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Most corporate tax breaks may be phased out in FY18

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Draft schedule released by CBDT says sunset clause may not be extended
The finance ministry has proposed a road map on making tax rates more competitive and proposed phase- out of most of the exemptions from the 2017- 18 financial year. This is in tune with this year’s Budget announcement that the corporate tax rates would be reduced to 25 per cent over the next four years from 30 per cent at present but would be accompanied by a corresponding phase- out of exemptions and deductions.
The draft schedule for phasing out these exemptions was put in the public domain by the Central Board of Direct Taxes on Friday. It has invited comments within the next 15 days.
The road map says profit- linked, investmentlinked and area- based deductions would be done away with for corporate and non- corporate tax payers.
Provisions with a sunset date would not be extended or advanced. For incentives with no terminal date, a sunset date of March 31, 2017, would be provided for commencement of the activity or for claim of benefit.
Experts pointed out that the sunset date of March 31, 2017, needed more clarity. “... where the relevant activity or project commences on or before March 31, 2017, the incomes beyond that from such activity should continue to be exempt for the period envisaged in the exemption, since commercial decisions have been initiated on that basis,” said Ketan Dalal, senior tax partner, PricewaterhouseCoopers India.
Corporate tax is 30 per cent but is effectively 23 per cent, due to many exemptions and deductions. In 2014- 15 the government is estimated to have forgone revenue worth Rs.62,398 crore in corporate taxes on account of various incentives, up from Rs.57,793 crore a year ago.
Minister of State for Finance Jayant Sinha says the government’s goal is to be able to simplify and make the tax code as predictable
Business Standard, New Delhi, 21st Nov. 2015

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