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Assocham asks Finmin to reduce corporate tax to 25%
December, 29th 2010

Industry chamber Assocham asked the Finance Ministry to reduce corporate tax to 25 per cent from the existing rate of 30 per cent so that India Inc is left with more money to make big-ticket investments.

"Assocham has recommended reduction in the corporate tax from 30 to 25 per cent. This will result in generating more surpluses in the hands of companies, with the consequential impact on investments and growth," the chamber said in a pre-Budget memorandum to Finance Minister Pranab Mukherjee.

The chamber said a liberalised taxation regime has been a long-pending demand of the corporate sector.

It said reduction of the corporate tax rate to 25 per cent would bring the tax regime in the country at par with that of developed Western nations and make the country's corporate sector more competitive globally.

"... To be a competitive and attractive investment destination, our tax rates must be in tune with others. The trend world over has thus been to gradually bring down corporate tax rates. Especially in the recent years, global average corporate tax rate has come to around 25 per cent," Assocham said.

It also termed Minimum Alternate Tax (MAT) "redundant" and called for its abolition.

In the same vein, the chamber also said that if MAT cannot be abolished, the rate should be reduced from close to 20 per cent at present to 15 per cent.

MAT is a tax levied on profit-making companies that do not fall under the tax net because of exemptions. With various exemptions phased out over the years, Assocham said MAT has become redundant.

"Assocham has suggested abolition of MAT, or alternatively, restricting it to a maximum 15 per cent as against 19.93 per cent, or be levied only on book profits," it said.

The chamber said that if at all MAT is to be levied, it should be imposed on book profits.

"The book profits can be reduced by the amount of profits redeployed for new investments/new business or transferred to specified reserves. If the same is redeployed for business expansion, this would help the industry redeploy the profits and contribute to the growth of the economy," it said.

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