New Delhi: India has become a highly competitive investment destination post-corporate tax reduction as the rates are now lower than that in China and most Southeast Asian countries, Finance Minister Nirmala Sitharaman said on Sunday.
India was earlier at disadvantage because of a couple of factors and on top of it was the high corporate tax rate, she said, adding that the reduction has made it attractive for foreign investors, including iPhone maker Apple, to set up units in the country.
"The top consideration on which India was rejected as investment destination is now better than everybody else... For someone who is coming up with new investment, no country is offering 15 percent (tax rate). We are giving 15 percent with no MAT (minimum alternate tax) and simpler taxation structure," she said.
Quoting experts, she said India is now much better than China in terms of rate, transparency, and tax administration so companies can now look at India for setting up new units.
"Apple and its entire ecosystem's moving will have a greater impact. Everyone who comes now will straightaway get 15 percent tax benefit. Component manufacturers of Apple in China will find India more attractive to have units at 15 percent in India than 25 percent there," she said.
Apple or any foreign company can come and set up business and enjoy the competitive rate of 15 percent, she said, adding that the stipulated timeline for the product roll-out from the new unit is on or before 31 March 2023.
In the biggest reduction in 28 years, the government on Friday slashed corporate tax by almost 10 percentage points as it looked to pull the economy out of a six-year low growth and a 45-year high unemployment rate by reviving private investments with a Rs 1.45-lakh crore tax break.
Base corporate tax for existing companies has been reduced to 22 percent from the current 30 percent; and for new manufacturing firms, incorporated after 1 October 2019 and starting operations before 31 March 2023, to 15 percent from the current 25 percent.
India had the highest effective corporate tax rate of 38.05 percent in 1997.
Companies in China, South Korean and Indonesia pay 25 percent tax, while those in Malaysia pay 24 percent. Only Japan has a higher tax than India at 30.6 percent. Hong Kong has the lowest corporate tax rate of 16.5 percent, while Singapore has 17 percent rate and Thailand and Vietnam levy 20 percent tax on companies.
The finance minister also made it clear that the upward revision of corporate tax rate from this level would be difficult.
"Anybody who wants to change will have to go to Parliament, she said, adding that it will be difficult to increase tax rate from this level as justification for raising would be difficult," she added.
With regard to reduction in personal income tax, she said there is nothing at the moment and the government has not thought about it.
On concerns of any expenditure cut to meet fiscal deficit due to tax break, she said the government is not intending any such move as of now.
In fact, the expenditure secretary is having a weekly meeting with various departments to push spending by them as per the Budget plan.
He is asking every ministry to spend the money given in the Budget and even asked the agriculture ministry to push PM-KISAN scheme for which target is 14.5 crore farmers, she added.
With regard to disinvestment, she said the government is on track to meet the target.
The government will focus on 23 companies which have been approved by the Cabinet Committee on Economic Affairs (CCEA), she said, adding that the Air India call will be taken by the Group of Minister which will meet in the next few days.
To give a push to further improve liquidity, the finance minister said, she has called a meeting of private sector banks as well.
On the fiscal deficit target, she said any decision on tweaking the target would be taken near Budget.
"The decision will be taken near the next Budget," she said.
The government has fixed fiscal deficit target of 3.3 percent of the gross domestic product for the current financial year.
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Updated Date: Sep 23, 2019 07:12:40 IST