary gains and economic involvement, the article stated.
The taskforce was assigned to draft direct tax laws in line with the norms prevalent in other countries, incorporating international best practices and keeping in mind the economic needs of the country.
The panel was initially supposed to submit its report to the government, within six months, by May 22 last year. The Finance Ministry had on that date extended the term of the taskforce by another three months till August 22, 2018. However, the committee did not submit a report within that deadline as well.
It was then supposed to submit its report to the government before the Budget by February 28, 2019, the ministry had said in a statement.
Prime Minister Narendra Modi, during the annual conference of tax officers in September last year, had observed that the Income Tax Act, 1961 was drafted more than 50 years ago and it needs to be redrafted.
Other members of the task force include Girish Ahuja (chartered accountant), Rajiv Memani (Chairman and Regional Managing Partner of EY), Mukesh Patel (Practicing Tax Advocate), Mansi Kedia (Consultant, ICRIER) and GC Srivastava (retired IRS and Advocate).
