Corporate Tax Rate Cut to Make India More Competitive: Revenue Secretary

New Delhi: Dismissing criticism that proposals in the Budget for 2015-16 are pro-corporate, Revenue Secretary Shaktikanta Das on Tuesday said reduction in corporate tax rate will make India more competitive, and enable companies to invest more and create more jobs.

"It is not that this decision (of reduction of corporate tax from 30 per cent to 25 per cent in the next 4 years) is going to benefit only a particular class of people."

"...my sincere reply to such critics is that when you reduce the corporate tax rates, the promoter does not take away all money, the money remains with the company. The company is a legal person. If money remains with the company then it enables the company to invest more and create more jobs," Mr Das said at an event organised by industry body CII.

The Revenue Secretary said, "Our present corporate tax rate is not competitive" and corporates have choice to go to countries like Thailand and Indonesia.

He said that even if a company does not invest and its money remains with the bank, then also it will improve liquidity of banks.

"The other criticism could be that what if promoter announces higher dividend, higher remuneration for them? Then also they will have to pay more tax," he said.

Former finance minister and senior Congress leader P Chidambaram had said that the Budget proposal to reduce corporate tax from 30 per cent to 25 per cent would benefit the corporate to the tune of crores of rupees by saving taxes every year for the next four years.

On the proposal of raising service tax from 12.36 per cent to 14 per cent, Mr Das said, "It was an necessary measure in our movement towards Goods and Services Tax (GST)."

Once Goods and Services Tax(GST) will be implemented, the states will also get power to collect taxes then obviously rates will be more than current rate of 12 per cent.

"Are you going to increase rate of service tax overnight say from 12 per cent to 22 per cent when GST will be implemented? Obviously economy cannot absorb it."

"So if minor doses of tax rate increases are brought out then it will be easier to absorb increase in tax rate," Mr Das noted.