Assocham demands cut in effective corp tax to 25%, inflation indexing of allowances

Industry chamber Assocham has demanded cut in effective corporate tax to 25 per cent, doing away with dividend distribution tax (DDT) and indexing of allowances and deductions under personal Income Tax with inflation.

In its pre-budget meeting with the Revenue Secretary last week, Assocham also demanded reduction of excise duty on Aviation Turbine Fuel (ATF), and a cut in customs duty rates on raw materials used in domestic manufacturing.

It also suggested that Minimum Alternate Tax (MAT), which is levied at 18.55 per cent, should be abolished and demanded that relaxation in norms for start-ups.

“The effective corporate tax on distributed profit is over 48 per cent. Need to reduce to 25 per cent and gradually to 20 per cent,” Assocham said.

It further said that Dividend Distribution Tax (DDT) at 20.55 per cent is “burdensome” and suggested that it be replaced with Dividend Taxation.

With regard to personal taxation, Assocham recommended that all allowances and deductions — medical/conveyance etc — should be “indexed as per cost of inflation”.

Such a step would make allowances more realistic and help in neutralising the impact of inflation for taxpayers.

With regard to rationalising excise duty on ATF, the industry body said post implementation of Goods and Services Tax (GST), credit of excise duty paid on purchase of ATF is not eligible. This has resulted in increasing the cost component for the airline industry.

“Government should consider decreasing the excise duty rates on ATF, in order to help aviation industry in India... Lower excise duty rates would be required to offset the impact of rising international fuel prices,” it said.