Proposed Reduction in Corporate Tax: Whom will it help?

Business analysts across the country are found to be lamenting at the fact that the saying “Men can never be satisfied” has been once again proved when the Government announced to bring down the Corporate Tax to 30% for both Domestic as well as International Companies from its current 33% (Indian companies) and 40% (Foreign companies). These analysts pities for the matter that Inspite of this reduction, most corporate houses are found to be portraying a dull face at the Government’s “indecision” in not curbing it down to 25% as suggested initially in draft of the Direct Tax Code (DTC) Bill.

However, although this new Bill proposes to bring the taxability of Indian corporate at par with global standards, the old notioned lot of the Tax Gurus claim that India is still far from going down as a low tax country. Interestingly, when at one end some experts are claiming that this reduction will bring in a much needed “Relief” to the industry, the same lots are found giving a blind eye to the Government’s decision to increase the Minimum alternate tax (MAT) from current 18% to 20%. MAT is the tax imposed on profit-earning companies that do not fall under the regular tax net due to various exemptions.

With the difference between the corporate tax and MAT now getting narrower, new entrepreneurs and start ups are bound to find it all the more difficult to compete against the Senior Competitors, specially against the foreign multinational brands who would be reaping off the maximum benefits.