Tax Incentives and Revenue Loss: Corporate Sector Update

Ministry of Finance addressed revenue loss and benefits related to tax incentives for corporates. From Assessment Year (AY) 2020-21 to AY 2024-25, companies claimed various income tax exemptions and deductions under different schedules, with detailed data provided in Annexure A. Tax incentives for emerging sectors like renewable energy and electric vehicles include reduced GST rates of 13.8% for renewable energy projects and 5% for electric vehicles. Mechanisms to monitor these incentives include reporting and compliance checks to ensure effective utilization for economic growth.

The government aims to promote investment in sectors like green energy, electric vehicles, and artificial intelligence by extending targeted tax incentives. Additionally, taxation policies are framed to foster economic development and job creation, especially in labor-intensive industries like manufacturing and services. However, specific details on the impact of tax incentives on job creation were not provided.

The government clarified that tax breaks and exemptions are integral to its fiscal policy for holistic growth, balancing revenue considerations with developmental goals.

GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
RAJYA SABHA
UN-STARRED QUESTION NO. 243
ANSWERED ON- 4/02/2025

REVENUE LOSS DUE TO TAX INCENTIVE
243 DR. ASHOK KUMAR MITTAL:

Will the Minister of FINANCE be pleased to state:

(a) the details of the different types of tax breaks given to corporates and the amount of potential revenue loss due to these tax incentives since January 2020;

(b) the mechanisms in place to monitor the utilization of tax breaks by corporates to ensure that they are used effectively for growth and development;

(c) the steps being taken to extend tax incentives to emerging sectors like green energy, electric vehicles, and artificial intelligence to attract investments; and

(d) whether the tax breaks contributed to job creation, particularly in labour-intensive sectors such as manufacturing and services, if so, the details thereof?

ANSWER

MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)

(a) & (b): The details of income exemption/deduction claimed by companies in ITR-6 from Assessment Year 2020-21 (upto 31-May-2021) to Assessment Year 2024-25 (upto 31-Dec-2024) is enclosed at Annexure-A.

(c): In case of renewable energy projects the following dispensation has been created under GST

o Under entry at serial no. 201A of schedule II of notification No. 01-2017 – CTR dated 28.06.2017 renewable energy devices and their parts attract GST rate of 12%. However when they are supplied by a supplier along with supplies of other goods and services one of which is a taxable service specified at Sl. No. 38 of notification No. 11/2017 –CTR dated 28.06.2017 (service rate notification), the value of supply of goods for the purposes of this entry shall be deemed as 70% of the gross consideration charged for all such supplies and the remaining 30% of the gross consideration charged shall be deemed as the value of the said taxable service.

• No. 38 of notification No. 11/2017 –CTR dated 28.06.2017 specifies rate of 18% on service by way of construction or engineering or installation or other technical services, provided in relation of setting up of renewable energy projects.
• Thus the effective rate of tax on renewable energy projects works out to be 13.80% considering a ratio of 70:30. 70% being value of goods (GST @ 12%) and 30% (GST @ 18%) being value of services;
• In case of electric vehicles, GST is applicable at the rate of 5% on sale of new electric vehicles.

(d): Taxation rates & exemptions are part of the overall fiscal policy of the Government which aims at holistic growth of the economy including job creation

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ANNEXURE- A