BT Budget Roundtable: 'Not extending deadline for lower corporate tax biggest miss of Budget 2023,' say experts

BT Budget Roundtable: No decision on extending the deadline of March 2024 for availing lower corporate tax rate was the biggest miss in Budget 2023-24 by Finance Minister Nirmala Sitharaman, business leaders said on Monday. Speaking at BT Budget Roundtable, corporate leaders hailed the government for not introducing any new tax and reducing surcharge on people with high income. However, they felt that the government should have extended the deadline for availing of 15 per cent corporate tax, which was introduced in 2019, beyond March 2024. 

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Speaking on taxation - hits and misses in Budget 2023-24, senior tax advisor Ved Jain said there was nothing to say about hits and misses. "It's so clear what is the hit - obviously Rs 7 lakh tax exemption threshold in the new tax regime is the biggest hit. The second hit was reducing the surcharge from 37 per cent to 25 per cent," he told Business Today Magazine's Editor Sourav Majumdar.   

Jain further said the one miss, in a lighter vein, was that in a budget one expected concession, and the finance minister not putting any adding additional tax was the biggest miss. "You don't find any new tax in the budget - that is the miss in the budget," he said. 

Jain, however, listed one big miss in the Budget which he felt was necessary if the country wanted to continue the momentum in manufacturing. He said India was going to become the global capital of manufacturing and the geopolitical situation permitted (companies) to shift their manufacturing base to India. 

"We introduced, in 2019, a corporate rate of 15 per cent for a company manufacturing in India. And that exemption is going to expire on 31st March 2024. If we are really looking at 'Make in India', really wanting that India should become the manufacturing capital - there is no reason why this (exemption) should not be extended and be available to people who want to put a project." 

"If I were to put a project in 2023 and I see that gestation period of 2 years for putting the plant in operation. I can't do it because the exemption will go by 31st March 2024. So I think this should have been extended, this is the biggest miss," he added. 

Neeru Ahuja, Tax Head for APAC at Deloitte also said that the exemption in personnel tax was the biggest hit in the Budget 2023-24. On the corporate tax side, she said, the tax rate remaining stable was also a hit. "We keep wondering what is going to happen next, is it going to go up or down? But the finance minister has given a very clear message that we wanted to be a very stable tax regime - that is clearly a hit," Ahuja said. She also hailed the government's move to appoint a new joint commissioner of Income Tax-Appeal to resolve the tax disputes.

Speaking on misses, Ahuja also referred to the deadline for lower corporate tax. She said there was one condition - to avail of the lower tax rate, one must set up a new legal entity. The industry wanted the government to do away with this condition. "Because when we want to bring in new investment, we don't necessarily want to spread them into new entities. Allow us to bring the investment, and set up the manufacturing in the existing (entity) which I thought is a valid request. There was also one demand that extend this lower rate to the service industry as well," she said.  

Sanjay Tolia, Partner at PwC said this manufacturing provision of 15 per cent was both - a hit and a miss. This was a hit because, he said, this tax rate was not available in any other part of Asian countries. The 'miss' part, according to him, was that India was not packaging its incentives to cooperate.

"We are doing a good amount of free trade agreements with the largest nations, and these are the new age agreements. So if you look at the harmonisation, and put it as a package - we have PLIs, we have state incentives, we have corporate rate tax of 15 per cent, we have customs duty exemptions - if you put all this together, you can actually do something that Vietnam has done. Vietnam has created free trade agreements in a manner where the world's supply chain goes and sits there," he said.