The finance ministry is working on to phase out tax exemptions and incentives to specific sectors such as power, oil & gas which means no further tax holidays for these sectors. The road map may also feature withdrawal of sops like weighted deduction of research expenses and may reduce the marginal rate of tax for Indian branches of foreign companies from 40% to 35%.
Corporate tax rate was reduced from 30% to 25% last year by Finance Minister Arun Jaitely. However, he also said that this would be followed by eliminating the exemptions which helps corporate to keep their effective tax rate much below the marginal rate. During the launch of Bandhan Bank in Kolkata, he said the phased rate reduction would start from the next financial year.
As per the ministry no new entrants of power producers, transmission and distribution companies will be able to avail the benefits of seven year tax holidays after 2017. A power company that starts operation by March 31, 2017 will have a time limit till 2032 to avail of the benefits in consecutive ten years in that period. The government is also planning to withdraw seven year tax holidays to crude oil producers and refiners by 2022, which means no new entrants in the sector after March 301, 2013 would avail this incentives.
Besides, the government is also planning to announce a terminal date for withdrawing ten year tax holidays to companies engaged in setting up airports, highways and inland waterway projects.
The government is also planning to limit the extent of accelerated depreciation available to investments in some sectors like (plant & machinery) in the fertiliser sector. However, the investments in backward districts of Andhra Pradesh, Telengana and Bihar will keep availing the facility. The research and development incentive of 200% weighted deduction given to pharma companies will also be withdrawn.
A report with plan to phase out tax exemption will soon be released for public domain. This would be followed by a chalked out plan on how to reduce corporate tax rate from 30% to 25% by year 2019. Once the exemptions are removed there would be no need to specify the minimum alternate tax (MAT) for companies and alternate minimum tax (AMT) for other entities, said Anita Kapur, Chairperson, Central Board of Direct taxes (CBDT).
Along with reducing the corporate tax to 25%, government is also planning to reduce the rate applicable on Indian branches of non-resident entities from current 40% to 35%. Most of the foreign banks will be benefitted by this step. According to business analysts the restructuring of corporate tax will definitely lure the foreign investors to come to India.
The post No more extension of tax holidays for power, oil & gas companies appeared first on EPC World.