Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: VAT Audit :: empanelment :: ACCOUNTING STANDARD :: ARTICLES ON INPUT TAX CREDIT IN VAT :: due date for vat payment :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: cpt :: list of goods taxed at 4% :: TAX RATES - GOODS TAXABLE @ 4% :: Central Excise rule to resale the machines to a new company :: ACCOUNTING STANDARDS :: articles on VAT and GST in India :: form 3cd :: TDS :: VAT RATES
 
 
« Direct Tax »
 Can we measure demonetisation’s impact on income tax collections?
 CBDT signs 2 more advance pricing pacts
 Income tax returns: How to calculate income from house property
 CBDT proposes new accounting standards for real estate firms
 1 lakh entities face I-T action as ‘clean money’ drive gains pace
 Here are 4 things to know about how CBDT improves ease of doing business by issuing PAN and TAN within 1 day
 Online platforms make tax filing easy, help fill details automatically
 Delhi HC refuses to stay tax case against Young Indian
 CBDT issues draft ICDS on real estate
 CBDT chairman Sushil Chandra gets one-year extensiona
 Income-tax (9th Amendment) Rules, 2017? - Amendment of Income-tax Rules, 1962 - Prescribing form & manner of exercise of option by the domestic company for the purposes of section 115BA of the Income-tax Act, 1961-reg

New investment paradigm: Tax sops will no longer be the driving force for capex
November, 21st 2015

Finance minister Arun Jaitley has done well to put out his plan to phase out corporate exemptions and deductions well before the next budget since this will give investors, both in India and overseas, time to come to terms with the new reality

Finance minister Arun Jaitley has done well to put out his plan to phase out corporate exemptions and deductions well before the next budget since this will give investors, both in India and overseas, time to come to terms with the new reality – in his budget, Jaitley had announced that the reduction in the corporate tax rate from 30% to 25% over the next four years would be done in tandem with corresponding phasing out of exemptions and deductions. While this will remove uncertainty and confusion over the government plan, prior consultations with the industry is a good idea as good tax law is about certainty and not taking taxpayers by surprise. Under the plan, all profit- and investment-linked or area-based deductions will be phased out for both corporate and non-corporate tax payers.

The Central Board of Direct Taxes (CBDT) has also clarified correctly that the provisions having a sunset date will not be touched and there will be no alteration to either advance or postpone the sunset date. The weighted deductions on capital expenditure – available to the businesses like laying and operating petroleum product pipelines, constructing hotels, warehousing facilities and even affordable housing – will also end from April 1, 2017; deductions for even areas like scientific research will be curtailed.

In other words, all fresh investment that will be made in India will now have to be made on the basis of the inherent strength of the project – the size of the domestic market or advantages of manufacturing here and exporting – and could, perhaps, be boosted by some sops offered by state governments. This is a bold gamble since removing the exemptions – as high as Rs 62,400 crore in FY15 – could make many capital-intensive projects look unviable. Indeed, many of the big-ticket investments planned by governments in the past, such as special economic zones (SEZs) and national investment manufacturing zones (NIMZs) which are even bigger, or low-cost housing have been predicated on large tax concessions.

The gamble, however, may turn out to be a winning one since, in the past, surveys have shown that several firms that have come into the country came in because of India’s inherent advantages, and were happy to get the tax advantages, but these were not the deal-clinchers. Indeed, not having investment sops will also make negotiating the tax regime a lot simpler, and long-term investors should look upon that as a positive. Indeed, removing the tax sops is also recognition of the fact that India has a lot more advantages that it did not have before. In the past, even if tax sops were given, few firms would want to, for instance, manufacture mobile phones in India – but now that there is a market of nearly a billion phones already, the lure of the replacement market is huge; and skilled and low-cost labour makes exports an option. In the case of the automobile sector, similarly, as Suzuki first showed, there were important cost savings to be made by manufacturing here and exporting. In the defence industry, similarly, it is the allure of the huge domestic market that will drive investment, not the tax sops. While many corporates will argue that the moves could result in a loss of investment, the finance minister will do well to stay the course.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - About Us

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions