Corporate tax lags behind personal tax collection in Year 2020-21?

GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE

RAJYA SABHA

STARRED QUESTION NO *90

ANSWERED ON 27-07-2021

CORPORATE TAX COLLECTION

*90 Shri G.C. Chandrashekhar:

Will the Minister of Finance be pleased to state:

(a) whether the corporate tax collection lags behind the personal tax collection in the year 2020-21;

(b) if so, the measures taken by Government to boost up corporate tax collection;

(c) whether Government has announced for a new corporate tax regime to help the MSME sector; and

(d) if so, the details thereof with the State-wise facts and figures?

ANSWER

THE FINANCE MINISTER
(SMT. NIRMALA SITHARAMAN)

(a) to (d): A Statement is laid on the Table of the House.

STATEMENT REFERRED TO IN REPLY TO RAJYA SABHA STARRED QUESTION NO. 90 FOR 27TH JULY, 2021 REGARDING CORPORATE TAX COLLECTION

(a) Yes sir, the net corporate tax collection is slightly lagging behind the personal tax collection in the year 2020-21. However, the gross corporate tax collection is higher than gross personal tax collection and the lower net corporate tax collection is on account of higher outflow due to refunds. The figures for corporate tax and personal income tax for the Financial Year (F.Y.) 2020-21 are as under:-

(Amount in Rs. Crores)

(Source: Pr.CCA, CBDT)

(b) As stated in part (a) above, the gross corporate tax collection is higher than gross personal tax collection. However, the Government has taken various measures to boost up corporate tax collection. Prior to the amendments made in 2019, the income of domestic companies was taxed at the rate of 30% plus surcharge and cess or, alternatively, they were liable to pay Minimum Alternate Tax (MAT) at the rate of 18.5% plus surcharge and cess. Finance Act (No.2), 2019 introduced a tax rate of 25 % plus surcharge and cess for domestic companies having a turnover up to Rs. 400 crores under section 115BA of the Income-tax Act,1961(Act).

In order to further boost corporate tax collection and also to ensure that India stays globally competitive and a favoured destination for investment, the Government has taken a historic decision of reducing the corporate tax rate for the existing companies and also for new companies in the manufacturing sector vide the Taxation Laws (Amendment) Act, 2019 (TLAA, 2019) as under: –

(i) an existing domestic company may pay taxes at 22% plus surcharge at 10% and cess at 4%, if it does not claim any incentive, or deduction, at its option, as per section 115BAA of the Act. MAT is not applicable to such companies.

(ii) a domestic manufacturing company (set up on or after 1st October,2019) which commences manufacturing on or before 31st March,2023, may opt to pay taxes at 15% plus surcharge at 10% and cess at 4%, if it does not claim any incentive, or deduction, at its option, as per section 115BAB of the Act. MAT is not applicable to such companies.

(iii) Apart from the above, MAT was also reduced from 18.5% plus surcharge and cess to 15% plus surcharge and cess.

These reduced corporate tax rates, will lead to increased earnings leaving more surplus in the hands of the corporates which can either be reinvested for expansion of existing units, setting up of new units or be distributed as dividends, increasing the disposable income in the hands of the individual. The new manufacturing companies availing the reduced tax rates, which commence manufacturing by 31.03.2023 will lead to more manufacturing in India, creation of jobs and new wage earners and increased revenue for the Government.

(c) No sir. The Government has not announced any specific new corporate tax regime for the MSME Sector. However, an optional concessional tax regime has been introduced for all companies by the TLAA, 2019 as detailed in reply to part (b) of the question above, which are applicable to all companies and MSME companies may avail these options.

Alternatively, if concessional tax regime is not opted, the Act provides for reduced tax rate of 25% plus surcharge and cess for domestic companies having a turnover up to Rs. 400 crores. Further, relief has been provided to the small and medium domestic companies through surcharge as well. No surcharge is being levied on domestic companies having a total income of less than one crore rupees and a lesser surcharge rate of 7% is being made applicable to domestic companies having a total income exceeding one crore rupees but not exceeding ten crore rupees. The MSME companies would get benefitted by these provisions as they would fall within the prescribed turnover/income limits.

(d) Does not arise, in view of reply to part (c) above.

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