Budget 2015: India Cuts Corporate Tax Rate to Win Back Investors
New Delhi: A cut in corporate taxes has been announced by the government along with other initiatives for a more stable and predictable tax regime in a bid to woo foreign investors and spur faster growth.
In a bid to win over investors disappointed by last year's interim budget, Finance Minister Arun Jaitley, while presenting the government's first full budget, said the corporate tax rate would be cut from 30 to 25 per cent over four years starting next year.
The minister pledged to make fairer a regime long criticised as being aggressive, arbitrary and holding back investment.
The moves are aimed at encouraging foreign companies to set up shop in India, and attracting overseas investment for roads, railways, ports, power plants and other dilapidated infrastructure.
"This will lead to a higher level of investment, higher level of growth and more jobs," Mr Jaitley said in Parliament.
India's tax authorities have been embroiled in lawsuits with a string of international companies including Royal Dutch Shell and IBM.
British mobile giant Vodafone is currently fighting a bitter, $2.4-billion battle with authorities, while Finnish company Nokia had a plant seized over a tax dispute.
Mr Jaitley deferred to 2017 the introduction of controversial GAAR rules seeking to curb tax evasion that were first announced by the former Congress-led government.
The General Anti-Avoidance Rules (GAAR) seek to prevent companies from routing transactions through other countries to avoid tax, but were seen as a money-grabbing move.
Mr Jaitley also said a long-awaited goods and services tax (GST), which seeks to help businesses by harmonising a web of state-based duties and taxes, would be introduced in April 2016.
The GST bill was tabled in Parliament in December, but has yet to pass the Rajya Sabha, where the government lacks a majority.
Mr Jaitley also said customs duties would be dumped on 22 items such as raw materials and components, seeking to help local manufacturers.
A wealth tax would also be abolished and replaced with a two percent surcharge on the super-rich, a move that is estimated to add Rs 9,000 crore ($1.4 billion) to government coffers.